A recent survey conducted by a national accounting and advisory firm indicates M&A activity to remain solid throughout 2017. Multiples are steadily increasing because interest rates are low and the supply of viable businesses available for sale is low.

Overview

Prospects for acquisition financing are the best we've seen in years. Several of the banks we work with are gearing up to accommodate the increased demand for business acquisition financing. Interest rates remain at historical lows.

While this may be good news for business owners who are considering selling in the near future, today's bullishness may not last long. There continues to be uncertainty about the economy, taxes, rising deficits, government regulations and the political future of the country. In situations like this, companies tend to focus their efforts by building from within, paring unprofitable product lines and cutting costs to improve profitability.

We anticipate businesses will continue to become more competitive by pursuing both courses of action – buying companies and building from within.

On the local level, buyer activity at our Southern California office is up over 300% from last year and it's from all segments of the market. Corporate balance sheets are strong and it's not just the public companies looking to buy businesses. Smaller, middle market companies with revenues of $5 to $50 million are actively seeking acquisitions of companies that provide complementary services or regional expansion opportunities.

Private Equity investors are increasing their acquisition efforts. We see activity in "add-on" acquisitions to be strong because fund managers are looking for strategic investments that enhance the value of their existing portfolio companies. It's known to us, but maybe not you that private equity groups make a lot more acquisitions of companies with sales under $20 million than sales over $100 million.

Private individuals who missed acquisition opportunities in 2007 and 2008 are back in the market and are eager to run their own businesses. Low interest rates and competition among local community banks to provide SBA 7A loans have created a window of opportunity these buyers might not see again for years.

Clearly, the desire and the money to get deals done exist. Whether it's private equity, corporations or entrepreneurial individuals, offers are being made. Overall, we think the outlook is very positive for 2017. It's a seller's market for now, but we can't say how long it will last. Business owners who are considering selling their companies or delayed putting their companies on the market a few years ago, should take a serious second look.

Mark Richardson, Acquisition Executive
714.282.7146

 


rsz 054 1Mark Richardson
CM&AA, CVA, MCMEA
Principal and Founder
 
Mark has been buying and selling businesses since 1982.
 

FROM CONCEPT TO CLOSING

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Phone: 714-282-7146
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Email: advice@jmrichardson.com

JMR Capital, Inc. CA DRE 01815017

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