M&A Trend Impacts Smaller Companies Too
Lower mid-market company sales are often influenced by larger M&A deal flow. A recent article on the Forbes website illustrates this point. Here’s why.
Acquisitions of “platform” entities often result in a search by the new ownership for “add-on” acquisitions. The targets are comparably sized or smaller companies in related fields. “Platforms” are businesses viewed by investors as a starting point for further acquisition, “add-ons”.
The goal is to grow both the acquired company’s top line and bottom line. Smaller companies become very attractive targets to support this strategy. The processes we employ in transactions helps connect larger entities with smaller ones.
Our niche is private companies that are still run by the founders who started the company, built it to an operational level that has sustained employment and lifestyle for years, and now is mature but with an uncertain future. Owners are wondering what to do next.
We find that these companies are often too big for an individual to acquire, but too small to be considered a “platform.”
The article referenced above is on the Forbes Magazine website. The Forbes Finance Council predicts that M&A activity will continue strong in the months ahead.
The piece is authored by investment banker Marc Cooper of P J Solomon who makes two key observations.
- More than $600B has been invested into buyout funds in the past three years. The data is from PitchBook.
- PE funds have a record amount of “dry powder” - estimated at $2 trillion – waiting to be utilized for acquisitions. It needs to be used.
While much of this investment will involve large deals, the kind that hit the media on a regular basis, it inevitably inspires activity downstream in the lower mid-market – the niche we focus on.
BTS News
-
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
-
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.
-
Perception vs Reality with Small Businesses
Sometimes the economic picture on the news seems inconsistent with what is happening for many business owners. Nearly every owner we speak to is out straight.
-
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.
-
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.
-
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.
-
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.
-
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.
-
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.
-
Buyer Trends in Lower Mid-Market
Other businesses are a significant market for companies being sold within the lower mid-market.
Case Studies
-
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.
-
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.
-
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?
-
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.