On an annual basis, Ernst & Young (EY) does a survey of planned M&A activity for corporations, equity firms, and other buyers to determine what the ensuing 12 months may look like. As expected, 2018 is predicted to be a continuation of what is a seller’s market that we have been experiencing in M&A in recent years.
This is how EY put it:
Looking ahead, a positive economic outlook, low borrowing costs and an abundance of “dry powder” waiting for deployment by private equity firms are all factors that should support continued deal-making in 2018, according to a survey by EY of senior executives from across the globe.
The firm’s poll showed 56 percent of respondents expect their company will actively pursue deals during the next 12 months. That is in line with prior results from the previous two years.
Note the adverb used prior to “pursue” to describe deal-making plans for 2018: ACTIVELY!
Business buyers that we talk to regularly are of the same mindset; many are planning to aggressively pursue transactions this year for many of the reasons outlined above. In addition, new tax legislation passed late last year will generate substantial cash for buyers to use for a variety of uses.
Presumably, mergers and acquisitions will be a key tactic allowing firms to obtain market share, gain new customers, get access to new technologies, and expand geographically, among a myriad of other purposes.
According to EY, another trend to lookout for in 2018 will be increased competition between buyer types. Here is their analysis:
Among the themes to watch: Corporate executives anticipate further competition in 2018 from private equity buyers for quality assets. “Private equity is likely to be one of the biggest stories in M&A over the next 12 months, with corporates being challenged for assets more than during the past five years,” EY said.
The firm’s survey found 60 percent of those polled expect more competition for assets, while half see private equity as the top challenger.
Bottom line: This is great news if you are the owner of a privately held company today. The next 12-18 months may be the best time in years to dust off (or create) your exit plans. Even if you are not sure exactly when you want to exit, or what the M&A process is, it is a great idea to find out what your business is worth now.
This will allow you to begin planning with your wealth advisor what time would be best for you to exit, based on how much you want/need to receive when you monetize your company via an M&A transaction of some type (either full or partial sale).
Keep in mind that selling a business to an optimal buyer is a process NOT an event. This means that getting started on your exit plans early is critical because it will allow you to build your business in a thoughtful, strategic manner, enhancing its valuation over time.
And since 2018 is going to be at least the fourth year of the current seller’s market, and these don’t last forever, it is a prime time to begin your exit process!
If you would like to learn more, contact our team at Generational Equity. We have been one of the leading lower middle market M&A firms for the past decade-plus. Our services are 100% focused on helping owners of privately held businesses exit their companies for the maximum value possible.
We spend time preparing our clients for a successful exit, not just the company itself, but also the owners and spouses/families. So, when the 11th hour of negotiations comes, all parties understand what the M&A process is.
And special thanks to EY for surveying the landscape and Merrill Corporation for reporting it to us.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
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
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
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
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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.
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
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).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 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
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
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
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.
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
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
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.
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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 quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
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