Regardless of continuing global economic and political volatility, there is clearly still an appetite for doing business deals. The robust mergers and acquisitions (M&A) activity of 2016 is expected to continue into the first quarter of this year.
A combination of strong corporate balance sheets, cheap loans and more challenging organic growth prospects in key markets continues to drive acquisitions, divestment and investment. In New Zealand, continued consolidation by strategic acquirers and renewed interest for inward investment is expected to support deal activity.
While 2016 may be best remembered for an unusual number of large listed company transactions, it is worth noting that mid-market companies formed the bulk of transactions. As acquisition targets, mid-market companies represent attractive value propositions. They are often targeted by larger industry players, as strategic bolt-on acquisitions because they offer opportunities for growth.
Given the current market conditions, business owners should consider getting ‘sale ready’ ahead of time. This is particularly important where shareholders know that they will want to transition out of a business in the future.
For those looking to exit, there are three key actions sellers can take to maximise deal value.
Timing is everything
While conditions are currently favourable for M&A transactions, they can and will change in the long-term. The market is cyclical by nature and sellers should look to sell while conditions are strong. Business owners should consider pre-emptively developing an exit strategy to ensure that the company is ready to be sold should an opportunity arise.
Know your value
Asking for too much can be just as detrimental as settling for too little. Having an unrealistic price expectation can result in missed opportunities, while not knowing your value creates missed opportunities. An expert valuation can provide a benchmark against which to assess acquisition offers.
Partner with a professional
Transactions can be complex, stressful and time-consuming. Given the limited specialist resources most companies have available to them, the guidance of an experienced adviser can be critical for maximising value and achieving a successful outcome.
Preparation is essential to any sales process and sellers should start planning early to minimise the risk of a failed transaction and optimise value. Many businesses leave it too late to get ready for a sale and either struggle to sell or are acquired at discounted prices.
With the market currently favourable towards M&A transactions, owners looking to divest should consider pro-actively developing and executing an exit strategy.
Findex has a team of leading professionals in the M&A sector that can provide expert lead advisory and transaction support services. Contact us to arrange a no obligation confidential meeting to discuss how we can help you.