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WHAT PORTENDS FOR DEALS IN 2021?

Our investment bank serves mostly private company sellers. The buyers are a combination of public and private firms – strategics and PEGs (private equity groups). We do not seek out or negotiate with high-net-worth individuals. These persons are more likely to work with business brokers.

With that background, the key trends for 2020 transactions follow:

  1. Through Q3, EBITDA multiples were at 10-year highs. This may partly reflect that the volume of available sellers and deals closed were lower year-over-year. Thus, buyers were willing to pay more for a transaction fitting their platform.
  2. Since 2013, the private seller multiples have increased in seven of the eight years, reaching a trick over 4x.
  3. Typical, the multiples vary widely by industry sector. At the high end at 11.3x was Information. Conversely, Accommodation and Food Service was a low of 2.6.

Clear prognosticating is not our specialty. However, we offer these projections for 2021.

  1. The immense pent-up demand, exacerbated by the uncertainties of COVID, should result in many more sellers on the market.
  2. Year end financials will reflect how well or poorly each seller performed. The most coveted sellers are those who have captured the metrics of why they failed or succeeded as a result of COVID.
  3. The “best” sellers will be those who planned and prepared in 2020 for a 2021 exit.
  4. Transactions that occur in 2021 will likely include numerous COVID liabilities/restrictions and less cash and more earnouts.
  5. Sectors expected to receive the largest multiples are Information; Healthcare; Professional, Scientific, and Technical Services; Finance and Insurance; and Construction.
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