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CHANGING LANDSCAPE

Some of the more prevalent aspects taking place in M&A transactions are the following:

  1. The typical Confidential Information Memorandum (CIM) is no longer a lengthy written document. Rather, it is usually in the form of a deck. Graphics and color with bullet points convey a clear pictorial and understanding.
  1. There are more banks, mezzanine and unconventional lenders that have returned to fill the debt leverage for deals. Since less equity is then required, there is more equity available for the next transaction.
  1. After a Letter of Intent (LOI) is signed, the time to close has increased. Both strategic and private equity (PE) buyers are more circumspect in performing due diligence. For example, a quality of earnings analysis (QofE) is almost a certainty for most deals, even lower middle market transactions as low as $20 million.
  1. The proliferation of PE buyers is almost stunning. And the funds raised are so much larger, many in the billions. That is the good news for sellers. However, it begs the question for investment bankers: how do you stay current with and connected to the better or best PEs?
  1. Pricing (multiples) of deals continues to rise, as the crowded field of buyers need to complete transactions to satisfy their fund sponsors. The converse aspect to this "frenzy" is the often-unrealistic expectations of sellers.
  1. Three of the most difficult "negatives" to overcome for sellers are the following:
  • customer concentration
  • recent decline in revenues and/or profits
  • margins lower than industry norms
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