This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
Most M&A professionals would agree that the first half of 2013 has been disappointing when considering the fundamentals in place at the year’s beginning: expiring dry powder, access to capital and an economy seemingly on the rebound. Deals were few and far between during the first half of 2013 and with average deal sizes drifting downward, middle market companies became prime targets for financial and strategic buyers alike. Sixty five percent of all M&A transactions involved companies with TEV under $100 million.
Why the trend in smaller size deals? Smaller size companies are popular as “add-ons” and are commonly added to existing investment portfolios to broaden an established platform. These add-ons may fill in an under-represented geography, product, or client base. Private equity investors usually seek controlling interests in the companies they buy, even add-ons. One interesting trend we are seeing is minority stake investing by private equity firms. Minority investments are less complex transactions and are easier and quicker to close. Many business founders are very reluctant to sell controlling interests in their business, but welcome the influx of growth capital by a financial partner. By expanding the “target” pool to include minority stake investments, financial buyers have more options and better companies to consider for purchase.
CFA dealmakers are cautiously optimistic about the second half of the year. Deal activity has begun to pick up and a number of transactions look poised to close before year’s end.
For more information contact:
Douglas Nix, CA, CPA | Vice Chairman CFA
905 845 4340 ext. 211