The mergers and acquisitions market looks robust for the months ahead, as most economic indicators point to a more bullish economy.

“Just about any metric you can look at is showing that business owners are reasonably optimistic about the future,” said Kip Clarke, Midwest region president for Key Community Bank.

With a robust M&A market, businesses must be more strategic than ever about the companies they pursue.

Projections and numbers of a possible acquisition do not always translate to the target company being the right one. More important than the numbers is whether the merging companies make a strategic and cultural fit, said Clarke and other top KeyBank executives involved in M&A.

A company’s conviction to its strategy must extend to its acquisition targeting, and that strategy trumps purely quantitative considerations, said Mike McMahon, managing director for mergers and acquisitions at KeyBanc Capital Markets, which was named Investment Bank of the Year by Mergers & Acquisitions magazine earlier this year.

“The days of looking for arbitrage multiples or buying smaller companies at much lower valuations in terms of multiples are behind us,” McMahon said. If a desired company fits into the long-term strategy, it could be an attractive acquisition irrespective of the multiple paid.

McMahon, Clarke and Bob Kane, KeyBank market president for the Greater Philadelphia Area, shared their insights on how companies should approach M&A.

Acquisitions: An outgrowth of corporate strategy
There are two cornerstones for a successful acquisition strategy — it needs to be a direct outgrowth of a company’s strategy, and a company must be proactive with a dedicated and coordinated effort against mergers and acquisitions, Clarke said.

Some companies pursue acquisitions because they see it as the quickest way to grow. But without a deeper analysis of whether there are synergies to be exploited by merging two companies, the buy-to-get-bigger mentality is a dangerous one.

“The biggest challenge I see is folks jump into a thesis that hasn’t been fully vetted, like ‘Let’s vertically integrate’ or ‘Let’s acquire just to get bigger,’” Clarke said.