Buy Your Competition at Garage Sale Prices

It is contrarian thinking to spend hard-won money (i.e., to expand) during an economic downturn. But spending money the right way can sometimes be your best source for growth. Organizations that hoard their cash and play it safe during a recovery are, in my opinion, wasting a good recession—especially when there are so many underpriced bargains to be had.

Want to grow your market share? Sometimes the answer is to simply buy your competition . . . on sale.

I have always loved this quote from Baron Rothschild (of the Rothschild banking family): “The time to buy is when there is blood in the streets.” New York mayor and famed financier Michael Bloomberg puts it this way: “I always try to look ahead and avoid the rearview mirror.”

My history buff friend (turned stock broker), Jeff Mash, reminded me of this Benjamin Franklin quote: “Buy low. Sell High. I know of no more reliable path to profit.”

Now is probably the time for you to buy rather than hoard. Consider the Boston Consulting Group's 1985–2000 recession studies, which stated that “average mergers in a downturn created an 8.3 percent rise in shareholder value after two years, while the average merger in good times dropped 6.2 percent within the two years following.”

A McGraw-Hill Research study of the 1980–1985 recession came to a similar conclusion: “[The] 600 companies who increased advertising expenditures during the 1981–1982 recession significantly experienced higher sales growth, ...

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