November 2016 … right now we are in the best market for selling private companies that we have seen in years. In fact, October 2016 was a record month for M&A. It’s truly a seller’s market – but it won’t last.
Why … ???
Interest rates are at record lows. Buyers borrow to buy companies; either from a bank or themselves. The lower the interest rate, the more they can pay to buy a company.
Strategic buyers have had stagnant growth since the crash of 2008. If large corporate strategic buyers cannot grow organically then they must grow through acquisition. Acquisition provides access to new markets and new products while reducing overhead thus providing the much needed growth.
Private Equity Groups
are fiercely competing for
Private equity buyers are experiencing fierce competition amongst themselves to buy private companies. Private equity buyers typically borrow as much as they can to buy companies. With low interest rates and the perceived stability of private companies, private equity buyers are competing for private companies.
In order to close a transaction in October 2016 and capitalize on this market, an owner selling a company would have had to start the M&A process around September 2015.
If the owner of a private company
wants to sell into this market,
they are advised to start the M&A process
before this market changes.