A recent survey conducted by M&A Advisor in conjunction with Intralinks focused on key factors influencing the current M&A environment. Here are a few of the survey results, which may not come as a surprise:
- 52 percent of respondents believe that the current M&A environment is a sellers’ market. Nine percent believe it is a buyers’ market.
- 80 percent believe the availability of cash in the marketplace has impacted valuation expectations.
- The unemployment rate has not influenced the M&A strategy for 53 percent of the respondents. 32 percent indicate that it has had a minor influence.
- Seven percent believe that rising interest rates will have a significant impact on valuations over the next 12 months. 86 percent believe the impact will be minor or moderate.
- 53 percent believe that valuations will rise over the next 12 months, while 22 percent anticipate no change.
As I contemplated these survey results, it became evident to me that, regardless of some of the external factors described above, a critical factor for a successful exit (whether it’s an internal or external transition) is owner and business readiness. Specifically, as a business owner, it’s vital to ask yourself if you have:
- Invested time and money to educate yourself on how to transition your business?
- Assembled a qualified team of advisors (accountant, attorney, insurance advisor, financial planner) to guide the process?
- Ensured that your personal, financial, and business goals are aligned?
- Completed a recent business valuation as well as personal, financial, and business assessments?
- Considered your various exit options and the optimal deal structure in light of your goals and objectives?
- Developed a post-business life plan that is consistent with your wealth management plan?
- Enhanced the probability of success by taking steps to de-risk the business and maximize its value?
Although addressing the above questions will likely result in a more successful business transition, there are also significant benefits to the business owner who is not looking to sell.
Benefits to overall readiness include a solid team that will provide a superior level of performance, a contingency plan in the event of unplanned events or circumstances, a well-thought-out response when a non-solicited offer is received, and increased annual income and value.
As we reflect on the current valuations, price and value are not always one and the same. The quote from Warren Buffet rings true: “Price is what you pay, value is what you get.”
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