With a network of senior M&A practitioners across 10 national markets, Eaton Square continuously monitors market sentiment for acquisitions in the technology, services and growth sectors.
Given our business model, we naturally spent a lot of time thinking about M&A market dynamics and here is our rationale for 2019 being the year for businesses with the right scale and story to sell – or at the very least be ready to respond if an opportunity comes knocking:
#1 Buyers Actively Looking for Acquisitions
At this point in the business cycle, there are many keen buyers looking for acquisitions.
From our perspective, every deal above the $20m enterprise value threshold is international. Through our highly collaborative team network, we are finding multiple bidders from different countries on deals. Fortunately for our clients, more competition translates into better outcomes.
The word on the street is that the doors of large financial and strategic buyers remain open for new acquisition opportunities in their areas of interest. We have been in contact with many financial and strategic buyers for many years, but we get the sense that in most cases, the easy deals have already been done. The M&A teams are being pushed by their Boards and Investment Committees to look further afield to find fresh acquisition targets. We also detect an uptick in unsolicited approaches from new parties keen to keep abreast of new opportunities to deploy capital to help sustain or accelerate growth.
#2 Sale Prices in Many Sectors are High
The second key reason for selling now is that prices in sought after sectors are strong as bidders compete for scarce capabilities. Sectors that we are currently seeing strong demand translating into better than normal transaction multiples include: AI, IOT, SaaS, Digital Transformation, Infrastructure Engineering.
#3 Good times roll.. until they don’t
Lastly and sounding a note of caution, we know that positive market sentiment can quickly turn and more than a few analysts are highlighting the downside risks in the international economic environment. We are reminded from our own experience that a hot market for acquisitions can rapidly chill. Looking back to the 2001 Dotcom crash, the 2007 GFC or the end of the infrastructure mining boom, we have seen many examples where business owners that were contemplating selling but were unable to transact, found themselves in the position of having to spend the next three to four years restructuring and working hard simply to restore the growth story they had before the crash.
So for those of you who are contemplating a potential exit, remember the adage that is always better to sell whilst things are going well and consider if 2019 should be your year for exploring options. Interested in understanding what a transaction could deliver or the work involved in getting transaction ‘match-fit’? The Eaton Square team are always interested in meeting innovative business leaders and learning about great businesses. We are happy to discuss potential exit plans on a confidential basis. You may reach me at firstname.lastname@example.org.
About the author:
Based in Sydney Australia, Neil has been working with growth stage technology business for over 15 years in venture capital and corporate finance. Neil holds a BSc in Electronic Engineering from Reading (UK) and an MBA from the Australia Graduate School of Management. For more information Click Here for Neil’s LinkedIn profile.