M&A in 2021 – An Update

As we have discussed before, M&A activity shows no signs of slowing after a frantic acquisition binge in the last six months of 2020.

Based on activity Generational has seen for the first few months of 2021, we are anticipating another record year for our firm in 2021, as evidenced by:

• Generational Buyer NDAs - UP 80% over the prior year 
• Current Dual-Signed LOIs - UP 75% over the prior year
• $$ Amount of Current Dual-Signed LOIs - UP 77% over the prior year

NDAs = Non-Disclosure Agreements, signed by buyers prior to confidential seller information being released to any potential buyers.

LOIs = Letters of Intent, the next step indicating a buyer is ready, willing and able to move forward and begin the due diligence process. A Dual-Signed LOI is even stronger in that both parties have agreed, in general concept, to close a deal.

An 80% increase in NDAs coupled with a 75%% increase in Dual-Signed LOIs are both very good indicators that Generational (and its clients) are going to see a significant increase in closed deals in the latter half of 2021, and it’s likely this will carry over in into 2022. A 77% increase in the value of our Dual-Signed LOIs only adds fuel to the M&A fire!

Our experience so far in 2021 was confirmed recently by a webinar hosted by expertwebcast.com entitled “M&A Outlook 2021: Domestic and Cross Border Transactions". The experienced, well-qualified team of professionals on the webinar had one theme in common: The M&A industry is hot right now, especially for deals valued in the lower middle market!

Here are some excerpts from the panelists:

Pradeep Khurana – Co-founder and Managing Director of ContinuServe, LLC:

“There is a ton of activity in the lower middle market. Except for very, very large deals, all other sectors are active. Acquisitions are being driven by money pouring into PE firms and low interest rates are driving LPs to PE firms because financing deals is less expensive.”

“Multiples are high, the environment is frothy. A $2 Trillion Covid bill and potentially a $3 Trillion (proposed ) infrastructure bill will both be a huge stimulus in the economy for 2-3 years. This will be enough fuel to get through 2023 pretty easily. Because of this, I don’t expect to see a negative business cycle on the horizon for a couple of years. Expect 2021, 2022 and 2023 to be very strong years”.

Will Dowden – Managing Partner, KLH Capital:

“In the 2nd quarter 2020, everything was on hold. Then it took off. Everyone realized that the Pandemic was not the Apocalypse! Valuations are going through the roof right now because of demand. Lots of froth in the market. Discounts didn’t happen at the end of 2020. Won’t happen in 2021. Momentum continues and will be strong for quite some time.”

Jason Kim – Corporate Partner with Blank Rome:

“In the second half of 2020, the M&A market was very active. However, the first half was slow. Second half everyone was making up for lost time! The activity level is still high so far in 2021. Strategics and PE firms are both active in this seller’s market and will continue to be.”

“Are Foreign acquirors active? Yes, they are quite active in the U.S. right now. There are big war chests coming over to the U.S. from Asia looking for companies to acquire.”

Again, based on our closed M&A deal results in the first months of 2021, we concur with all of these opinions!

The key though to you successfully participating in the booming seller’s market we are experiencing is twofold:

• Is your business buyer ready?
• Are you mentally buyer ready?

Fortunately, Generational and its family of companies can help you with both areas. Building a buyer ready business, one that is going to generate optimal results for you and your family, is possible with the right guidance.

Generational Consulting Group can help you create tactical (short-term) and strategic (longer-term) plans that, if you implement effectively, will potentially have an immediate impact on the salability of your business and its growth both long and short term:

• Cardinal Strategies – Growth Beyond Our Imagination
• The Davinci Group – Finding The Way Forward
• Karsare Systems – From Doubting to Dreaming
• Meridian Medical Service – Adding Structure to Our Vision

Helping you overcome the “hurdle” mentally of selling is a multi-faceted program with Generational, because we recognize that deciding to eventually exit the business you have created and grown is a very difficult one indeed. The process starts with education, helping you understand how and when you can exit for maximum value by attending a Generational Growth and Exit Planning Conference near you. 

The second step is meeting with one of our experienced Managing Directors while at the conference to confidentially discuss your business, and personal and business plans. If we decide that our services can benefit you, our team of professional, award-winning valuation consultants will help you to better understand what the exit process could look like for you and what the economic value of your business is. Finally, from there, our deal making teams take over and guide you through the final phase: Finding a buyer and negotiating a deal.

One of the key reasons that Generational has been recognized for years as a leader in middle market growth and exit planning services is the quality and integrity of our process and people.

So, if you are interested in finding out how we can help you and your business become buyer ready, please call us at 972-232-1121, or provide us with your contact information and we will have one of our Senior Business Advisors reach out to you.

And special thanks to our friends with Expert Webcast for hosting a fantastic overview of M&A trends in 2021 and beyond. You can register to listen to the replay of the webinar here:

• M&A Outlook 2021: Domestic and Cross Border Transactions

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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