Every year in late spring, a few thousand M&A professionals, including private equity investors, investment bankers, strategic acquirers and operating partners, converge on the annual ACG DealMAX conference in Las Vegas. As the premier M&A event in the U.S., each year we send our own team of M&A specialists representing investment banking, tax, assurance and consulting to stay connected with the players in the M&A market — private equity groups, strategic acquirers, financing sources and other firms serving this growing market. The insights are invaluable and something we enjoy passing onto our clients.
On a macro level, discussions at ACG DealMAX centered around rising interest rates and possible fallout from the upcoming election — a topic you can expect every four years for sure! But on a micro level the conversations were much different. We met with more than 100 attendees, mostly private equity funds. These interactions gave us the opportunity to review each group’s acquisition criteria (size, profitability and industry focus), their current portfolio of companies and if their growth strategies involve “add-on” acquisitions. These meetings serve as key insights regarding available opportunities or potential connections down the road.
One of the top concerns on the top of everyone’s list was deal flow. The number of companies available for sale was very disappointing last year, and no vibrant rebound appears on the horizon. This is a critical issue for many private equity funds. They are in the business of raising funds for acquisitions, deploying those funds by acquiring companies and realizing a return for investors by growing their portfolio through profit improvements, organic growth and acquisitions. If they are unable to make their initial investment in acquisitions due to lack of deal flow, they must “give back” their investors’ funding.
There were many discussions about the reasons for sluggish deal flow. Many theorized that perhaps transactions were being pushed out due to sellers’ expectations for improved profitability/valuations and the absence of an especially compelling need to raise liquidity. That said, M&A practitioners know this is a very good time to sell. Lots of capital needs to be deployed and any bona fide seller will get a lot of attention in the market, including from many buyers who are looking at smaller deals than they typically would in more robust market.
What do we make of all of this? Here’s our take on where the deal market stands today:
The end game is that it is still a good time to sell a profitable, thriving company. There is opportunity and money from strategic and private equity buyers alike just looking for the right fit!
Contact Jim Lisy or a member of your service team to discuss this topic further.
Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.