Insights & Info

Insights > Middle Market M&A Trends

Middle Market M&A Trends

By Generational Equity

Middle Market Trends

Recently PitchBook and the Association for Corporate Growth co-hosted a webinar entitled “Putting Middle Market M&A on Top: Past, Present & Future.” The panelists included James Gelfer, Senior Analyst, and Dylan Cox, Analyst II, both with PitchBook.

The goal of this webinar was two-fold: To bring participants up to speed on where middle market M&A is today and, more importantly, to provide information on where we are heading in 2018 and beyond.

Here is a synopsis of their findings:

Middle-market M&A deal-makers are facing as competitive a landscape as any time in the last decade. Dry powder in private equity vehicles has reached all-time highs, while public equity valuations and cash on corporate balance sheets continue to climb.

At the same time, the M&A boom of the last few years has left fewer viable targets in the market, wrenching up the pressure on diligence and deal sourcing. Private valuations have soared along with their public counterparts, but opportunities remain in select sectors and segments of the market.

The key part of the paragraph above is the segment in bold. Based on conversations we have regularly with professional buyers, the biggest issue they are collectively facing is that there simply are not enough businesses in the market today to acquire.

When we bring this up at our exit planning conferences, most attendees are surprised. When it comes to selling a company, far too many middle market business owners believe that their company is either too small and/or in an industry that buyers simply are not interested in.

Reality is not in agreement with that line of thought. Over the past few years we have sold companies to buyers in industries that many consider far from sexy. If you are interested, have a look at just some of the industry sectors where we have closed deals:

I purposely selected three of the least sexy industry segments you can imagine to prove my point: Don’t assume that just because of your company’s industry or size that it is not potentially desirable to business buyers.

Why Do Professional Buyers Acquire Middle Market Companies?

Professional buyers generally have mandates that revolve around key strategies that the company may be pursuing. Some we have seen include:

  • Geographic expansion

  • Product line addition

  • Vertical and horizontal integration

  • Economies of scale

  • Access to skilled employees

And these are just a few examples. Here are some facts to ponder:

  1. Big companies really do buy small companies
  2. Buyers might see different opportunities for growth than you do
  3. Buyers are buying your future, not your past
  4. Often you are too close to the daily grind to realize the significant opportunities your company can capitalize on in the hands of new ownership
  5. Your company probably has significant “intangible assets” that an experienced M&A team can leverage to attract buyers
  6. You most likely have been minimizing your pre-tax profits for years. Recasting allows you to present the true profitability of your organization

You may now see you have lots to learn about selling your company for maximum profit. Most middle market business owners do. That is why we hold educational, no-obligation exit planning conferences throughout North America. Investing a few hours of your time could pay off handsomely as you begin to examine your exit opportunities. To learn more about Generational Equity and what we offer business owners, please use the following links:

And no matter what you end up doing with your business in 2018, do not sell it short! The right buyer will most likely pay a premium for your business.

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

© 2018 Generational Equity, LLC. All Rights Reserved.

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.

Success

Success, you have been added to our list.

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.
Generational Equity’s assistance was invaluable in compiling and marketing our business.
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
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
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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 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
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 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
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.
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
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
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