The Cornerstone of M&A Activity in 2022 and Beyond

By Generational Equity

02/13/2023

A recent article published by Axial sums up our findings in 2022 (and YTD in 2023) as well:

The lower middle market demonstrated its resilience in 2022, serving as the source for fresh consolidation opportunities that a growing number of investors have capitalized on despite sustained macro-level uncertainty. These plays have also provided business owners with liquidity and succession planning that ensures the enterprises they have built not only retain a competitive advantage in their markets, but also continue to function as cornerstones in the communities they serve.

As we have discussed in prior postings, the middle market (made up of deals valued below $500 million) and the lower middle market (those below $100 million) continue to be the heartbeat of M&A activity. Since Census data shows that 85% of all U.S. based businesses have less than 20 employees and average about 4.4 each, middle market companies are a tremendous source of deal targets for professional buyers of all sorts.

I have highlighted the section above to point out that very few privately held businesses ever reach their true revenue/earning potential. This is no fault of the founders, it is simply a reality due to a lack of capital, managerial depth, and solid accelerated growth plans. Yet nearly every business owner that we work with says the same thing, “I want to leave a legacy for the Company I have built, for its employees, the community, and our clients.”

This sentiment is honorable and noble and is part of our Core Values too. Our goal with every client engagement and every client journey we are privileged to participate in, is to help the owner and the business reach their true potential. This means finding an optimal buyer, with an optimal deal structure, at the optimal time for each.

It is no easy task to do this, but it is the challenge we present ourselves every day. Are we always successful in this quest? No, but we have demonstrated over the years that we are leaders in the middle market investment banking industry:

• 2023 Global M&A Network USA Investment Bank of the Year
• 2022 M&A Advisor North America’s 2022 Investment Banking Firm of the Year
• 2022 M&A Advisor Consulting Firm of the Year
• Generational Wealth Advisors Recognized as D Magazine 2022 Top Wealth Manager
• Ranked Second for Investment Banks up to $500 Million in Refinitiv 2022 Tables
• Proven History of Completing Transactions

These are just a few of the accolades we have received for the work we do for our clients on a daily basis.  If you are part of the 85% of U.S. businesses classified as being in our sweet spot for services, I would suggest that you attend one of our Growth and Exit Strategy Conferences soon. Given current market conditions and 2023 challenges, having a proven middle market investment bank working for you will be key! 

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

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