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Category: Industry News
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Created: Thursday, 27 September 2018 21:52
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Written by Craig Castelli
M&A activity has remained strong in 2018. According to PitchBook, in the first half of the year U.S. private equity investors completed 2,247 deals that totaled a combined 263.9B in value, marking a 2% increase in volume and a 6% decrease in value compared to 1H 2017. The median buyout size is up 31% compared to last year, suggesting that the decrease in overall deal value reflects a lack of mega deals rather than a softening of valuations.
Overall, global M&A deal value rose by 64% compared to the first half of 2017, according to data from Thomson Reuters, although volume declined by roughly 10%. In the U.S., total deal value was up 79% but volume declined by 14%. This is largely due to a big increase in corporate acquisitions valued at $5B or higher, as private equity transactions only represented 8-10% of global M&A.
A few key trends suggest this white hot deal market is sustainable. First, corporations and private equity firms continue to sit on incredible levels of cash - private equity alone had amassed $1.8 trillion of dry powder by early 2018, according to a McKinsey report from earlier this year. Private equity firms also set new fundraising records in 2017, and although fundraising is down considerably thus far in 2018 there is no reason to believe PE firms will do anything but continue to invest at their current pace.
Finally, baby boomers dominate the ranks of business owners. Numerous sources estimate that baby boomers own between 59% and 67% of privately held companies in the United States, suggesting that several million companies will change ownership in the next 10-15 years. Further, a recent survey on business owner demographics reported that 32% of small business owners plan to sell their business in the next two years.
When you pair an abundance of sellers with cash-rich, deal-hungry investors, deals are bound to happen.
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Category: Industry News
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Created: Friday, 19 August 2016 17:59
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Written by Craig Castelli
To conclude this series, I’d like to highlight three things every owner should do before attempting to sell – have your business valued; implement a de-risking initiative; and, create a life after ownership plan. Checking these boxes will not only establish a solid foundation for your exit plan but will also enable you to more clearly envision the most logical buyer and position your business accordingly.
Valuation
First, it’s imperative to understand the value of your business. Many owners think they know what their business is worth, but most have never had it formally appraised. Instead, they rely on gossip from friends and colleagues and articles touting rules of thumb or describing publicly announced transactions. These source typically provide incomplete information that in the best cases is not applicable to the reader and risks being completely false.
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