Outlook for Buying or Selling a Company in 2017
- Selling Activity is Ramping Up: More than half of the market is currently involved in or open to selling in 2017 (53%), up from 34% in 2016. Potential tax policy and regulatory changes may assist in driving increased 2017 deal flow.
- Sellers are Ready to Deal: 25% of Sellers are extremely confident that their company will be acquired in 2017. Though extreme confidence does not always translate to a successful closing, it does indicate an increased desire and a ramp up in activity from recent years.
- Top 3 Drivers of a Sale: The top reasons for selling have remained fairly consistent, with an emerging driver being the desire to alleviate owner fatigue.
- To provide liquidity to the owners
- To maximize value of the business and take advantage of current market value
- To alleviate owner fatigue
- Top 3 Seller Worries: With valuations as high as they are, Sellers recognize that the likelihood of being undervalued is low and their window of opportunity could be closing:
- Meeting stated target revenue or growth goals after acquisition
- Losing key employees during/after sale
- Meeting stated target revenue or growth goals prior to acquisition
- Urgency to Sell: 6 in 10 Sellers believe that there will be a significant financial crisis in the next 3 years, which has instilled an even greater sense of urgency among those selling. Many Sellers also want to capitalize on fairly high valuations before the window of opportunity ends.
- Buyers Remain Active: 73% of Buyers indicating they are currently involved in or open to considering making an acquisition (up from 60% in 2016), with 23% of Buyers indicating very high confidence that they will make an acquisition in the next 12 months.
- Top 3 Drivers for Buyers: For financial buyers, acquisitions of a solid platform company are the lifeline of their business. And for an existing company, the key drivers to acquire often include:
- To increase revenues
- To put cash to work
- To expand geographic reach within U.S.
- Top 3 Buyer Worries: When doing a deal, Buyers indicated that they are most worried about:
- Inherited liabilities
- Merging differing corporate cultures
- Overpaying/overvaluing target firm
Each of these concerns can be mitigated in different ways:
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