On an annual basis our good friends with Bain release a survey of M&A sentiment/plans among folks that are active, professional buyers. Their research is always compelling and highly accurate.
This year, anticipating a potential economic downturn sometime in 2023 (although the jury is still out on that storyline), they compared their findings to the data they collected during the Great Recession on 2008-2009 and found one key fact:
In an uncertain market, executives make bold moves that define the future.
Generational’s deal making teams have seen this time and time again during multiple economic transitions, all the way back in many cases to the late 1980s.
The fact is, as we discussed in a recent article, professional buyers stay active because they know that the ROI never ceases and are always looking for well-run, middle market companies to acquire, because they are focused on the much longer-term timeline and know that their returns magnify and multiply over time. This is how Bain’s research played out:
Bain research on M&A in times of turbulence validates how M&A was part of the winning response in previous down cycles. They examined the acquisition activity of 2,845 companies from around the world during the global financial crisis and economic downturn of 2008–2009.
They found that in the long run, companies that executed at least one deal per year during the economic downturn earned 120 basis points more in total shareholder returns than companies that were inactive in M&A. Moreover, as they explore in the chapter “M&A in Times of Turbulence: Lessons from the Last Recession”, many industry-defining deals were made throughout the last downturn.
So for those of you thinking of staying on the sidelines in 2023 and putting your exit plans on hold, think again! History tells us that you will find active buyers across all industries especially as they look for a healthy ROI on middle market companies. Here is what Bain found in the course of their research:
Deal practitioners are prepared to take advantage of this moment. Bain surveyed around 300 M&A executives globally about their outlook and priorities for dealmaking in 2023. Respondents anticipate closing a similar number of deals, if not more, in the year ahead, encouraged by more attractive asset availability and decreased competition. They express confidence in the ability for M&A to create value. Nearly two-thirds of respondents report that acquisitions completed in the previous three years have met or exceeded expectations.
As for 2023, Bain identified five M&A trends to watch for in the year ahead:
Cash-rich companies making strategic, bold moves.
A continued prevalence of small to midsize deals.
A balance of scale and scope deals.
Valuations coming under further pressure.
Companies reshaping portfolios through separations and divestitures.
I have highlighted the first two of these five because they pertain directly to our clients and what we anticipate for them this year. As the Sage of Omaha, Warren Buffet, has wisely stated:
Be fearful when others are greedy. Be greedy when others are fearful.
2023 will be seen as a time when wise investors made bold strategic moves indeed. But they can only make those moves if sellers are not shrinking from the opportunities afforded to them during this time. Often a lack of sellers is the only thing that constrains active buyers.
So, if you have a written exit plan, continue to follow it. If you lack a plan, attend a Generational Growth and Exit Strategy Conference near you. While there you will become acquainted with all the options available to you for a planned, strategic growth and exit plan.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2023 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.