We’ve all been reading about the unprecedented demand for acquisitions on the part of private equity firms and corporate buyers. For the former, nearly $1 trillion of “dry powder” and persistent low interest rates have created a feeding frenzy to find the next deal. Strategic buyers, after years of right sizing their business and re-evaluating their cost structure, are now looking to increase revenue, and realize that a prudent acquisition program may be the most efficient means to get there.
This has led to a barrage of incoming calls to business owners with solicitations to buy their company. While any interest can be flattering and the potential riches intoxicating, there are solid reasons to give them the Heisman, and not all are obvious.
Bear in mind that when PE firms approach you, they are typically shooting in the dark. They may have read or heard about you in the trade press, but odds are their perception of you is distorted. Much like blind dating before Tinder. And if the person calling is 25 years old, don’t bother expending any energy on blushing….their job is to troll for fish, hoping to snare a 500 pound tuna. Before spending a lot of time and effort with a prospective acquiror, it will pay to do a simple diagnosis of your situation. At a minimum, you should assess the following:
The M&A market is as robust as it has ever been for middle market companies. Leverage has shifted to sellers like never before, as current earnings multiples exemplify. Nevertheless, be careful not to spend valuable time courting until you and your company are ready. The market may not be as ebullient as it is today, but your chances for a successful closing will improve immeasurably.