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Mergers and Acquisitions in 2012

Posted by Carl Doerksen on January 23, 2012 at 10:00 AM

mergers and acquisitions in 2012 and exit planningAs we have discussed in past articles, a growing number of experts are expecting the number of deals closed in 2012 to outpace 2011. If this holds true, it will represent the third straight year of increased M&A activity.

Despite the facts that 2012 is an election year and there is continued volatility in Europe, analysts believe that the fundamentals are sound enough in the U.S. to propel deal activity forward during the next 12 months.

According to The New York Times:

“Deal makers are growing confident that 2012 will be better for business. Not only do they point to cheap financing and the large amounts of cash on corporate balance sheets, but they say that companies that have already cut costs may decide that they need to make acquisitions to drive growth in the face of a tepid economy.”

This expectation for growth is further supported by a recent survey conducted by Ernst & Young, where 36% of the companies surveyed indicated that they were going to be pursuing acquisitions in 2012.

Financial Buyers Will Be Active Too

And you can expect the same from private equity groups in 2012 given the fact that they are sitting on nearly $400 billion in committed capital that needs to be invested. Given that there are typically time frame limitations on capital committed to equity firms, and many of these funds are now entering the final years before their time restrictions expire, it is safe to assume that the next 12-18 months will see significant renewal in equity firm activity.

However, according to The New York Times:

“Though signs point to a stronger mergers and acquisitions market, there is at least one class of deals not ready for a comeback: the highly leveraged buyout. In 2011, the private equity titans pursued more modest-size transactions, compared with the go-go years of 2005 to 2007.”

And not only is this good news for our over-leveraged economy, it is also really good news for owners of middle-market sized companies (we define the middle-market as being companies generally valued below $200 million) because, over time, equity firms have invested heavily in middle-market sized businesses. It sounds like this will continue in 2012, according to the New York Times. So, based on all of this, it appears that 2012 will be a continuation of the M&A trends we saw in 2011.

Resolve to Learn More in 2012

Many of you probably made some New Year’s resolutions a few weeks ago. Most of them may have already been broken! However, if are a business owner, we hope you made a resolution to begin to explore your exit planning options in 2012.

Too many business owners we meet tell us that the current (and ongoing) volatility in the economy, coupled with political unease both in the U.S. and abroad, are negatively impacting the joy of owning and operating a middle-market company. We are regularly told that the level of risk today in simply maintaining a business, much less growing it, is higher than ever.

If you have reached the point where you have resolved to learn more about your exit planning options, you have several key steps that you can take. First, you can download our free whitepaper that covers the basic steps you need to take to begin the process. It is designed to de-mystify the course of action and gives you some practical ideas on how to get started. If you would like to download a copy, please click here.

After reading our whitepaper, you will probably have a desire to learn more about the steps involved in successfully selling your company. If so, I would invite you to attend one of our free M&A workshops that we regularly hold in North America. By clicking here, you can learn more and determine if our services would be a good fit for your company.

In summary, 2012 should be another good year for sellers to find buyers of their businesses. Despite slow economic growth and political uncertainty, the fact is buyers are hungry for well run, middle-market companies. Professional buyers regularly lament to us that they simply cannot find enough good companies to invest in. The coming year should prove to be a great year to find a buyer.

© 2012 Generational Equity, LLC All Rights Reserved

Topics: mergers, m&a activity, acquisitions

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