Tailwinds Continue for M&A Deals in 2017
There are good indications that the favorable tailwind continues for M&A activity in the coming year. Key indicators paint a clear picture: buyers are actively seeking opportunities that advance their strategies. Owners are aging, and looking for transition options.
Citizens Bank Commercial’s annual study on the appetite for M&A deals found that “he number of mid-sized U.S. companies already engaged in or open to buying and selling has risen sharply since last year, setting the stage for a very active 2017 merger market.” [1] Among the findings:
- 53 percent either currently involved in or open to considering a deal, compared to 34 percent last year
- The number of buyers is increasing with 73 percent currently involved in or open to considering deals, up from 60 percent last year.
- Mid-market decision makers feel company valuations may not have peaked just yet.
Allstate/USA Today have developed a Small Business Barometer based on input from thousands of owners across all markets. It found resilience and optimism with 90% believe the benefits of ownership outweighs the challenges. Also, 70% feel their businesses have grown the same or more as last year. Often these businesses are best transitioned using M&A sales processes.
The most recent Market Pulse survey, a survey we participate in and which is conducted by M&A Source and IBBA with Pepperdine University, reveals that deal multiples remain very as strong as 2015. Also, there are more well-funded buyers in the market now than top quality sellers, so the seller market continues.
The M&A process that we use involves actively seeking strategic, synergistic and financial buyers. We welcome the opportunity for an exploratory conversation, whether a sale is in the short or longer term. It is nice to learn about your business and to start talking about possibilities.
Footnote [1] Middle Market M&A Outlook 2016, Citizen Bank Commercial
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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.