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PitchBook’s Findings on 2015 Merger & Acquisition Activity

Posted by Carl Doerksen on May 22, 2015 at 8:30 AM

So far this year is turning out to be even stronger than last in terms of buyer activity and interest. More and more sources are indicating that 2015 may end up being another record year for deal closings in the U.S. and worldwide.

Recently PitchBook, in conjunction with PricewaterhouseCoopers and Madison Capital Funding, released its 2Q 2015 U.S. PE Middle Market Report.

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Topics: middle market, add-on company, private equity firms

M&A Activity Predictions

Posted by Carl Doerksen on May 20, 2015 at 8:30 AM

As we have examined in past posts, a great indicator of future M&A activity is the level of deal launches and data rooms being populated. Traditionally, if a data room is opened and filled with information, it is a good indicator that a transaction will be closing eventually.

For this reason, we closely watch the Intralinks quarterly Deal Flow Predictor. Intralinks is a leading, global SaaS provider of secure content collaboration solutions. They are a key provider of virtual data rooms for the M&A industry and have created the Deal Flow Predictor (DFP), which they update quarterly, to track potential M&A activity worldwide.

The Intralinks DFP has been independently verified as an accurate predictor of future changes in the global volume (number) of announced M&A transactions. Quarter-over-quarter (QoQ) percentage changes in the Intralinks DFP are typically reflected (on average) six months later in announced deal volumes, as reported by Thomson Reuters.

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Topics: deal activity, m&a activity, sellers market

M&A Trends – Add-Ons Take Center Stage

Posted by Carl Doerksen on May 18, 2015 at 8:30 AM

One of the truly interesting phenomenons we have seen in recent years in the M&A industry is the move by buyers, especially private equity firms, “downstream” into smaller-sized company valuations. A number of factors have contributed to this, the primary being this: Equity firms have learned that it is far safer and more lucrative to look for fragmented industries, acquire a mid-sized “platform” company and then “add on” to it by making a number of follow-up strategic acquisitions that are complimentary to the platform. In fact, last year more than 60% of all private equity acquisitions were add-ons.

Dozens and dozens of equity firms throughout the U.S. and the world are now following this strategy. Because this trend is growing, a number of people in the industry are seeing it as a new and growing business model rather than a trend.

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Topics: add-on company, platform company, selling your business, private equity firms, sellers market

M&A Basics: Creating a Value-Added Succession Plan

Posted by Carl Doerksen on May 15, 2015 at 8:30 AM

You have to love entrepreneurs and the skills, strengths, aptitude, and attitude that enables them to risk everything to build something. Having worked with leading visionaries who are true serial entrepreneurs for nearly three decades, I can honestly tell you that without them, our economy and society would not be nearly as vibrant, growing, and diverse.

However, a couple of their key qualities can, in the long run, actually end up hurting the very entity they have founded if not managed correctly. To put it bluntly, far too many entrepreneurs lack the delegation, mentoring, and personal development skills that are so vital to help a business reach its full potential. This is not a knock on this group. Rather it is simply an observation that their leadership strengths, decision making skills, and vision often run counter to one fundamental dynamic: eventually a successor must be groomed. This is a reality far too many business owners put off.

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Topics: succession planning, becoming buyer ready

Corporate Business Buyers Aggressively Looking for Targets

Posted by Carl Doerksen on May 13, 2015 at 8:30 AM

As we have examined in past posts, deal making in 2015 is off to a rousing start, with the numbers indicating that 2015 could be a record year for transactions. So I was not surprised by the news reported in the LA Times recently:

“A striking 56% of companies assessed say they intend to make acquisitions in the coming year, up from 40% in October … That’s the first time since 2010 that more than half of executives say they plan to make an acquisition in the next 12 months.”

This data came from an Ernst and Young (EY) survey based on interviews with 1,600 senior executives from large companies across industries in 54 countries.

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Topics: projections, m&a activity, sellers market

The Challenges of Successfully Selling the Family-Owned Multi-Generational Business

Posted by Carl Doerksen on May 11, 2015 at 8:30 AM

One of the biggest challenges Generational Equity faces is educating the owners of family-owned businesses about the need to eventually develop an exit strategy. And often it seems the longer a family has owned a business, the more difficult the task becomes of teaching multiple generations about how a family’s financial legacy benefits after developing an exit plan, rather than turning the company over to the fourth generation, hoping that the 28-year-old nephew has the skills needed to grow a $50 million business to $100 million and beyond.

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Topics: selling a business, exiting your business, selling your business, Exit Strategy, exit planning, family dynamics

The Importance of Being Committed to Your M&A Process

Posted by Carl Doerksen on May 8, 2015 at 8:30 AM

Commitment. What a key word. The official definition is:

1. a: an act of committing to a charge or trust: as (1) : a consignment to a penal or mental institution (2) : an act of referring a matter to a legislative committee

b: mittimus

2. a: an agreement or pledge to do something in the future; especially : an engagement to assume a financial obligation at a future date

b: something pledged

c: the state or an instance of being obligated or emotionally impelled i.e., a commitment to a cause

Since we are not referring to being consigned to an institution or a committee, we will focus on the meaning as it relates to No. 2 above. In this sense, a commitment to a deed is an indication that at some future time you will take action because of a “commitment” to a project, cause, movement, or belief state.

In the M&A arena, a committed seller is one that buyers have confidence in, certainly more than a seller who is not willing to complete and conclude a transaction.

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Topics: finding a buyer, becoming buyer ready

M&A Basics – What is Recasting?

Posted by Carl Doerksen on May 6, 2015 at 8:30 AM

We recently published an article outlining the importance of having your company valued before going to market. In that piece we examined why this is important for YOU (so you have a good idea of the current market value) and for BUYERS (so that they know you are committed to actually selling your company and you have appropriate value expectations). We also mentioned how vital it was to use “recast” financials as part of the evaluation process. Given the fact that most business owners are not familiar with this term and concept, we wanted to do a follow-up piece on recasting, providing you further details on this key step in any valuation process.

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Topics: valuation, recasting, becoming buyer ready

Errors To Avoid When Selling Your Company

Posted by Carl Doerksen on May 4, 2015 at 8:30 AM

One of the common themes we find when meeting with business owners is how many of them are coming to us AFTER a failed attempt to locate a buyer on their own without professional help. In many cases, to the detriment of the business, many deals fall apart under this scenario because of frequent and regular mistakes that are made during the M&A process.

Let’s face it – the equation is not balanced. You will most likely only sell one business your entire professional career. Buyers, especially those working for equity firms and corporate strategics, will make dozens of acquisitions in their careers. Because of this, they have the upper hand and can negotiate deals aggressively to their benefit, not yours.

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Topics: offering memorandum, selling a business, selling your business, valuation

M&A Basics – The Value of the Valuation

Posted by Carl Doerksen on May 1, 2015 at 8:30 AM

One of the most important steps in the proven Generational Equity system is our evaluation of each and every client’s company. Many of our smaller competitors bypass this step and take their clients directly to market. We don’t do this because we firmly believe that every one of our clients needs to have a good idea of what their company is worth in today’s market BEFORE entering the market and negotiating with buyers.

This vital step is important for several reasons:

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Topics: enhancing value, selling a business, valuation, becoming buyer ready

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