Recently, Mergers and Acquisitions Magazine held a roundtable discussion with a number of leading firms in the M&A industry. The focus was on trends in the lower middle-market (generally defined as deals valued below $100 million) and specifically what private equity firms are doing to locate and invest in well run, privately held businesses in today’s “seller’s market.”
Here are some excerpts of key answers from the roundtable:
How would you characterize market conditions today?
We're seeing higher valuations, particularly in the bigger companies. It's a more competitive market and it is more important than ever before to have an edge going into the process of acquiring accompany.
Do you anticipate the market remaining competitive throughout 2017? How do you differentiate yourselves?
Every firm is capable of writing a big check. So you've got to bring something to the table beyond just capital. For us, the focus is on situations where we've got an operator who can come in and add value to that business, or an operating partner to sit on a board to provide strategic insight and do things the owner wouldn't be able to do on their own like find that add-on acquisition.
It seems to reason that deregulation is underway. How do you think that impacts private equity transactions the lower middle market?
People are more optimistic than they have been in a long time. I see it at portfolio companies, with management teams and in general. You don't know how it will turn out, but a lot of the current administration's possible policies don't really affect what we do.
Would you still characterize today as a seller's market?
It's definitely a seller's market.
Although each of these questions is equally important, it is the last one that really cuts to the chase. Based on conversations we are having with buyers today, we would concur with this assessment: We are currently in one of the strongest seller’s markets we have seen in years. In fact, we are on pace to have a record year in terms of deal closings.
Savvy business owners are taking advantage of aggressive buyers in today’s environment and are creating “limited auction” processes. In these, multiple buyers are essentially bidding against one another for assets, thus driving up valuations in general and sparking renewed interest in well-run, privately held companies.
Is your business prepared to capture buyer interest?
Are you personally ready to exit and move on to the next phase in your life?
Do you have an exit strategy in place?
If the answer to any of these (or all of them) is no, then you need to attend a Generational Equity exit planning conference soon. The reality is it takes up to a year to close most deals with optimal buyers, the kinds of buyers that you want to attract to your company. So, beginning the process as early as possible, even if your exit target is some time away, is vital.
Our meetings are highly educational and are designed to help business owners learn the intricacies of the M&A process. Don’t just take my word for it, listen to the reviews of our meeting from real business owners who have attended in the past:
If you are interested in learning more about how you can take advantage of the current seller’s market for your business, please contact us at 972-232-1121 and ask to speak to one of our senior business advisors about any pending meetings we may have in your area. Or, to see a list of upcoming conferences, please visit our website.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
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