Over the last several years one of the most accurate predictors of M&A deal volume has come from Intralinks. Intralinks is a leading financial technology provider of software and services, including virtual data rooms (VDRs), for the global banking, dealmaking, private equity and capital markets communities.
The Intralinks Deal Flow Predictor (DFP) forecasts the volume of future M&A announcements by tracking early-stage M&A activity – sell-side M&A transactions across the world that are being prepared or have entered the due diligence stage. These early-stage deals are, on average, six months away from a public announcement.
Published quarterly, the Intralinks DFP has proven to be a reliable predictor of pending M&A activity. The fact that their data is based purely on the level of activity in their VDRs makes it a highly reliable indicator of future deal activity.
We have used it for years and found it to be highly accurate. Based on their latest update, they expect an overall slowdown in global deal making, but a 5% increase in deal volume in the U.S. for the first six months of 2019.
Use the following link to review their entire 2nd quarter forecast:
Can You Capitalize on Increased M&A Volume?
This is great news for “buyer ready” businesses. What constitutes a buyer ready business? In general, a buyer ready business is one where the owner has taken steps to address the following common issues:
Far too many business owners that we meet at our exit planning conferences are not aware that focusing on these three strategic areas can have a significantly positive impact on the value and sale-ability of their businesses.
Why do these factors matter?
Because buyers loath risk. When they calculate the value of a business, they typically use a discounted cash flow model (DCF).
Basically, through a DCF model they look at the future earnings of the business and discount them back to today’s dollars using a “discount” method. The rate that is used is driven largely by the risk they see in the future cash flow of the investment they are analyzing.
The higher the perceived risk, the higher the discount rate and the lower the value. Conversely, the lower the risk seen (compared to other opportunities) the lower the discount rate and the higher their valuation.
Your goal as the owner of a privately held business is to reduce (as much as possible) the risk perceived in your opportunity. By addressing the three areas listed above, in most cases, you can significantly improve the value of your company in the eyes of buyers.
The Unknown Knowns
As Donald Rumsfeld once said, “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.”
Any privately held company will carry some level of risk simply because in most cases there is little public information available. Unlike publicly held businesses that are required to file quarterly reports with the SEC (and often more frequently than that), privately held business largely fly under the radar screen. So the very nature of these companies means a higher level of risk (unknowns) for buyers.
The good news is that you don’t need to reach “perfection” in each of the three areas above to impact the level of risk seen by buyers. In fact, as long as you are making progress towards addressing these issues, you will command a better value than if not.
Of course, there are many other value-building strategies in addition to these three, but the ones you need to implement will depend on your business and its unique situation.
That is what makes the Generational Equity system so successful. The first step in our process creates a full analysis of your business which is then used to create value-enhancing strategies for your company. The value-building ideas that we generate for you will help you better prepare your business for the intense buyer scrutiny that ultimately comes with due diligence.
The very first step in your value-building process would be to attend a Generational Equity exit planning conference in your area. These are designed by business owners for business owners to inform them about the process behind exiting a company, and the investment of a few hours will be well worth it in the long run.
Even if you don’t hire us to represent you, the information you take with you at the end of the conference will enable you to generate a far greater return than if you didn’t have any concept of value-building ideas at all.
To learn more about our services and how you can build a buyer ready business, please use the following links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2019 Generational Equity, LLC. All Rights Reserved.
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
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.
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
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
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.
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
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
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 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 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
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
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 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.
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 thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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
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
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
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 must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
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