We have returned with more M&A projections and predictions for 2017, and like all the others we have seen so far, the majority expect the seller’s market to continue for at least the next 12-18 months. This is the analysis of 2017 trends by Mergers and Acquisitions magazine:
Some of the obstacles to closing deals that persisted in the beginning of the year (in 2016), such as financing challenges, have eroded. Fueling confidence, the U.S. gross domestic product grew 2.9 percent in the third quarter, according to the U.S. Department of Commerce.
Expectations that the momentum will continue, especially since the presidential elections are completed. On Mergers & Acquisitions’ M&A Conditions Index (MACI), leads for new transactions and completed deals delivered their highest scores of the year late last year, heralding a strong fourth quarter. And survey respondents say that, barring a major catastrophe, 2017 will be a strong one for M&A.
As we have discussed in past articles, only you can take action to partake in this current seller’s market. Just because M&A activity is expected to remain strong in 2017, this won’t benefit you if you are not already taking steps to take advantage of this cycle. Many of you are not personally ready for either a partial or full exit. We fully understand that. However, what may surprise you is that it may take several years to prep your company to be ready for your transition. Even if you are not going to take advantage of this seller’s market and plan on waiting the 5-7 years until the next, your preparation to do so should start today.
Business owners are often surprised to hear this when they attend our exit planning conferences that we hold throughout North America. Many don’t realize that you can grow a business and create a successful company, but in a manner that does not positively impact the key issue that buyers nearly all aim to minimize: RISK.
For example, growing your largest client from $1 million of revenue to $5 million is a wonderful idea. However, if in doing so, their share of your revenue goes from 10% to 50%, you will have grown both your top line AND the level of risk associated with your company to any buyer.
Likewise, if you grow as outlined in this example, and your net profit margin declines from 10% to 5%, you will be raising red flags for many buyers who might look at your opportunity. Some sellers might say, “But the client who is now half of my revenue stream is a Fortune 500 company, they always pay early and have promised to keep purchasing product from us for years and years, based largely on my personal relationship with the buyer there.” Again red risk flags will go up!
The reality is you not only need to expand your business, but you also need to do it strategically, thoughtfully, and using methods that reduce the risk associated with your business to buyers.
This is just one example; there are literally dozens of key metrics that we analyze when creating our Roadmap for Enhancing Value for each of our clients. This document and analysis are key parts of the services we offer to business owners who sign up with us. And trust me, the sooner you get started on implementing the strategies and concepts we develop through our full evaluation on your business, the better off you will be. Our “hold and grow” program is designed to help business owners take a company worth X and over time (and with some effort) make it worth 2X or more.
To learn more, attend one of our informative, educational M&A conferences. While there you will have an opportunity to meet one on one with our professionals and discuss your situation in detail, and using the information you gather, begin to create your own exit plan.
To learn more, contact us via our website or call us at 877-213-1792.
Bu Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
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
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
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’s assistance was invaluable in compiling and marketing our business.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
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 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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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 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
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.
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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
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
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.
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.
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
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 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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