Based on a recent survey of 2,900 business executives throughout the world by Ernst & Young - taken AFTER the impact of COVID-19 was felt on the economy - 56% of executives surveyed are actively planning to pursue acquisitions in the next 12 months, an actual increase from October's figure of 52%!
For many of you, this is stunning news. But it makes sense because professional buyers (the kind that you want to sell your business to) know that once the economy begins to return to normal, there will be an anticipated increase in acquisition activity.
In fact, according to Bill Casey, an executive at Ernst & Young who worked on the consulting giant's survey, "I think there will be a tremendous uptick in the level of deal activity."
But you probably are asking: What kind of businesses will they be after? Most likely huge, mega-deals?
Again, according to the survey highlighted in Pitchbook: “For now, many dealmakers are forgoing transformational mega-deals in favor of smaller acquisitions.”
And this makes sense. History shows that it is far more effective, and the ROI (return on investment) better, when buyers acquire 10 smaller companies and merge them over time rather than make one huge transformative deal that often yields poorer results.
Again, according to Mr. Casey:
"Ultimately, companies are going to have to reimagine their business. The world will be changed fundamentally as a result of this, and that will lead to more transactions.”
Although the survey found that 73% of respondents expect the COVID-19 outbreak to severely undermine the economy short-term, 38% expect a quick, V-shaped recovery, with economic activity returning to normal in 2020.
This is an important question. Right now we realize that there is tremendous uncertainty in the world and we are facing several weeks of continued business disruption. But most experts agree that eventually the U.S. economy will return to some level of normalcy. Certainly, the $2 trillion dollar CARES Act passed recently and the Paycheck Protection Program which is part of it will help sustain many businesses for the foreseeable future.
So what you need to do is begin preparing your business today for the eventual return to business as usual by beginning your M&A journey.
What is the best way to do that during these turbulent times?
A very good first step is to either attend one of our exit planning meetings that we hold throughout the U.S. or register to attend one of our informative M&A webinars. At either venue, you will have a chance to meet face-to-face or virtually with a Generational Equity M&A Advisor.
Our M&A professionals have extensive experience in guiding business owners through times like this. During that meeting, you will mutually determine what the next steps may be for your particular situation in relation to our services.
Keep this in mind: It takes 90-120 days to complete the initial evaluation phase of your business, a critical first step in a professional M&A process. So starting out soon means that you will most likely be entering the market at the point when recovery may be in full swing, and buyers will be most active.
We have never met a business owner that regretted starting the exit planning process too soon!
As you can see from the survey discussed above (and history shows us this too), privately held companies are acquired during all market cycles. The folks that reap the most benefit are the business owners that have built buyer-ready businesses that, coming out of any cycle, are prepared to meet with buyers and generate optimal deals for their owners.
So, if you are interested in being part of this eventual increase in buyer activity, reach out to us at 972-232-1121 or visit our website, provide us with your contact information, and we will be in touch.
If you would like to learn more about Generational Equity and the services we provide please use the following links:
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