Updated: Jan 2, 2020
Hope you had a wonderful Thanksgiving last week.
As we rocket towards 2020, we would like to share our view on the M&A environment based on what we are seeing.
M&A activity in the US has peaked. Not a bad thing, the M&A “market” is still vibrant and active.
Despite the record amounts of “dry powder”, the money available for acquiring businesses and investing in private companies, the number of deals closing has come down. It is also taking longer for deals to get done.
Buyers and investors have become more thorough in the due diligence process than ever, so sellers need to have their accounting buttoned down, and some sellers may need to consider vendor due diligence in order to have a successful transaction. Vendor due diligence may also maximize the value of the business.
There have been so many changes since 2018 in Federal income taxes, sales taxes, accounting principles, etc. that middle market companies’ management needs to be conscious of. These changes directly impact the business, and how long it takes a potential buyer to evaluate it.
The CEO and founder should speak with their CPA firm, and their legal counsel, at the earliest stages, even if only curious or “just thinking about it.” This will allow more time to plan the initial preparations which often is the most important bottleneck in communicating with potential buyers and investors.
2020 will be another active year for acquisitions – for business owners that are ready early in the year. Deals that are well on their way by mid-year 2020 have a better chance of success.
Those that are not ready until later may not happen until 2021, if ever.
We’re always happy to hear your thoughts and know what you are seeing in your industry.
Andrew Barker MBA (NYU)
We Like It Complicated
M&A – Advisory – Consulting
Middle Market Advisory LLC
6600 LBJ Freeway, Suite 150
Dallas, TX 75240