Middle market businesses are the drivers of growth and competitiveness in the U.S., with nearly 200,000 companies generating over $10 trillion annually. That is why Ryan Binkley has continued to focus M&A advisory firm Generational Equity’s efforts to support entrepreneurs in the middle market. It is these owners and businesses that push the U.S. economy forward, so they deserve specialist support when pursuing merger and acquisition activities.
And, if research from the National Center for the Middle Market is any indicator, many middle market businesses will place a lot of emphasis on M&A activity in 2018. On average, 20% of middle market companies make an acquisition and 5% make a sale annually.
Furthermore, in recent years, Thomson Reuters has reported around 2,000 deals taking place per quarter. Ryan and Generational Equity have noticed that first-hand, as the firm was ranked second in the nation for deals closed up to $50 million in the first half of 2017.
So, it is evident that middle market businesses place a great deal of importance on M&A activity. But why?
NCMM reports that the standout reason is to help drive growth, whether the company is acquiring or selling assets. Ryan Binkley recognized this in numerous deals Generational Equity facilitated last year.
Many business owners who were exiting were keen to benefit from a prevalent seller’s market, while executives who were acquiring needed a good company to take their current business to the next level.
Whether the aim is to acquire another company’s intellectual property, technology or talent, or monetizing their business to fund greater investment, entrepreneurs are clearly utilizing M&A processes to maximize company growth on both the buying and selling sides of M&A.
2018 therefore appears a fitting year for middle market businesses to pursue mergers and acquisitions, either to boost company growth or to receive a premium price from buyers. Yet, while good timing is certainly important, it requires more than that to achieve an effective M&A deal.
Are Middle Market Businesses Approaching M&A Correctly?
For Ryan Binkley, the intention behind this M&A activity is great, especially as 2018 is expected to witness as strong and active a market as 2017. Global M&A is expected to hit a record $3.2 trillion this year, with Intralinks’ Deal Flow Predictor predicting a Q1 2018 increase of 2% year-on-year.
But, intention is one thing; execution is another.
The greatest challenge for middle market business owners pursuing mergers and acquisitions is a lack of experience in deal-making practices. This inexperience can lead to several problems, from lengthier negotiations to leaving money on the table when exiting your business.
Ryan believes the latter of these two is something all business owners who are selling should work especially hard to avoid. After the long hours, working weekends and significant investment placed into growing your business, you want to feel like your efforts have been rewarded when you sell all or part of your company. You want to depart confident that your family’s financial future has been secured.
Of course, middle market business owners have found that difficult to guarantee, particularly when they go it alone. Frankly, it isn’t surprising that many suffer a lack of preparation – 21% of buyers and 45% of sellers say that their last deal resulted from an unexpected opportunity. More of these should arise if expectations for M&A in 2018 are met.
You never know when opportunity will fall into your lap. So, it is essential that you are prepared at any given time.
That is why the biggest piece of advice Ryan Binkley can offer middle market business owners hoping to engage in M&A activity in 2018 is make your business “buyer ready.”
Generational Equity’s experienced dealmakers preach this guidance above all others, because it allows company owners to capitalize on ideal market conditions and exit efficiently, without falling short of the maximum value of their business.
Consider the following:
- Are all your company finances in good order and clearly visible for prospective buyers after they sign a nondisclosure agreement?
- Do you have a wide client base that isn’t over-reliant on one or two major customers?
- Is your business highly dependent on you as its owner, or have you built a capable middle management team?
- Can you rely on a recurring revenue stream?
- Does your business hold intangible assets/intellectual property that helps you stand out among other companies?
Having positive answers to these questions puts you in the perfect position to maximize the potential of your business in a sale. Ryan encourages all middle market business owners, regardless of industry or timing of your exit strategy, to devote energy to building a buyer ready company.
What more motivation can you need than the sustained growth of your business, or a secure financial future for you and your loved ones? With M&A activity predicted to increase, you shouldn’t overlook these invaluable steps.
You too could benefit from experienced support from dealmakers like Ryan and his team at Generational Equity, providing the guidance to enhance your company in the eyes of buyers. Professional advice will help you navigate the M&A process, meaning money is not left on the table during your next sale/acquisition.
Learn More About Ryan Binkley & Generational Equity
Ryan Binkley is the President and CEO of Generational Equity, one of the leading M&A advisory firms for middle market businesses. A well-traveled businessman, Ryan’s leadership has resulted in the firm’s consistent development, with nearly $4 billion in wealth transferred to clients.