According to Frank Aquila at Business Week,
The prevailing view is that acquisitions are a luxury, to be pursued in good times and forsaken in the bad. The prevailing view is completely wrong. Deals are always risky, but doing nothing in a downtown may be the riskiest move of all.
Acquisitions and divestitures are key tools in the implementation of corporate strategy. Since corporate strategy needs to be implemented throughout the business cycle, in good economic times and bad, so must M&A. In fact, many of the most value-creating deals are done during economic downturns.
He cites a number of examples from the past several downturns, including: Diageo’s 2001 acquisition of Seagram Wine & Spirits from Vivendi (which never should have been in that business in the first place); Bank of America’s 1991 acquisition of Security Pacific; and IBM’s acquisition of Lotus in 1995.
Mr. Aquila, about whom more after the jump, works for a little firm you might have heard of: Sullivan & Cromwell.
Aquila (Columbia AB ‘79, Brooklyn JD ‘83) has been an M&A partner at S&C since 1992. He was American Lawyer’s dealmaker of the week in November, for leading an ungodly team on the InBev acquisition of Anheuser-Busch.
Frank knows what he’s talking about. But you do have to take this advice with a little grain of salt:
It is clear to me that the winners and losers for the next decade will be determined over the next six to nine months. In some cases, a firm’s fate will be out of its control. But for the most part, companies will make the strategic decisions that will have long-term impact on them and their competitors. Those that choose to hunker down and hoard their cash may very well survive the current downturn. But the companies that aren’t afraid to seize the M&A moment are likely to be the real winners in the years ahead.
After all, it’s in his best interest to see as many deals get done as possible.
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