Recently one of the leading publications in our industry, Mergers & Acquisitions magazine, interviewed several leading M&A experts regarding their expectations for deal making in 2017 given the impact of a new Congress and president. As you would expect, dealmakers, strategic buyers, and equity firms are all fairly bullish on the impact that a Republican Congress and President will have on the economy in general and M&A activity specifically. Here are a few of the excerpts from this interview:
There’s going to be “a pickup in M&A,” says Jim Freedman, chairman, Intrepid Investment Bankers LLC, reflecting on the Republican Party’s winning the White House and both houses of Congress in the U.S. election…
“The general consensus is that there will be a reduction in taxes. There will be a reduction in regulation. There will be more of a pro-business philosophy. I think those are all good things for the M&A industry. I’m pretty bullish on what this means for the M&A business.”
“If people conclude, in the next several months, that the transition will foster some policies that will cause some economic activity, then we may see more M&A activity,” says Geoffrey Rehnert, co-CEO, Audax Group.
“My prediction is that it is going to accelerate M&A activity,” says David Bonrouhi, managing director, Calabasas Capital, referring to the election outcome. “Business owners are going to want to get deals done before any new initiatives get passed and slow things down.”
Dealmakers that I speak to with our firm, the Generational Group, echo these sentiments. You have to keep in mind that two things buyers of all types have to factor into their ROI (return on investment) valuation equations are risk and unknowns.
The first can be quantified somewhat when they create their discounted cash flow (DCF) models. For those of you unfamiliar with a DCF calculation, essentially your business starts with a risk-free return percentage and a variety of risk factors are considered that may influence a discounted rate on a potential sale. The higher the risk associated with a company, the greater the discount rate and the lower the valuation.
The second issue, unknowns, are nearly impossible to quantify via the DCF model, but can have a much greater impact on the psyche of buyers, and even sellers in many cases, than risk. Often the fear of unknowns will kill deals even more than risk factors will.
And certainly in 2016 we faced a bevy of unknowns, which were made even more problematic by one of the most contentious election cycles in recent memory. For many buyers and sellers, the wide divergence in the possible outcomes, even until the day of the election, caused pause and delay in transactions.
With all of that behind us, 2017 should provide a tremendous opportunity for both sellers and buyers to connect and close win-win transactions. I reprise what Mr. Freedman said earlier: “I’m pretty bullish on what this means for the M&A business.”
We concur. Now is the time for business owners who have been delaying their exits, many of them since the market crash in 2009, to move forward. As we all know, there are two kinds of owners:
Where you fall in relation to these two options is dependent on your ability to discern when and how to exit for maximum value. The Generational Group and its team of experienced M&A professionals can help you do just that. We are one of the leading lower middle-market investment banking firms, and attending one of our highly educational executive exit planning conferences will provide you with ample opportunity to begin your process.
Even if you believe your exit is five years out or longer, the reality is you need to start building a buyer-ready business today. How do you do that? You learn to think like a buyer and discover what adds value to a business. Attending one of our complimentary, no-obligation conferences will help you do just that.
To find out how to attend, please call us at 972-232-1121 and ask to speak to one of our Senior Business Advisors, or visit our website and provide us with your contact information and we will be in touch.
And let’s all hope that 2017 brings a high level of clarity and stability to our entire country and economy.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
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