M&A Timing – The Time for Finding Buyers is Now!

By Generational Equity


Recently the National Center for the Middle Market (NCMM) produced a compelling report entitled, “Let’s Make a Deal: 3 Reasons Why the Time Is Ripe for Middle Market M&A.” As always, their research and analysis were impeccable and their timing perfect, for we truly are in the midst of one of the strongest seller’s markets in quite some time.

The three reasons they outlined for why now is a great time for M&A transactions are very similar to facts we have covered before:

  1. Favorable economic conditions and increased confidence are bringing more players to the game.
  2. The need for strategic M&A is growing.
  3. Vast amounts of private equity funding are ready to be put to work.

Now any of these individually would lend itself to creating a seller’s market; however, we have rarely seen all three converge at the same time. Let’s look briefly at each one of these.

U.S. Economic Growth

Simply put, buyers are more active when they have confidence in the direction the economy is taking. They generally loath risk and try to minimize it as much as possible. Solid economic growth coupled with the new tax reform legislation, is giving them confidence (and the cash) to fund acquisitions as never before.

The Need for Strategic M&A

As the NCMM put it in the report, “Executives may also feel there is limited room for organic growth in their markets, so they look to M&A as a means to expand and acquire new capabilities and customers.”

Most M&A professionals will tell you that the fastest, most efficient way to grow an organization is via acquisition, not organic growth. The ability to add new talent, customers, vendors, and processes can be achieved much faster via a strategic acquisition. Savvy buyers realize this and are constantly looking for targets to acquire.

Private Equity Funding

Finally, as the report states:

“According to data from Thomson Reuters, about $200 billion in private equity funds was waiting to be invested at the end of 2017, up from around $130 billion raised by the same time the year before. And middle market companies are the number one target for those funds.

Far too many business owners discount the notion that a private equity firm would find their businesses attractive. Many owners focus on the billion-dollar deals that get all the press made by very large equity firms. The reality is a significant majority of deals closed are completed below $100 million in valuation, and a high percentage are even smaller than that.

On an annual basis, about 25%-30% of our clients are acquired either fully or partially by equity firms. And, since our entire focus is on M&A transactions in the lower middle market, we are in communication with buyers who specifically look for companies that are in our niche. In fact, we have over 34,000 buyers in our proprietary buyer database that have told us exactly what types of companies they are looking for.

Is the Timing Right to Consider Your M&A Strategy?

Again, based on the three factors outlined by the NCMM, now is a PRIME time to consider your exit plans if you are the owner of a company today. Don’t let the rare convergence of these factors pass you by.

To learn more about the current seller’s market and trends driving it, you should set aside a day and attend a Generational Equity exit planning conference. These highly educational meetings are held throughout North America and are designed to help business owners understand how to exit their businesses for maximum profit at the appropriate time. Use the following links to learn more:

Remember: timing your M&A activity effectively is essential in pursuing a deal for the optimal value. Don’t delay in planning your exit while the market is still highly active.

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

© 2021 Generational Equity, LLC. All Rights Reserved.