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The 2018 M&A market will be very active, but a little different

First, a quick look back at 2017
The regional M&A market continued to be very active in 2017, and was particularly hot for growing manufacturing and distribution companies with revenue under $25 million.  The overall market continued to be fueled by a combination of available investment capital, low interest rates, growing economy and talk of a possible reduction in tax rates.  We saw the number of businesses contemplating going to market start increasing in the first quarter of 2017 and interest continued to build throughout the year due primarily to older business owners looking to capitalize on current market drivers.

Buckle up in 2018!
Lingate sees even further market expansion in 2018.  Transaction multiples topped out over two years ago, but continue to hold.  More companies will likely be going to market in 2018 as older business owners sense that the market is likely "as good as it's going to get".  However, with more companies going to market, buyers have more companies to look at and will take some extra time for broader market review before making an offer.  This may lengthen marketing timelines a little and necessitate more prospects in the marketing process.  What won't be changing is that above average companies with predictable revenue and earnings growth will draw the most attention and achieve the best prices and payment terms.  Under-performing companies, and companies with unpredictable revenue and earnings, will continue to sell but will require more extensive marketing, longer timelines, and are likely to achieve lower multiples than the consistently high performing companies of a similar size.

If you are considering an internal or external transition of your company, we would enjoy visiting with you to learn about your company and your plans for the future.  Lingate is able to tailor a service plan, resources and fee structure to meet your needs and accomplish your goals.

 

Greg Loeschke