M&A Transactions Predicted to Increase in 2018Feb 27, 2018
As we have seen from other sources far this year, Deloitte’s “State of the Deal: Ma7A 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 fill 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 fastemost 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.
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.