PitchBook Says: Most Companies Sold Are Lower Middle-Market

By Generational Equity


One of the most compelling pieces of exit planning research that we present in our M&A seminars is the fact that year after year, the vast majority of closed M&A transactions are with companies from the lower middle-market, which is loosely defined as those valued below $100 million. This assertion is supported by PitchBook’s recently released 2nd Quarter 2016 M&A Report:

As you can see, in the last quarter, about 70% of all deals closed were valued below $100 million. This percentage is pretty constant from Q1 2013 through YTD 2016, fluctuating from a high of nearly 80% in Q1 2013 to a low of around 70%.

When we present this type of data in our seminars, we usually surprise most attendees because they have the opposite assumption, namely that most deals closed are very large because this is what gets all the press. In fact, research also shows that of the 70% below $100 million, a near majority is valued below $25 million, indicating that smaller deals are very popular with professional buyers.

The Attraction of Smaller Businesses

Why is this, you may wonder? If the huge deals get all the press, what is the benefit of acquiring a smaller target?

As we mentioned recently in another post, the answer is simple: Professional buyers have learned the hard way that it is easier to acquire and integrate a smaller player than it is to try and do the same with a billion-dollar transaction. And this makes sense. If you are a corporate strategic doing $100 million in revenue and are on an acquisition expansion program, it will be far easier to locate and acquire/integrate four $25 million revenue companies over several years rather than do so with one $100 million business of similar size.

In addition, the really exciting factor is that acquiring four businesses introduces four different management teams and business models, each with new ideas, strengths, and ways of doing things. This can be a huge incentive for the acquiring company.

So the facts are clear: Smaller deals are attractive.

If this is news to you, and you own a privately held company, then you really need to set aside time to attend a Generational Equity M&A Seminar. We hold these throughout North America and they are complimentary and no-obligation; we have designed them to aid business owners who have little or no experience, through the entire exit planning process. Our M&A professionals have designed an educational system that is intended to give you 100% more info after you leave than you had before you attended.

To learn if your company qualifies to attend, please reach out to us at:

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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