Industry consolidation

Industry consolidation is an attractive strategic option when it is seen that it would be worthwhile to combine several companies in the same industry.

The background to a industry consolidation is almost always a combination of strategic, financial and structural factors. The parties to a industry consolidation can seek value realization through a larger entity if as smaller stand-alone companies they are not a sufficiently attractive acquisition targets for buyers.

A larger entity also enables other ways of realizing value for owners. Listing or selling to a global industrial buyer is easier when the scale is larger. Through a larger entity, the options for seeking a private equity investor can also increase significantly.

A larger size reduces unit costs, strengthens bargaining power in the supply chain and enables a broader product and service portfolio. Industry consolidation can expand customer relationships or geographical coverage faster than would be possible as stand-alone entities if the limits of organic growth has been reached.

Industry consolidation can provide resources for development and investments, which would not necessarily be possible in a smaller entity. Regulation, sustainability or safety standards increase the need for scale and reporting, which
small operators can find burdensome.

Consolidation through industry consolidation can improve cash flow and creditworthiness, which in turn lowers financing costs and makes it easier to finance new investments.

Combining into a larger entity through industry consolidation can ensure that critical expertise remains in-house and help attract new talent. Industry consolidation can bring significant business, strategy and financial expertise to the company, as well as the risk-taking ability to enable future growth.

There are several options for implementing transactions, which allow flexible solutions for company owners and possible different owner groups, especially if, for example, private equity investor are involved. When several actors merge, a project manager is often needed to coordinate negotiations between the different parties, produce various calculations for the needs of stakeholders and actively drive the project forward.

Successful implementation of an industry consolidation is helped by a clear shared growth vision between the parties, credible financial calculations, and a view of creating shareholder value. Creating these and communicating them correctly requires time and careful preparation. When combining several companies to a larger entity, it is particularly important to find valuation levels accepted by all parties for all companies involved, where the key factor is often the equalized measurement of company valuations.

3J Partners' services focused on implementing an industry consolidation are implemented with an understanding of the perspectives of the different parties and stakeholders, but with the interests of entrepreneurs and owners first.

We have implemented several demanding industry consolidations as partners for entrepreneurs and owners. We are experienced transaction and financing professionals – we know how to package the industry consolidation as an attractive investment opportunity for all parties involved. We know which terms are worth negotiating and where flexibility serves long-term value creation.

Call or send a message – let’s discuss with confidentiality if industry consolidation sounds like an interesting option.