Two key components of our success as the leading lower middle-market M&A advisor in North America are the quality of our deal makers and the value of our buyers. Both go hand in hand and are equally important.
Our dealmakers have years of success closing transactions under their collective belts. There is an old saying in the M&A industry that goes something like this: A deal isn’t a deal until it dies three times. That is only a slight exaggeration but the reality is, a dealmaker who has been in the business for multiple years gains so much understanding from every transaction that he or she brings to each new client, that the value of this knowledge is nearly impossible to quantify. Don’t just take my word for it, listen to a few of our clients talk about the quality of their dealmaker:
A common theme you will hear in these clips is that our dealmakers provide more than just M&A advice, they become partners in the process with our clients, and this partnership extends to all facets of the business operation.
As mentioned, the second key to our success is the quality of the buyers in our database, the value of which is cultivated and developed by our deal teams on an ongoing basis. As you may be aware, we have over 34,000 registered buyers that update us regularly regarding what they are looking for in an acquisition. Keep in mind that we ONLY work for sellers; we never take any payment of any kind from buyers. That is how we maintain our focus on “sell-side” projects – we never have even the appearance of any conflict of interest.
Having said that, buyers enjoy working with us because we bring them vetted, fully committed sellers. Buyers tell us all the time that they have plenty of capital available right now for investing, but what they lack is one simple item: time. Nothing frustrates a buyer more than to work several months on a process with a target to have the seller back out of the transaction at the 11th hour, causing the buyer to lose not only countless hours of work but also the lost opportunities that they could have been exploring.
So buyers come to us because they realize that our system, process, and team prepare our clients in a much more profound fashion than any other.
What else are buyers telling us right now? Several things…
First, they are having trouble finding enough well run companies to analyze for acquisition purposes. This has become a big issue, especially in the past few months. We are currently in the third year of a strong seller’s market. At this point, all of the low-hanging fruit, the “easy to find and acquire” companies have been invested in (so their thinking goes). They are begging us for deals to look at because of this.
Our dilemma is that far too many sellers are delaying their exit timing largely because of the theory that they want to wait and sell at the peak of this cycle. This is known as timing the market, and it is not only nearly impossible to do, but it is also financially foolish.
You see, data regarding M&A transactions is always based on historical data. So we won’t know when the peak of this cycle occurs until AFTER the fact. By then the peak will have passed and sellers will be entering the market at the conclusion of this seller’s cycle rather than at the apex.
This literally could end up costing millions in many cases, as valuations at that point in the cycle favor buyers not sellers, which is the opposite of the market now. In addition, deals tend to take longer to close and deal structures tend to be less lucrative for sellers. For these reasons, we counsel to avoid timing the market. Rather we are encouraging business owners right now to realize that this is a prime time to sell assuming that the business and the owner(s) are ready.
In addition to limited supply, buyers are also telling us that they are frustrated by the lack of realistic expectations in terms of value and structure on the part of sellers. Again, another real benefit to both sellers and buyers of Generational Equity’s process is that before taking any client to market, we conduct a thorough evaluation of each client’s business in order to do two things:
As you can imagine, knowing a business’s current value is critical in the decision-making process regarding when to exit.
For example, if my wealth manager tells me that I will need $5 million in the bank when I retire to maintain my lifestyle and Generational Equity tells me that that my company is worth $4 million, I have a million-dollar gap that needs to be filled before I close a deal with a buyer. The value-enhancing strategies that we provide in our Roadmap for Enhancing Value will give me concrete ideas that I can implement in the next year or so to hopefully close this gap and go to market when my valuation is closer to my exit needs.
Knowing your company’s value is also key in determining which offers you should legitimately entertain. Some of our smaller competitors like local business brokers often take clients to market without a baseline value in mind. We see this as a disservice for our clients because without a valuation based on sound analysis, financial recasting, and believable forecasts, any offer will do.
To summarize: Our success is due to a number of related factors, key of which are the people on our team and the quality of the buyers we work with. Because of our skills and experience, we bring qualified, focused sellers to our buyer database. And because of this, buyers really enjoy working with us even though we often command a premium for our clients. Don’t just take my word for it, listen to input from buyers we have closed deals with:
If the discussion here about our success has peaked your interest, and if you are interested in learning more about us, I invite you to contact us and speak with one of our senior business advisors. Chances are good that our team has most likely closed a deal in your industry and our experience doing so could be very, very valuable to you.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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