PitchBook is a leading research organization that tracks merger and acquisition trends, focusing largely on the key segment of the industry where the vast majority of deals are sized, the lower middle-market (deals valued below $500 million are generally defined as being in the middle-market, those below $100 million are usually lower middle-market).
Based on their analysis, this latter segment of the M&A market still remains a “seller’s market,” especially for well run, profitable, growing companies. This is how PitchBook describes the situation in a recent article:
It's clear that continued competition for deals and sustained high prices for quality companies is helping elevate transaction multiples and, consequently, overall deal value even at the lowest ends of the middle market…
The lower reaches of the middle market are quite popular nowadays. Since private equity buyout shops are sourcing so widely, and, moreover, are still firmly staying away from the mega-buyouts of old, it’s more likely than not that a shrunken supply of worthwhile targets is contributing to the slowing of the buyout cycle. The question then is how much the buyout cycle may slow by, and how long that will take.
As long as the cost of borrowing remains low and PE capital overhang so bulky, it really does come down to a matter of supply. Accordingly, the slowing of the cycle still has some ways to go, as a fair degree of consolidation among small-to-medium businesses in certain sectors, either due to generational wealth transfers or industry cycles, is still ongoing—generating opportunities for financial sponsors—in which the quality of the company in question becomes the primary obstacle.
According to Pitchbook, the demand for quality lower middle-market companies remains robust and should continue to be so for quite some time. Now the key to this analysis is the word “quality.” As with the definition of beauty, you know it when you see it. But generally speaking, a quality company usually has many of the following characteristics:
If you have these features in your business, then it may command a premium value in today’s market, because what buyers tell us regularly is the one thing they lack in today’s market is a base of well-run companies to target:
The common theme we hear from buyers is this: We have plenty of capital to invest, what we lack is time to spend reviewing too many targets that are not relevant to our needs as platform or add-on companies. If you have one (or more) of the features listed above, it would behoove you to re-examine the timing of your exit plans.
Currently we are in the midst of a seller’s market in the lower middle segment. Fortunately, post-election, it is clear that changes are coming that may positively impact the financial markets. The results of November 8 caught many M&A professionals by surprise and it is now clear that the business environment going forward will be positive as it relates to M&A activity.
If you are considering an exit in the next 18-24 months, I recommend that you reach out to an M&A advisor to guide you through the pending few months. If you have not spoken to an M&A professional, the Generational Group is here to help. Our firm is comprised of the leading M&A professionals in the lower middle-market. In fact, no company has closed more deals in this niche than we have over the past several years, according to Thomson Reuters, a research organization that tracks deal closings.
For more information about our services and how you may benefit from them, call me at 972-232-1125 or send me an email at firstname.lastname@example.org. For additional information about our services, use the following links:
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Group’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Group to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Group is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.