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This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
G.F. Data’s CEO Andy Greenberg recently penned an article entitled “Where Have all the Sellers Gone?” shining a spotlight on the supposed lackluster volume in middle market business sales. His ultimate point was that many middle market business owners don’t find the need to sell. Instead, they choose to continue running their companies long after the typical age of retirement and continue investing in the business and industry they know best, resulting in a low inventory of companies on the auction block.
It’s important to note that this premise focuses on closed transactions and does not take into account the total pool of middle market businesses for sale today. Maybe the question shouldn’t be “where have all the sellers gone?” but rather “what needs to be done for mid-market business buyers to say ‘I’ll take it’?”
We know that above-average performing companies with post-sale management continuity plans tend to reap higher valuation rewards. But what hasn’t been clear is how many mid-market companies today aren’t being sold because they just don’t hit all the buttons. So what happens to those companies with less-than-above-average financials? The business may indeed sell (likely not at the asking price) or the business may sell to a different type of buyer. Strategic buyers, management buyouts and employee stock ownership plans all fill a nice niche when private equity buyers do not come knocking. Then again, the business sale may be put on hold while the company is “revitalized”. Given sufficient time and resources, this may be the best strategy to prepare a business for sale when it goes to market, regardless of the buyer.
For more information contact:
Douglas Nix, CPA, CA | Vice Chairman CFA
905 845 4340 ext. 211