Liquidity and Middle Market M&A: Don’t Worry

Recent news headlines about market fluctuations and global instability have caused some would-be sellers to put their plans on hold. They might be missing an opportunity.

The economy is challenging, that’s true. But we’re seeing sellers achieve good deals in 2022. Let’s look at some of the reasons why the news media doesn’t tell the whole story.

Lower and middle market M&A still has liquidity

It is hard to argue that liquidity will eventually go down. But we aren’t there yet.

Private equity firms are still sitting on more than a trillion dollars. That money must go somewhere. Thanks to the popularity of buy-and-build strategies in recent years, small to mid-sized companies look particularly attractive as a lower-risk way to spend that capital. That’s why we often work with our clients to strategically position themselves for buy-and-build opportunities.

Deals are still happening

While inflation and rising interest rates might cause the average consumer to hesitate to make a purchase, a middle-market buyer still wants to do business. For example, if a 1% to 2% rise in interest rates causes a transaction to no longer be viable for a buyer, that is a transaction that should have never happened in the first place. Industry leaders believe rates would have to go much higher for rates alone to have an impact on lower middle market transactions. Fortunately for sellers, at this point, we have not seen material changes in the ways buyers are executing transactions.  

If you own a mid-sized business and are thinking about selling in the next year but have hesitations due to inflation, interest rates, or global headlines, you might need more information to make an informed decision. We can help you evaluate your options. Please contact us for a confidential discussion of your specific situation. We have experience helping business owners across a variety of industries to sell their businesses, as well as relationships with buyers who are interested in new opportunities.

Sources:

• https://blog.benchmarkcorporate.com/ma-trends-in-the-lower-and-middle-markets
• https://www.themiddlemarket.com/opinion/the-potential-impact-of-inflation-on-ma
• https://www.livewiremarkets.com/wires/private-equity-investing-why-an-increasingly-volatile-market-environment-can-favour-middle-market-co-investments