Middle-Market Merger and Acquisition Trends

By Generational Equity


On October 13th, Grant Thornton and The Deal co-hosted an informative webinar entitled “Middle Market Global Dealmaking Review & Outlook.” The panel was comprised of:

  • Rhonda Schaffler, Moderator, The Deal
  • Sal Fira, Partner, National Private Equity Industry Leader, Grant Thornton
  • Kenneth R. Meyers, Vice President & Group Head, M&A Americas, Siemens Corporation
  • J. Rohde, Partner, Thoma Bravo

As you can see from this group, this exploration into Middle Market trends was well represented by this panel of industry luminaries. In an hour they covered several key trends that are affecting transactions today and will continue to be significant in the near future. Some of the issues they examined include:

  • Some professional buyers have been taking a “breather” by and large this year, mainly because last year was a near record M&A market and now deals are being digested/integrated.
  • Buyer activity should pick up dramatically once the election is over and the annual year-end rush to close deals occurs.
  • A lack of organic growth opportunities is making M&A strategies very attractive.
  • The IPO strategy of the past is no longer as popular as an M&A event.
  • Due diligence is now playing an even more important role in transactions.

This last point was probably what leaped out at me as I listened to the session. Professional buyers are requiring more and more information from sellers to shield themselves from as much risk as possible. This is how two of the participants described the current due diligence environment:

Sal Fira: Buyers as a whole are more disciplined. Value creation models are being fashioned. Now it is much more than a financial due diligence and includes an operational team that is developing value drivers even before the deal is closed. Due diligence is so vital now. Lot more risk on the landscape now – cyber risk, cross-border rules – the world is a lot more complex.

Kenneth R. Meyers: We take a very planned approach to due diligence, especially compliance due diligence. For example, we look very closely at the target and the target’s supply chain. The other big area is data protection and IT. Every deal will be an IT deal now.

The reason I am pointing out this emphasis on due diligence is simple: Far too many sellers enter the final phase of selling their company (due diligence) and are woefully unprepared for the level of detail, the 100-200 questions that buyers typically ask, during that stage of negotiations. There are two levels of this preparation:

  1. Having financial, operational, HR, and IT records accessible and organized
  2. Being emotionally prepared to answer detailed questions, many of which can often be misconstrued as being personal (Why are they asking me this? Don’t they trust me?)

As we work with our clients, we ensure that both of these areas are addressed in advance. Our dealmakers do a fantastic job of preparing our business owners for the 30-60 days of grueling research by the buyer(s). But even so, I find it fascinating how challenging due diligence can be for even prepared sellers:

As you will hear in these video clips, if you enter due diligence without preparation both from a documentation standpoint and emotional and mental one, chances are good that if your deal even closes, the trauma you will go through will be challenging for you and your loved ones.

So get ready before negotiations reach that point. To learn more about due diligence and how to be prepared, I suggest that you attend a Generational Equity exit-planning conference. Spending a few hours with us will provide you with tremendous information about how to exit in an optimal fashion, with a special emphasis on what to really expect during due diligence. To find out when we will be in your area again, follow this link and a typical agenda of what we cover can be seen here.

If you are interested in the witnessing the webinar on Middle Market Global Dealmaking, you can watch it here.

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

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