Merger and acquisition environment changing

Brian Bray
Brian Bray

The merger and acquisition (M&A) environment constitutes the end result of many decisions made by individuals and companies. In reviewing recent history, we can try to identify trends that will affect the market in the future.

Since the 2008 downturn, companies have struggled to remain profitable, and there wasn’t much in the pipeline for the M&A business. There are different reasons buyers want to purchase a company, but they generally look at the cash flow generated from that company. For this reason alone, the M&A business remained in hibernation. Some deals were done, but funding had just about dried up and turned the pool of buyers into a puddle. Some national rollups have occurred over the past few years, but most Western Colorado businesses have not been a part of that mix.  

More recently, the story begins to change. Over the last couple of years and especially the last two quarters, there’s been some significant activity that can be attributed to a number of factors. The most obvious factor is the recession ended and businesses have able to show a history of profitability. This helps provide a level of comfort for buyers and what they can expect. This supply of new deals comes in a different form, though.

We have a number of baby boomers who, if it weren’t for the downturn, would have retired by now. They’re eager to do so now that they’ve climbed out of the trenches. A lot of members of this group kept their nest eggs in their businesses to keep them going during hard times. Those businesses that survived have a great story to tell that further ensures the strength of the viability for a new owner. 

We also have a lot of millennials who put their entrepreneurial ambitions on hold when no one was willing to loan them money or, in some cases, give them a job. This group is now drawing significant attention in many ways. Parts of this segment has been creating and growing profitable businesses over the last three to five years and are now ready to either sell and go to it again or make some vertical or horizontal strategic moves Yet another segment of this group has finally built up enough capital to dive in. Members of this group have been churning on ideas and business plans for a number of years while accumulating equity and are now prepared to deploy capital towards acquisitions that will help them realize their dreams. 

Combinations of these factors will make for a colorful M&A landscape in the foreseeable future. Whether it’s one generation handing down to the next or a newer generation moving, it appears there are a number of artists willing and able to participate in this mosaic.

So who’s doing the deals? Where do I go?

If you’re curious about the value of your company or maybe purchasing a company, find the right team to help you. This isn’t a simple process and takes a number of professional services to pull off this type of transaction. If you don’t have an accountant, you’re going to need a good one who understands the complexities of a business sale. You’ll also need a good lawyer well versed in business transactions. 

Last, but not least, make sure you secure the services of a qualified and experienced merger and acquisition specialist. This specialist might have such credentials as Evaluation Analyst. They might also have a real estate license. That doesn’t mean anyone with a real estate license can sell a business, though. Even though you might not typically sell the real estate involved in an M&A transaction, there’s almost always a leasehold interest associated with the transaction. Other than your accountant or lawyer, the Colorado Real Estate Commission forbids anyone else from collecting a fee for transacting M&A business.