Insights & Info

Insights > Dealmakers Expect 2018 M&A Market to Remain Strong

Dealmakers Expect 2018 M&A Market to Remain Strong

By Generational Equity

Strong Market

As 2017 draws near to its close, we now enter the time of year when M&A analysts, dealmakers, and pundits begin to look at the approaching 12 months and provide their expectations for 2018. Their analysis should provide a bearing on when you should plan to exit your business.

Here’s the consensus: despite a lot of unknowns about what may happen in 2018, dealmakers and analysts are generally very bullish on next year, expecting the current seller’s market to continue gaining momentum.

The private equity industry is a good indicator of what trends will be impacting M&A activity next year. PE firms exist to do only one thing: invest in companies in order to help them grow for their limited partners. So demand from this group is a bell-ringer for what may occur in the larger M&A arena as well.

According to a recent article by a contributing editor in Mergers & Acquisitions magazine:

“Industry professionals far and wide are saying the same thing: this bull market can’t last forever. On the other hand, they aren’t pointing to any particular clouds on the horizon either. Sure, as I write this, everyone is wondering if Congress will pass a new tax law and the impact it might have on M&A, and there are ongoing concerns over deal pricing and the intensity of the competition for high quality opportunities. But private equity firms have more capital than ever and macro-economic conditions remain strong, pointing to another robust year for the industry.

The last part of the prior paragraph is key. The amount of available capital committed to equity firms right now is at a record high. As we have been pointing out all year, this money will need to be eventually invested or it has to be returned to the PE firms limited partners. As the latter is not a welcome event (not a nice reputation for a PE firm to develop in the investor community), odds are good that all this money will be chasing far too few deals in the coming year, sustaining the seller’s environment we are now in.

Again, from Mergers & Acquisitions magazine:

“‘In the near term, we expect the hot market to continue,’ says Gretchen Perkins, a partner with Huron Capital. ‘Debt continues to be readily available to support acquisitions and there are plenty of deals in market and soon-to-be taken to market.’ In other words, there’s nothing pointing to an imminent slow down.

Although our final numbers for 2017 are not in yet, in general our dealmakers agree with Ms. Perkins; there is really nothing on the horizon that should slow down buyer activity. This is what we are hearing all the time from professional buyers we regularly talk to, and based on the fact that in 2017 we will be closing a record number of deals, we expect demand to remain strong for our clients in the market going forward.

The key question every business owner should be asking themselves right now is this: What am I waiting for before I initiate my exit plans? Since it takes 9-14 months to generally close a deal with an optimal buyer, waiting too long could prove problematic. That may take you into 2019, causing you to miss what may be one of the strongest M&A years in memory.

Now we understand that exit timing is impacted not only by external market trends, it is also affected by your personal journey in life. As much as we would like to make the decision to exit your company a “scientific” exercise, we also recognize that the idea can be extremely emotional for many business owners, especially if the business has been in the family for multiple generations. The clan’s ongoing legacy and association with the company and community might be at stake.

However, setting all that aside, it really is important in ensuring your personal financial future (and that of your family’s) that you begin to plan for an exit event sooner rather than later. A great place to start this process is by attending a Generational Equity M&A conference. Investing a few hours of your time will greatly benefit you later, as the information you gather will allow you to outline your exit planning goals and time frame.

If you would like to learn more about Generational Equity and our educational conferences, please use the following links:

Remember: the timing of your exit strategy plays a significant role in determining the value of your business in the eyes of buyers. If you are considering the next chapter, make sure you act now to benefit from this seller’s market while it lasts.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2017 Generational Equity, LLC. All Rights Reserved.

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.

Success

Success, you have been added to our list.

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
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
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 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
We thank you Eric and Generational Equity making our dream come true.
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
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
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.
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
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.
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
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.
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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
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
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