Merger and Acquisition Activity Remains Strong, Says FactSet Mergerstat

By Generational Equity

09/30/2015

The volume and value of deals closed so far this year is outpacing 2014 by a good margin, according to data released recently by FactSet Mergerstat. As you can see in the following graph, the trajectory of deal closings had its best two contiguous months in June and July of this year in quite some time:

Source: FactSet Mergerstat

This certainly bodes well for the rest of the year since M&A transactions typically slow during the early summer months due to holidays. It becomes harder to close deals due to vacations, so two solid months like June and July provide us with renewed confidence that the current seller’s market we find ourselves in will remain strong.

Most interestingly, according FactSet Mergerstat, the deal category that grew the most from July 2014 through July 2015 was the category described as “undisclosed” deals:

Source: MergerStat Factset

A 13% deal volume increase in this category during the past 12 months is telling. You have to realize that most M&A transactions that are valued below $100 million are closed without either party (seller or buyer) disclosing the value of the deal. So the vast majority of these “undisclosed” are smaller deals.

Why is the value not revealed? Given the reality that most of these involve a private seller, you can understand how important it is for the seller, and in many cases the buyer, to keep intimate deal details confidential. For example, Generational Equity never reveals these details when we are given permission to publicize a completed transaction. Most M&A firms that operate in the lower middle-market have the same policy.

Are You Prepared?

The demand for smaller deals is quite strong right now, as we have discussed in other postings. Sadly, most owners of privately held companies are not positioned to take advantage of this trend. Most are unaware that we are in a seller’s market, assuming that only billion-dollar deals are closing since that is all they hear about in the media. Secondly, those that do want to take advantage of the current environment and monetize their largest asset are unable to do so because they lack the knowledge of how to effectively manage an exit plan process.

Fortunately, Generational Equity and its team of professional, dedicated, and experienced associates is here to void that gap. Our process begins with education: We firmly believe that during the next 10-15 years we will see the largest transfer of generational wealth in the history of the world as aging baby boomers retire and dispose of their companies. We are so dedicated to helping business owners retain as much of their net worth as possible that we have created a complimentary, educational seminar entitled, “How and When to Exit Your Business for the Most Profit: A Planned Exit Strategy.”

A couple of key points leap out at you from this title. First, the “how” and the “when” you exit your business are equally important. We meet business owners all the time who have horror stories of exiting under terms that favored the buyer, not the seller, and the long-term impact on the business can be devastating (most involve selling to employees or relatives with a huge note that the buyers cannot eventually pay). Likewise, far too many business owners exit when circumstances force them to, not when the market timing is right (usually one of the big D’s interferes: Death, Disability, Divorce, Disagreement, Disinterest, and Disembowelment).

In addition, one more key feature in the title is this: most profit. Certainly you can find a buyer for your business using the Internet, Craig’s List, classified ads, making the rounds at the country club, or even putting up a for sale sign. But these methods will typically not yield the most profit to you. The most profit is generated when you follow the last part of the title: using a “planned exit strategy.”

As the old saying goes, if you don’t have a plan, any road will take you there. This is especially true when you consider monetizing your business and using the proceeds to enjoy the remaining years of your life.

Business owners, it is up to you: Do you want to take advantage of one of the strongest M&A markets in years? Do you have an exit plan created and are you following it? Do you have any idea about how to create a “buyer ready” business? If your answer to any of these questions is no or maybe, then you need to attend a Generational Equity M&A Seminar. Don’t just take my word for it, listen to a few of our clients discuss the importance of the Generational Equity exit planning conference:

• Some Tangible Benefits of the Generational Equity Educational Process
• Key Items I Learned At the Generational Equity Seminar
• Why the Generational Equity Seminar is Important

As you will hear from these business owners, the investment of a few hours of your time will enable you to gain a significant amount of information about how to exit and how to do so wisely. Let me add this: The seminar is NOT a sales pitch. If you would like to meet with us after the conference to discuss your situation, that can be arranged. However, the vast majority of those that attend never hire us; but they do use the information we provide to go forth and make a deal with much better terms than they would have gotten if they didn’t attend our seminar.

Again I will ask you the three key questions you must face:

1. Do you want to take advantage of one of the strongest M&A markets in years?
2. Do you have an exit plan created and are you following it?
3. Do you have any idea about how to create a “buyer ready” business?

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

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