DealMAKERS Cope With Changing M&A Market at Fall Meeting

By Ryan Doyle, Supervisor
Gray, Gray & Gray, LLP

Ryan DoyleAlthough the sluggish economic recovery continues to affect merger & acquisition activity, there are deals to be made for those who are flexible enough to adapt to changing times. That’s the message received by the 40 M&A industry leaders who attended the October 2013 DealMakers event in Norwood, hosted by Gray, Gray & Gray, and co-sponsored by Webster Bank, Seyfarth Shaw, and Axiom Capital Group.

This month’s panel of experts started the session with a look at the “pulse” of the M&A market. The general consensus is that there is a faint heart beat in the lower and middle M&A market. There is more than enough capital available, but a dearth of quality deals has quieted activity. 

Part of the problem is that the private equity industry continues to hold out hope for a return of the good old days, when there were plenty of middle market companies they could lever up and flip in five years.

But those deals are not out there right now because owners are still reeling from the recession, and can’t get the valuations they want. If and when they do come to market the deals are over-shopped and become unattractive for buyers. PE groups need to start thinking about investing more creatively rather than just expanding their ideal EBITDA range.

Among the financial buyers attending this DealMakers session, many have begun looking down market at deals they would not look at before. If they were a $5-10 million EBITDA investment firm they are now willing to look at $2 million EBITDA deals. Here’s news you can use: so is everyone else. The private equity industry is shrinking and the fast-paced LBO days are not coming back any time soon.

Another hot topic came from several business owners in attendance, asking “when is the right time to sell?”. Many were concerned about what they can realistically get for their business and if it would generate enough income to last through retirement. Returns on fixed income and other safe investments are so minimal that many fear a sale wouldn’t be sufficient. All the more reason to have your house in order in terms of clean books, getting legal counsel, and working with a wealth advisor to plan your retirement.

The panel advised that an owner should sell a business when the timing is right for their needs, not to meet market pressures. No one knows more about a business than the owner. Taxes or the market should not dictate when you are ready to exit.

This was the fifth event in our ongoing series of invitation-only DealMakers conferences. At each meeting the discussion has been spirited, key introductions have been made, and a number of successful partnerships launched. Good deals aren’t coming easily in today’s economic climate. But Gray Gray & Gray’s DealMakers is helping to bring some attention and activity to the middle market.

If you would like more information on the DealMakers events, please contact Ryan Doyle at rdoyle@gggcpas.com.

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