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M&A Transactions Predicted to Increase in 2018

By Generational Equity

02/26/2018

As we have seen from other sources so far this year, Deloitte’s “State of the Deal: M&A Trends in 2018” projects another strong year for merger and acquisition transactions in our current seller’s market. Here is a brief look at their summary from this extensive study:

In Deloitte’s fifth M&A trends report, we heard from more than 1,000 executives at corporations and private equity firms about the current year and their expectations for the next 12 months.

The results point to strong deal activity ahead: About 68 percent of executives at US-headquartered corporations and 76 percent of leaders at domestic-based private equity firms say deal flow will increase in the next 12 months.

Although we have seen other studies so far this year that have been very bullish on acquisition activity, Deloitte’s is especially meaningful because it is based on input from over 1,000 business leaders in a variety of industries and buying communities.

And these are all “real” buyers, comprised of “private or public companies or private equity firms with annual revenues of $10 million or greater.”

The survey is full of additional revealing insights:

  • Corporations have spending firepower; more companies say their cash levels have increased, and M&A remains the No. 1 intended use of those funds.
  • On the private equity side, 60 percent of respondents expect a greater focus on bolt-on acquisitions to build scale in the next year.
  • Corporations did maintain their appetite for deals in 2017, as the overall volume of transactions increased, though the aggregate value of deals was smaller.

These bullet points reveal several things we can expect for M&A transactions in the foreseeable future. First, an M&A strategy is the fastest, most efficient way to expand a business, and these buyers know that.

Secondly, bolt-ons, typically pursued by equity firms to expand platform holdings, are expected to grow as a strategy as well.

And finally, in keeping with the bolt-on concept, buyers are focusing more and more on acquiring smaller companies. They have found that doing so typically leads to more successful post-transaction integration.

If you’d like to learn more about merger and acquisition trends in 2018, check out these other insightful pieces:

Are You Prepared for a Successful M&A Transaction?

These are all good trends for business owners prepared to take advantage of them. Frankly, no matter where you think you are in the exit timeline, getting started early is far better than waiting until circumstances force you to do so.

I have never met a business owner who regretted starting his exit planning process too early. However, I have encountered dozens who lamented the fact that they held on too long.

If you want to avoid the same trap, I encourage you to hire an M&A advisor now and, with their advice, begin to build a buyer ready business today. Keep in mind this old M&A axiom:

Selling a business is a PROCESS, not an EVENT!

Approaching an M&A deal as an event will most likely mean that you will leave chips on the table when you exit your company. It is going through the process with an experienced M&A advisor that will yield you the maximum value for your company.

Make sense?

If so, and if you want to learn more, make plans to attend a Generational Equity exit planning conference soon. We hold these highly educational meetings throughout North America, and they are designed to help you begin to position your company for your full or partial exit to an optimal business buyer. To learn more, use these links:

And special thanks to our friends with Deloitte for once again creating a comprehensive review of projected M&A activity. If you would like to see the entire analysis, you can do so here: State of the Deal: M&A Trends in 2018.

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

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