How can an M&A advisor integrate intelligently?
Should advisors be cautious or growth oriented in 2018? A defining theme in 2017 was the state of valuations in the M&A market, which triggered an unprecedented market for sellers. This begs the question, are we at the end of the current cycle?
Intelligent integration is the theme for the Source this month. Given the state of the M&A market, and with 2018 off to the races, it would behoove M&A advisors to consider expanding their M&A community to those less active sponsors, which are typically discounted by the larger investment banks. Akin to the boutique M&A advisors that SPS and others champion, less active sponsors can be a good source for business, especially when it’s time for these sponsors to sell their portfolio companies. The early bird gets the worm.
Firms plan to divest businesses in 2018
Deviating from a prior post focused on constructing a buyer’s list, intelligent integration also lends itself to slicing data to direct advisors towards sponsors looking for the exit sign. According to Deloitte’s annual survey, The state of the deal: M&A trends in 2018, 70% of respondents plan to divest businesses in 2018. Deloitte contends this movement is due to shifts in strategy, as well as financing.
How can one use ‘intelligent integration’ to connect with less active sponsors?
Engaging your closest deal relationships could be the fount for hundreds of new, relevant sources of deal flow. Archetypal league tables start with the most active firms funneling down to the least active. Carving the data by the number of firms closing a given number of deals, and the results may surprise you. 78% of active sponsors completed 3 transactions or less (LTM September 2017). To intelligently access these 1,373 firms trading 3 deals or less, leverage your existing relationships. A simple way to do this, apply the SPS one-degree of separation to access the multitude of active investment bankers, M&A attorneys, sponsors, lenders, and service providers that comprise the M&A community that can provide warm introductions to these sponsors.
This list of firms that closed three or less deals in the last year would be great to build relationships with now, as they prepare to exit these investments down the road. Vote early and often!
What about those sponsors that invested in a firm five years ago, and may be gearing up to sell? We got that! I’m getting ahead of my Source themes here, but the SPS Harvest Report will be refreshed in the coming months. This is a great resource to proactively target those relevant sponsor portfolio companies that may be ready to sell in the near term. As we learned from Deloitte, this is the strategy for many firms in 2018.
Last week’s deals today
January 1 – January 5, 2018
~117 deals traded!
Deal of the week
Apple Inc. acquired the Vancouver based Buddybuild. Interesting to note, Buddybuild will cease all Android app developments beginning in March of 2018.
Most active subsectors
- IT: Software & Services
- Industrial: Equipment & Products
- Services: Misc., Asset Light
- Financial: Personal & Commercial Banking
- Healthcare: Misc. Services, Asset Light
- Construction: Building Materials
- Financial: Insurance
Most active cities
- New York
- Santa Monica