The Transition Companies News

M&A News from the middle-markets is largely drawn from empirical data and day to day observations and experiences marketing and closing M&A transactions. Much independent data is available but it needs to be tempered and blended with daily feedback from actual markets to develop any meaningful updates or “News”.

In fact, market data, news and feedback can even be affected by definition of “middle-markets”. There is no strict definition of “middle-market”. In some definitions the middle-market is defined as transactions between $1 million and $500 million while in other cases the middle-market is defined as $250 million through $500 million transactions with smaller transactions defined as “lower middle-market”.

Therefore, true M&A Market News depends on the definition of “market size” combined with empirical data, experiences and observations.  Clients are encouraged to speak with an M&A professional from The Transition Companies for more detailed and defined information to help get the lives they want.   

What’s happening in the lower middle-markets now?

1. Contrary to conventional wisdom given rise to the buying power of European companies based on exchange rates…Canadian firms have been the biggest buyers of U.S. companies over the past 12 months ending November 30, 2009. Canadian firms have announced 212 deals for U.S. companies during that period.
2. Stock for stock transactions have increased 22% for the trailing 3 months of December 2009 over 2008. This method of payment helps the buyer reserve cash and mitigates taxes for the seller.
3. Payment methods have also migrated driven by market conditions to include more owner financing, earn outs and transaction structure. We’re seeing an increase of 50% to 60% of offers including additional amounts of transaction structure. This type of deal provides higher values to sellers while off setting any temporary performance issues during a side ways economy.
4. The breakout of different types of buyers active in this market has changed with private buyers (37% of activity L3M 11-30-09 compared with 29% L3M 11-30-09) more active than public buyers (38% similar time frame compared with 41%). Private money is seeking private opportunities rather than stomach the volatility of the stock market.
5. Private Equity Group activity has decreased from 13% to 9% of buyer activity L3M 11-30-09 compared to 11-30-08 however, funds with private sponsors seem to be as active as ever.
6. Interest rates remain low, for the moment, allowing buyers to grow by acquisition which is easier and more cost effective especially in a very competitive market. However, interest rates are expected to rise in 2010 which will reduce buying power and may result in lower values.
7. Based on empirical data as of December 1, 2009 values of privately-held companies, based on offers for those companies in market, have  not changed materially, if at all, in this market.