Nearly half of respondents (43.8 percent) describe the M&A market for mid-sized, privately-held companies as "improving" or "very aggressive" in the next 12 months, according to a recent Deloitte poll. Even more (46.4 percent) feel confident their companies are prepared to entertain an offer immediately from a hypothetical "perfect buyer."
"As company valuations, share prices and cash-on-hand liquidity are generally on an upswing, many sellers have more options today than in the past five years to extract value from their companies — sometimes without selling outright," said Phil Colaco, managing director, Deloitte Corporate Finance LLC (DCF). "Some mid-market business owners are leveraging debt recapitalization to pay dividends that buy out minority shareholders. Others are recapitalizing to extract capital without giving up total control or ownership."
Although the current M&A market is providing opportunities for many owners of midmarket firms to finance investments or extract capital, the opportunity does not come without risk.
"Thoughtful planning is crucial to a successful transaction," said Kevan Flanigan, national managing director, Deloitte Corporate Finance LLC. "Don't try to time the market too closely or put too great a focus on driving value for the transaction at the expense of current operations and strategy. Focus your efforts on: retaining advisors; evaluating management succession plans; assessing tax, personal and business implications of potential liquidity alternatives; and, identifying potential value-erosion areas before negotiations commence. You created a business plan to start your business — don't forget to create one to sell it."
DCF works heavily in the mid-market space, helping entrepreneurs to grow or sell their businesses and helping larger companies, private equity funds and other investors to help smaller companies grow. During its most recent fiscal quarter, DCF advised on 17 mid-market transactions.
