The Shifting and Crazy State of M&A — Have You Missed It?

  • Buyers are being cautious and conservative, worried that the run is slowing. Many buyers are pulling their chips back. They still have the chips. They just aren’t as eager to jump as they were before.
  • Multiples for attractive platform companies are “insane,” as more than one buyer put it. Some companies are going for multiples as high as 12 or 13, which is extraordinarily high for even golden opportunities.

The haunting of 2008.

For many experienced buyers of companies, the current economic environment is beginning to feel like 2007 and 2008 before the economy shifted. Multiples were also high then. Funds were being pressured by their investors to deploy the capital and make investments into portfolio companies. Investors bought at a market high, often using significant amounts of debt to fund it.

The pressure to deploy.

That said, private equity and other financial investors exist to deploy capital into businesses that show promise for growth in revenue, profitability, and return on investment.

Competition for the good companies.

The supply of good companies for sale is not what you might think given the current demographics. Many businesses are up for sale. However, few meet the investment criteria for buyers.

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