It is always reassuring to find third-party evidence that supports the trends we see daily in our M&A practice. As we have discussed in past posts, we are currently in the midst of one of the strongest seller’s markets in decades.
Now, based on new research from Merrill Data Source, we can anticipate several more months of increased buyer demand. According to Merrill:
In the “Americas” pre-completion M&A activity continues its 1Q surge, with particularly strong growth in the business services and consumer sectors. All regions and nearly all sectors remain a “go,” with a global uptick of 15%+ from the first four months of 2017.
This data is from their June “Merrill Insights,” which is based on the activity they are seeing in their VDRs (virtual data rooms). Merrill Data Source provides confidential “rooms” where due diligence documents are stored/analyzed/reviewed prior to a transaction closing.
As one of the leading VDRs for M&A transactions, their data provides us with a unique preview of deals closing six to nine months down the road, as VDRs are only opened when two parties are seriously considering a transaction.
So, if they are tracking a 15% increase in VDR activity through the first few months of 2018, it is a safe bet to assume that this will translate into a similar increase in deal closings in this M&A seller’s market for the remainder of 2018.
This is not a perfect science, and certainly VDRs are opened all the time for deals that do not close, as many transactions do not progress beyond due diligence (this is why VDRs are created).
However, based on past history, it is clear that a 15% “uptick” in global M&A activity (and by the way it is +16% in the “Americas” region that includes North, South, and Central America) would lead us to believe that the current seller’s market is not slowing down quite yet.
For one simple reason: If you are the owner of a privately held company, you are facing a market unlike any we have seen for at least a decade, if not longer. Sitting on the sidelines attempting to “time the market” to sell your business at its peak is no longer a viable option.
The day we know that a seller’s market has passed is when we are about six months into a buyer’s market. You don’t want to wait until that point to act.
Let’s face it: Most entrepreneurs don’t want to discuss their eventual exit until it is required of them. Keep in mind that based on our experience there are two kinds of business owners:
Based on surveys we regularly conduct with business owners, the number one reason that they don’t plan in advance is a lack of knowledge of how to exit their business in an optimal manner – one that maximizes their ROI, not only financially, but also in the intangibles of sweat equity poured into the company for decades.
We hold no-obligation, highly educational exit planning conferences throughout North America that are designed in a few short hours to take a business owner with no knowledge on exit planning to a point where he/she is prepared to start the process.
Frankly, it is in our name: Generational Equity. We are convinced that over the next decade, we will see the most significant transfer of wealth in the history of the U.S. economy as baby boomer business owners begin to retire in droves.
Sadly, far too few will be prepared for this event and many will sell their business at a significant discount or simply close the doors of their company altogether because they have not taken the time to PLAN for their exit.
Take the first step: Attend a Generational Equity conference near you. While there you will not only learn a significant amount about how and when to sell a business for maximum value, you will also be able to meet one-on-one with our M&A professionals leading the meeting.
You will have the opportunity to share your specific transition plans with them and learn how Generational Equity might serve your needs. To learn more, use the following links:
No matter what, please take time to consider your future plans prudently and thoughtfully. If you own a business, think about the legacy you want to leave behind not only for your family, but also for your employees, customers, and community.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
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