Strong Companies Are Still Doing Deals
While the market for 2023 remains uncertain, it is still moving. And a dynamic market means opportunities for strong players. For those with companies that are good candidates for sale, making a deal during an economic slump can mean better returns than in a strong market. But in order to be an attractive business opportunity, business owners need to do their homework to get all of the information as accurate as possible—something that can be difficult to do. Let’s walk through some unforeseen perks of the current market and the preparations businesses can make in M&A this year.
Opportunity for midsize businesses
With the market predictions for this year being uncertain for many in M&A, there is still the possibility of a significant opportunity for businesses willing to seek a deal. In fact, signs point to the middle market being primed for some of the best M&A deals, with the bulk of recent deal activity being made in this sector. After all, midsize businesses tend to operate outside the mega-deal constraints of large companies, perhaps looking for an opportunity to sell for early retirement or to raise money for new investment possibilities. And with a stagnant IPO market, M&A is an attractive option.
A bad economy could mean a better deal
Considering the opportunity for midsize businesses in this current market, there’s a possibility that some could make a significant profit that they might not be able to obtain in a better business climate. This could be due to scarcity since the volume of deals available will be smaller than in a healthier economy.
The same is true from a buyer’s perspective: some of the best deals can be made during the worst economic times. A report from PwC, highlighting M&A patterns within poor economic structures, found that during the 2001 recession, companies that made acquisitions had better returns than industry peers. The report states, “More than 900 companies made 1,600-plus deals during that recession. In several sectors—including consumer durables, insurance, media and entertainment, and healthcare equipment—the median returns for those acquirers after a year were higher than the overall sector by double digits.”
In addition, private equity is still sitting on a significant amount of dry powder. With private equity buyers still needing to put money to work, this will continue to drive transactions.
For those looking to sell, preparing your business for an M&A transaction at any time means getting organized—calculating pricing, cost management, and cash flow, as well as accounting for the structure of the organization, its operating model, its culture, and its people. Doing so in an unpredictable market means assessing all of these things while going the extra mile to account for economic conditions
Finding a valuable partner is a strong step in the right direction to get the best value for your business and to ease the transition as you sell your business. Please contact us for a confidential discussion of your specific situation. We have experience helping business owners across various industries sell their businesses, as well as relationships with buyers interested in partnering with owners.