Recently, Merrill Corporation released their December and year-end reviews of M&A activity. Merrill is widely recognized as the premier technology provider for M&A professionals around the world.
Their analysis of 2018 was based on data gathered by Mergermarket, reportedly the largest network of dedicated M&A journalists and analysts in the industry. This allows the firm to provide the most comprehensive M&A intelligence service available today. As usual, their findings are compelling and detailed. Based on their research:
M&A value in the US and Canada through the first 11 months of 2018 exceeded the total from last year and is on pace to surpass the 2016 total as well. Unemployment in the US remains at the lowest level in nearly 50 years, and GDP grew 3.5% in the third quarter on the back of robust consumer spending. Companies continue to report strong earnings, thanks in part to the US corporate tax cut to 21% earlier this year.
This data can be seen graphically in the following chart:
A key segment of buyers also had a phenomenal year – private equity firms. Again, according to Merrill’s research:
Private equity is closing the year in a position of strength, with global buyout value on pace to match or surpass the amount reached in 2017, when a post-crisis high was reached. PE firms continue to raise record amounts of capital, as investment demand grows ever higher.
It is clear from this data that 2018 was a continuation of the M&A seller’s market, one of the longest, and strongest, we have seen in years. Unless some very potent economic changes hit, or some geopolitical crisis rears its ugly head, buyers will continue to be very aggressive in 2019.
However, as we have said many times over the past 12 months, a seller’s market only benefits sellers. If you are a business owner today, your company is probably at its peak valuation (assuming it is growing, profitable and not in an obsolete industry). Sadly, based on our experience, most business owners lack one key fact: The knowledge of the business enterprise value of their company.
For this reason alone, even if your plan is to exit in 5-10 years, it is critical to receive an estimated valuation of your business, if for nothing more than to aid in wealth planning. The good news is that this is a service we provide all our clients before taking them to market. In fact, many choose not to go to market right away in order to build their company’s economic value after obtaining a valuation from our team.
Our firm was awarded Investment Banking Firm of the Year three years in a row, most recently in 2018. Further, our valuation team has won Valuation Firm of the Year from the M&A Advisor several times, most recently in 2014. So, our advice to business owners is sound and based on years and years of M&A experience.
If you are interested in determining your company’s current business enterprise value, please contact us at 972-232-1121. Or you can visit our website, provide your contact information, and we will reach out to you to have a conversation about our services and how they can benefit you.
A special thanks to Merrill and Mergermarket for confirming that the seller’s market remains vibrant and strong!
By Carl Doerksen, Director of Corporate Development at Generational Equity.
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