The merger and acquisition market for mid-sized, privately held companies should be "improving" or "very aggressive" in the next 12 months, according to 43.8 percent of respondents to a recent Deloitte poll. And nearly half of them (46.4 percent) say their companies are prepared to entertain an offer immediately from a hypothetical “perfect buyer.”
“As company valuations, share prices and cash-on-hand liquidity are generally on an upswing, many sellers have more options today than in the past five years to extract value from their companies — sometimes without selling outright,” Phil Colaco, managing director, Deloitte Corporate Finance LLC, said in the release that accompanied the poll. "Some mid-market business owners are leveraging debt recapitalization to pay dividends that buy out minority shareholders. Others are recapitalizing to extract capital without giving up total control or ownership.”
According to the Deloitte poll, although the current M&A market is providing opportunities for owners of midmarket firms to finance investments or extract capital, the opportunity does not come without risk, and companies should be prepared for an M&A scenario.
"Thoughtful planning is crucial to a successful transaction" Kevan Flanigan, national managing director, Deloitte Corporate Finance LLC, said in the release. "Don't try to time the market too closely or put too great a focus on driving value for the transaction at the expense of current operations and strategy. Focus your efforts on: retaining advisors; evaluating management succession plans; assessing tax, personal and business implications of potential liquidity alternatives; and, identifying potential value-erosion areas before negotiations commence. You created a business plan to start your business – don’t forget to create one to sell it.”
A handful of notable acquisitions in the distribution and manufacturing sectors have occurred in October, including Wolseley Industrial Canada Inc. acquiring the pipe, valve and fitting supply business of Goodman Industrial of Saskatchewan and Bunzl plc acquiring De Ridder Groep BV of the Netherlands. Also, Fastenal acquired Av-Tech Industries and Dover acquired Accelerated Cos. LLC.
Look for the complete list of October M&A activity in early November at www.mdm.com.