Another Year Added to the M&A Seller’s Market

By Generational Equity

03/11/2019

Recently Citizens Capital Markets (part of the Citizens Financial Group) published a survey they conducted about future M&A activity. As we have seen in other overviews that examined pending deal volume, the folks that Citizens surveyed were also enthusiastic on both the sell and buy side of the equation.

The survey was conducted among U.S.-based middle market businesses ($50MM to $3B in revenue) that are currently engaged in or open to mergers and acquisitions activity. Over 600 business executives directly involved in decision-making related to mergers and acquisitions (owners/partners, CEOs, presidents and other C-level directors) completed a 15-minute survey between November 8 and December 3, 2018.

As you can see, the results of this survey are highly indicative of what these middle market executives see pending. The survey revealed that for sellers, solicitations from buyers are at an all-time high.

Source: Citizens Capital Markets

Likewise, buyers too are looking forward to 2019.

Source: Citizens Capital Markets

But the most fascinating finding in the survey is that both sellers and buyers prefer to work with M&A advisory firms on transactions.

Source: Citizens Capital Markets

A couple of key takeaways come from this information above. First, time and time again we hear from buyers who say they are actually pleased when a target has hired an M&A advisor. 

Why?

Because the odds that the deal will close successfully go up dramatically if a seller has hired an M&A intermediary. Hiring an M&A advisor or investment bank does several things for the seller:

1. It allows the seller to focus 100% on running their business.
2. It shows a level of commitment to the exit process that makes buyers far more comfortable that the deal will close.
3. It gives the seller a third party to handle the tough negotiations and guide the seller through the challenges that due diligence brings.
4. It gives the seller a better opportunity to get a premium deal because of the limited auction process that most professional advisors use.

These are key benefits to the seller that cannot be underestimated. The fact that buyers also see the benefit (even though they may end up paying more for a target) is very telling. Don’t just take my word for it, listen to what these buyers have said about Generational Equity over the years:

• The Key Role Generational Equity Plays
• A Private Equity Group's Viewpoint
• What M&A Intermediaries Bring to the Table

The fact is professional buyers have all the capital and financing they could ever want right now. 

What they often lack is time.  

Spending 3-6 months trying to close a deal only to see it fall apart because a seller is unwilling (or unable) to close is an incredible waste of their resources. So help yourself, and your buyer too, by hiring an M&A firm to support your sale!

If you would like to download the entire Citizens Capital survey, you can do so here:

• Still a Seller’s Market – For Now

If you would like to learn more about the current M&A market and where it is heading, please give us a call at 972-232-1121 or visit our contact page, provide us with your information, and we will be in touch.

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

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