Mergers & Acquisitions Trends
If you’re noticing an uptick in mergers & acquisitions (M&A) activity, you’re not alone: 79% of respondents in Deloitte’s annual survey anticipated an increase in M&A transactions in 2019 – up from 70% last year.
Haefele Flanagan’s experience aligns with this projection. Our firm has participated in a remarkably high number of mergers & acquisitions dealings and transactions over the past 18 months, serving as resources for buyers and sellers as well as lawyers, other certified public accountants, and consultants overseeing offers, negotiations, and closings. While the scope and specifics of Haefele Flanagan’s involvement vary from transaction to transaction, one detail has proven consistent since early- to mid-2018: Businesses are being sold for top dollar.
Determining causation for price inflation is a multi-billion dollar business in and of itself. Global growth, tax cuts, hefty cash reserves, and the rise of private equity firms as middle market buyers are just some of the interdependent factors driving up prices. The driving force behind high transaction volume, on the other hand, is relatively easy to pin down: Faced with offers they can’t refuse, business owners are selling.
For private businesses, what does this climate mean? What considerations should business owners prioritize as mergers & acquisitions peak in the wake of unmatched sales prices?
Prepare an exit strategy.
Even if you’re not actively courting offers, an exit strategy provides accurate valuation, allowing you to properly assess offers that might materialize. “In the absence of accurate valuation, businesses are unable to evaluate the attractiveness of a possible deal,” says Jim Haefele, Partner at Haefele Flanagan. “Valuation is critical to understanding the true value of the offer at hand.”
Consider any offers on the table.
What goes up must come down, and the window is likely closing on this trend of top dollar offers for businesses. Business owners with an eye on selling within the next decade are particularly wise to consider offers before the market cools down – a change Haefele predicts will happen within eighteen months, if not sooner.
Navigate sales – and assistance – carefully.
Mergers & acquisitions transactions are complex. The groundswell of recent M&A activity has put a strain on availability of top-notch resources to help you navigate the sales process. Don’t let this obstacle deter you from working with lawyers, accountants, and other consultants who offer indisputable M&A expertise.
“There are countless critical intersections before and during the sale of a business. Sale classifications in particular – that is, differentiating asset sales from stock sales – have major tax implications, as does the allocation of purchase price in asset sales. Proven resources are essential to fair and successful deals,” Haefele says.