Recently, Ernst and Young (EY) surveyed more than 2,500 executives from 43 countries, including more than 500 executives in the U.S., to determine their attitudes and future goals regarding their acquisitions plans. Not surprisingly, given that we are in one of the strongest seller’s markets in ages, and demand for targets is high, these executives plan on being quite active over the next 12 months or so:
Encouraged by recent policy changes and positive economic growth, 86 percent of executives surveyed expect the global M&A market to improve over the next 12 months, according to Ernst & Young LLP’s twice-annual Global Capital Confidence Barometer. In the U.S., 72 percent expect the domestic M&A market to improve, a considerable uptick from 25 percent of respondents six months ago.
Based on research we have done and on conversations we have regularly with buyers, we are in total agreement with the results of this survey. In fact, we think business buyers might even be more active than suggested by the results. According the EY data:
The polled executives are feeling good about the economy, with 96 percent in the U.S. indicating that economic conditions are stable or improving. They’re also optimistic about deal making, with 54 percent of the U.S. executives surveyed expecting to actively pursue M&A, a climb of 12 percent since October 2017. Also, 61 percent expect their pipeline of potential M&A deals in the next 12 months to grow, which is three times higher than the percentage reported one year ago.
The last sentence that I highlighted is fascinating to me. What the survey suggests is that these executives expect to have more acquisition targets in their funnel over the next 12 months – three times more than one year ago. The only way this will happen is if business owners realize the tremendous opportunity before them and prepare their companies (and themselves) for an acquisition of some type.
We ask business owners these questions every day:
Sadly, too few are taking advantage of this seller’s market cycle and will most likely have to wait until the next seller’s market in 7-10 years. Don’t fall into that trap.
Keep this in mind: Far too many business owners assume that buyers are only after their balance sheets, specifically the value of their equipment. Nothing could be further from the truth. Today’s buyers are looking for intangible assets and according to the EY study, the number one item they are searching for is talented employees:
Of the U.S. executives in the EY survey, 58 percent say that acquiring talent is the top strategic driver for acquisitions. Another recent survey—by SunTrust Banks Inc. of small- and middle-market businesses-- also found that acquiring skilled talent is a major driver for M&A.
Think about that: You may be radically undervaluing your business by not taking stock of the true value of your company - your associates.
Bill Casey, Vice Chair of Transaction Advisory services for EY Americas states, “More than half of executives say they are struggling to identify and hire people with the right skills.” Casey adds, “The fact is that maybe a shorter path might be to acquire a business to get access to a talent pool. In addition to having a job market that’s getting tighter, we also have a skills gap.”
The reality is you may be sitting on a gold mine in the form of your employee base and not even be aware that to some buyers, it might be worth a premium over your book value to acquire the future potential of your company.
So all of this is very good news for business owners prepared to take advantage of the seller’s market and buyer activity over the next 12 months.
If you are already a Generational Equity client reading this post, then you have made the most important first step in your preparation: Hiring the most experienced M&A advisory firm in the lower middle market.
However, if you are a business owner who has not hired us, has no plan in place and is not prepared to reap the continued seller’s market, then you need to contact us to discuss your goals and objectives and to find out if our services are a good match for you. Please reach out to us at 972-232-1121, or provide us with your contact information and we will be in touch.
Additionally, we regularly hold complimentary conferences throughout North America that help business owners ready themselves for acquisition – find a conference near you. And if you would like to hear from some of our clients who have benefited from our executive conference, follow these links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC. All Rights Reserved.
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
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
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
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
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
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
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 must say that I have never worked with a more driven, competent and focused individual as Don Ho.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
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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.
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 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 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.
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