By , Axial | December 15, 2016
I've summarized key points and added commentary in red text. If you want to read the original article, click the link at the end of the summary - Eric Gall
Comments from two investment bankers from December 2016 on M&A in 2017:
I've summarized key points and added commentary in red text. If you want to read the original article, click the link at the end of the summary - Eric Gall
Comments from two investment bankers from December 2016 on M&A in 2017:
- George Shea, Focus Investment Bank
- Keith Dee, Osage Advisors
Shea's advice:
- Think long before executing.
- Have your financial house in order.
- Understand the key metrics of your business.
3 M&A Insights
1. Search funds have proliferated the lower middle market.
Search funds are individuals or small groups looking to buy and operate a small company. Search funds are viable options for businesses not fitting the objectives of strategic buyers or private equity funds. Search funds tend to be conservative regarding valuations. I have seen this as well and I am executing searches for quite a few of them.
2. Private equity is going upstream.
Private equity has become too well funded to be interested in add-ons under $2M EBITDA. Smaller companies need to sell turn to strategic buyers, search funds, or independents. True as well as you just can't obtain interest under $2M EBITDA.
3. It’s still a seller’s market.
There is still a lot of money in private equity and the lower-middle-market. There is a short supply of quality companies. You always want to be selling on an uptrend.
In this video, Shea discusses tips for preparing for a transaction:
3 Industry Trends
1. The precision machinery industry is hot.
Aerospace drives a huge number of inquiries from private equity and strategics. Large manufacturers (Boeing, GE) are gearing up for big projects in the next 20 years. Buyers are looking for highly skilled labor and capacity. Aerospace has done very well for me over the past few years.
Aerospace drives a huge number of inquiries from private equity and strategics. Large manufacturers (Boeing, GE) are gearing up for big projects in the next 20 years. Buyers are looking for highly skilled labor and capacity. Aerospace has done very well for me over the past few years.
2. Infrastructure, energy, and defense companies might want to wait and see on M&A.
The new presidential administration will focus on infrastructure, energy, and defense. Older business owners should initiate a deal process now as the market heats up.
3. Buyers continue to reward recurring revenue in IT services businesses.
Buyers pay very high premiums for recurring revenue models in IT services (vs. project model companies). Very high demand for subscription software/SAS companies.
In this video, Dee discusses the importance of educating oneself as a seller:
For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com.
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