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Second Quarter U.S. M&A Transactions Expected to Increase

By Generational Equity

03/07/2018

A few weeks ago, our friends with Merrill Data Site released their prediction for 2nd quarter M&A deal closings in the U.S. As other sources have also shown, deal closings based on Merrill’s data will be up around 10% in the second quarter over the previous year.

Merrill is in a unique position, allowing them to provide valuable estimates of future M&A transactions. For those of you unfamiliar with Merrill, the company provides secure, cloud-based virtual data rooms (VDRs) that deal making professionals use to exchange deal data with buyers and sellers.

Although the information shared is completely secure and confidential, Merrill is allowed to tabulate the opening of VDRs and on a quarterly basis makes accurate predictions of pending deal closings from the number of VDRs in their system. Since they are one of the leading VDRs in the industry, their data is very reliable and provides a good window on pending deal making.

Here are a few key additional points from Merrill’s latest M&A Deal Forecaster:

Following the passage of the new US tax bill, optimism about 2018 M&A abounds. “People were waiting for the smoke to clear,” says Peter Hawthorne, VP Corporate Strategy and Development at Cargill. “For both onshore and offshore investors, it provides clarity.”

"U.S. Companies can now bring cash back home, so I would expect an inflow of repatriated corporate cash to fund domestic M&A,” agrees Jonathan Rothenberg, SVP Corporate Development and M&A at GlobalLogic. “It’s been ten years since we’ve had as good a regulatory environment to invest, plan and do business in.”

A Bright 2018 for M&A Transactions

As we have indicated in past posts, we also believe that the clarity in the market now regarding tax policy will provide further impetus to our expanding M&A seller’s market.

This is great news if you are in the market right now with your company and are actively looking or negotiating with buyers. But what about the millions of others of you that are not? Delay can be very, very costly.

Did you know that of the 15 million privately held businesses in the U.S. nearly 60% are owned by folks who were born prior to 1964?

Let that last statistic sink in for a moment. Then do the math: Around 9 million business owners, one way or another, will be faced with exiting their businesses over the next 10 years or so. Certainly, many will simply close the company doors. Others will turn the keys over to children, younger siblings, or employees.

The wise ones will hire M&A advisors and will be able to find premium buyers for their businesses. This is the route we suggest that business owners actively investigate. Don’t delay until after this seller’s market ends (estimated by many to be at the end of 2019) when overall valuations will drop. And certainly don’t wait five to ten years to enter a crowded market with the millions of baby boomers who will be desperate to sell.

Selling a company is a PROCESS, not an EVENT. Wise folks will understand this and proactively plan for their exits.

To learn more about M&A transactions and how you can successfully prepare for your exit, call us at 972-232-1121 or visit our contact us page on our website and we will be in touch. Generational Equity is one of the leading middle market M&A firms in North America. Our track record speaks for itself:

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

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