Rich and Co.

M+A Summer Update, The New Normal?

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We are in the middle of a busy summer season for our client’s M&A efforts. Since we represent both buyers and sellers, often both in one transaction, we have an opportunity to view both the overall market and specific transactions.

Let us share what we’re seeing now:

  • Realistic Valuations – Valuations, whether based on earnings or revenues, have been swinging from lows to highs and back over the last 3-4 years. This summer both sellers and buyer perceptions are realistic.
  • End of Unrealistic “Roll-Up” Expectations – The almost universal failure of firms paying high multiples in stock has been a good reality check and removed a distracting influence from the market.
  • Optimal Deals are True Partnerships – For owners to maximize the value they have built and for buyers to realize a market return on their investment, all the resources of the combined firms are needed.

Some Q&A:

  • Will Valuations Rise Or Fall?  — Everyone is sensitive to uncertainty and there is a general mood that the fee disclosures will be a serious blow to profitability. The glass, as always is likely both half-full and half-empty on the fee matter. But the mood, always powerful, is pessimistic now.
  • Are There Still Strategic Buyers. i.e., Buyers Who Will Pay A Premium? — Yes, large firms are still reorganizing around the recent troubles and new uncertainties. Growth is a priority. Organic growth is more challenging than acquisitions. So, yes, there are buyers who want to add significant capacity thru buying.

You may have questions of your own — contact me, confidentially, for answers.


Written by Rich and Co.

July 28, 2011 at 3:52 pm

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