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Merger and Acquisition Trends

By Generational Equity

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Recently The M&A Advisor, a leading mergers and acquisitions trade organization, along with Katz, Sapper & Miller, a renowned CPA firm, conducted a survey of experienced M&A professionals.

The aim of the study was to delve into trends and developments impacting M&A deal making in 2016 and how those issues might impact 2017. As always, their findings were quite enlightening. We will be spending the next couple of postings looking at some of their results to discern how business owners can take advantage of the current M&A environment.

Respondents were asked to rank the top three to five challenges buyers faced in 2016. The top two choices were “sourcing a company that is a good cultural fit,” chosen by 55.2 percent of respondents, and “owners’ willingness to relinquish control,” chosen by 52.4 percent of respondents. You can see the entire results of the question below:

Source: The M&A Advisor 2016 Trends and the Outlook for 2017

I found the results of this question quite interesting because the top two variables address how challenging it is for professional buyers to close transactions. By far, finding the appropriate candidate to invest in is the largest challenge buyers tell us about as well. That is why they enjoy working with the Generational Group: our dealmakers are skilled in bringing appropriate sellers to synergistic buyers. This saves the buying organization the task of sourcing deals that make sense.

On top of that, we ensure that our clients are, in fact, true sellers, not merely business owners testing the market to determine if there are any buyers active in the industry. How do we do that? First, we charge an initial fee that is refunded from our success fee at the close of the transaction (except in California). The commitment of paying the initial fee is a key first step in gauging a business owner’s true interest in selling.

Secondly, the first step in our proven process is our full and thorough evaluation of the client company. This step usually takes 60-120 days depending on the quality of the company’s financials, as well as the availability of ownership to answer our key questions. Although not nearly as grueling as due diligence usually is, the evaluation nonetheless does certainly test the true goals of our client and their commitment to actually culminating the process with a sale.

In fact, quite often our clients decide to retain the company long-term after our evaluation simply because through our process they realize that leaving the business is simply not the best option for them at that point in time. Holding and growing the company for a later exit point makes more sense.

So, our work clearly removes those unsure of selling from our pool of clients, which, again, is helpful to buyers. Buyers tell us that they have plenty of capital to invest right now; what they lack is time. There is nothing more painful from a buyer’s perspective than to spend three of four months getting to know a target, moving through due diligence, only to have the seller back out at the 11th hour due to cold feet. Our process helps to better prepare the seller psychologically for his/her eventual departure from the business.

However, the most important first step even before a decision to sell is to gain as much education as possible about the process. Knowledge is power and the more you know, the better a decision maker you will be regarding when and how to exit from your company for maximum value. A great place to start your education on this topic is attending a Generational Group executive conference on exit planning. We hold these throughout North America and spending a few hours with us will allow you to examine some key topics like these:

  • Building value vs. growing a business
  • Value myths exposed – The truth about multiples, book values and more
  • How savvy buyers take advantage of unprepared sellers
  • Interest rates and their impact on selling price
  • Exit strategy and timing
  • Presenting your financials properly

This is just a short sampling of what we cover, to see our full agenda and find out how you can attend, please use the following links:

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

© 2017 Generational Equity, LLC. All Rights Reserved.

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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
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
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 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
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Ralph Noblin, President of Noblin & Associates
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 am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
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.
Dear Chris and Andre, I just wanted to say thinks 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. As I said before 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
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 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.
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
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Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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
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
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.
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 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 thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
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 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
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
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