EXIT READINESS
A Perfect Storm Fuels Surge in M & A
The Baby Boomer generation has reached retirement age and is making the largest transfer of generational wealth in history . Call it the perfect storm .
At the same time , international investors are hungry for American businesses , which are considered the best investments in the world .
Finally , a dramatic surge in M & A activity has emerged as an unexpected consequence of the COVID-19 pandemic , which upended the global supply chain .
What does all this mean ?
It means you , as a business owner , may get a phone call from a buyer offering you an eye-popping price for your business – a business you had no intention of selling .
What Will You Do ? prices to continue throughout 2022 and into 2023 , but don ’ t sit around and wait for the phone to ring . Become educated about the stages of making a deal , talk to your business partners or family members ( if your business is family-owned ) and consider your personal goals .
Most importantly , talk to your trusted advisors .
When you receive an unsolicited offer , find out if it ’ s a good offer in today ’ s environment . You may be caught off guard by the suddenness of the offer , but don ’ t let that discourage you from considering it . Conversely , don ’ t jump in and accept it without doing your due diligence . The value of your business is in the eye of the beholder . A competitor making the offer has a different motivation than a private equity buyer or an ESOP . Valuation is a range and sales price is a negotiated amount . If you decide to move ahead , you ’ ll need to consider several variables to help determine a fair price .
The time to consider your options is now , before that phone call comes .
Unsolicited offers to buy businesses are prevalent today in part because of the global supply chain disruptions caused by the pandemic . Manufacturers and distributors in particular are attractive to companies that are looking for ways to guarantee their supplies of raw materials and component parts . They were unable to get those goods during the pandemic , so they are shifting to vertical integration by acquiring manufacturers and distributors that can help them ride out the next business crisis .
But the ramp up in offers and prices goes well beyond the manufacturing and distribution sectors . An Ohio fast food restaurant chain was recently offered a multiple of 18 in an industry that typically sees multiples of eight to 10 . Other industries that are seeing unusually strong offers include trucking , medical innovation and professional services firms .
Buyers don ’ t mind paying more for acquisitions right now , including premiums of 15 to 18 percent , because they are looking for synergies . That ’ s why competitors are increasingly buying each other , and companies are buying their suppliers .
Can You Wait 10 Years ?
Fueling the momentum is the reality that prices may not be this high again until the height of the next business cycle , which could be 10 or more years from now .
If you ’ re considering an exit within that timeframe , you should seriously consider any offer that comes your way . We expect today ’ s strong