WHAT PORTENDS FOR DEALS IN 2021?
Posted on Jan 1, 2021 4:00am PST
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:
- 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.
- Since 2013, the private seller multiples have increased in seven of the
eight years, reaching a trick over 4x.
- 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.
- The immense pent-up demand, exacerbated by the uncertainties of COVID,
should result in many more sellers on the market.
- 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.
- The “best” sellers will be those who planned and prepared in
2020 for a 2021 exit.
- Transactions that occur in 2021 will likely include numerous COVID liabilities/restrictions
and less cash and more earnouts.
- Sectors expected to receive the largest multiples are Information; Healthcare;
Professional, Scientific, and Technical Services; Finance and Insurance;
and Construction.