Are Buyers Still in the Market?
We continue to believe that mergers and acquisitions will carry on once the current crisis ends.
We know this is the case based on the volume of inquiries received from private equity funds, search funds and well-funded individual buyers even during the Covid crisis. While several of our clients have temporarily closed physical operations, others are busier than ever since they are designated as providing “essential services.”
A survey we participate in offers insights. The final quarter of 2019 reveals the types of buyers in the market. This information is from MarketPulse, a survey of M&A advisors nationally compiled by Pepperdine University.
In this chart, the largest segment of buyers is existing companies – representing 40% of the fourth quarter transactions.
This means that existing companies are growing through acquisition, a trend that continues to be a major driver of transactions in the lower mid-market. In order to remain competitive, companies seek growth, and acquisitions are the quickest way to achieve it.
On the left side of the chart, two more big slices of the buyer pool are private equity funds with platform acquisitions representing 13% and “add-on” acquisitions representing 12% of transactions. A platform is a company that serves as the primary company for additional acquisitions; “add-on” transactions are made to build up the platforms.
We do not have a crystal ball about what to expect post Covid crisis.
But at last check, PE firms had undeployed capital waiting to be invested. It is generally a “use it or lose it” situation. Fortune magazine estimated $1.5 Trillion in “dry powder” was available at the start of 2020.
As for existing companies, growth through acquisition remained a major driver heading into 2020. Time will tell if it continues, but we see reasons for believing it will.
BTS News
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Manufacturer Sold and New Owner Expands It
BTS served as advisor in the sale of PlasTech Machining Fabrication, Inc. to DelCam Holdings in 2020...the company has grown substantially, doubling employment and adding capacity to boost future prod
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How M&A Will Respond to Next Recession
The takeaway for business owners: Get back to basics. Don’t worry about hyper growth. De-risk your company as much as possible.
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Perception vs Reality with Small Businesses
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NH-Based Techinical Manufacturing Company Sold
Hampshire Controls has a bright future with new ownership. The company was recently sold by Diane Rush, owner and president, to Pillar Imaging and its leader Dr. Michael Pilon.
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Be Ready When You Are Ready
When a business owner says it’s time to sell, I ask, “How fast do you want to be out?” The answer I hear most is, “Yesterday.” But sellers underestimate how long the process takes.
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Looking at a Sale Through the Right Lens
Sometimes our vision about the future is blurry because we aren’t considering the whole picture but only parts of it.
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5 Deal Points from the Trenches
Today I work with clients of Business Transition Strategies who are implementing Growth Through Acquisition strategies. Here are a few observations from working on a wide variety of projects.
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Tax Changes Could Hurt Net Proceeds
Changes proposed to the capital gains tax suggest they may need to get 30% more in a transaction in the future just to net the same value they would get today.
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Good Ideas From Shark Tank Deal
One of my colleagues in Cornerstone Alliance was front and center in a recent Shark Tank exercise. A business that had been sold was put in front of four potential buyer groups.
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Buyer Trends in Lower Mid-Market
Other businesses are a significant market for companies being sold within the lower mid-market.
Case Studies
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Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
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Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
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Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
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Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.