M&A market continues strong run into 2015

A fairly rosy economic outlook and booming stock market have had an encouraging impact on the mergers and acquisitions market going into 2015, experts say.
According to Milwaukee investment bank Cleary Gull’s Market Monitor, “there seems to be a consensus around positive/improving outlook which makes it far easier for buyers, sellers, lenders and investors to plan and commit to transactions.”

Many local private equity firms and investment banks reported higher deal activity in 2014 than in 2013, which has driven a strong pipeline of pending transactions going into the New Year.

“We’re bullish. We’ve got 14 transactions that we are working on currently across our group,” said Jeff Bartlett, a director at Wipfli Corporate Finance Advisors LLC who focuses on the Milwaukee and Madison markets.

WCFA completed two of its four corporate finance transactions in the Milwaukee market in the fiscal year that ended May 31, 2013. It completed one corporate finance transaction group-wide in fiscal 2014. In the fiscal year that began June 1, it has already closed two corporate finance transactions and has another six that are in various stages of completion. WCFA also works on another 15 to 20 assignments annually in some sort of due diligence, strategic planning or buy side advisory role.

Transaction volumes are the highest since the recession, valuations are high, there is a lot of debt available to support M&A, and many buyers with cash are available to buy companies, Bartlett said, all factors that could contribute to more completed deals in 2015.

Bartlett

Vicki Fox, managing director at Eisen Fox & Co. LLC in Milwaukee, agreed that conditions are right for a flurry of M&A activity. The stock market is doing well, and those who have more wealth from selling a business are putting it back into the M&A market. In addition, corporate balance sheets are still pretty flush with cash and some companies are divesting non-core operations since it’s such a good seller’s market, she said.

“There’s really nothing on the horizon that seems to be in a position to shake this market,” she said. “We’re anticipating probably another year, maybe two years, of good M&A activity.”

Eisen Fox focuses on deals in the $1 million to $5 million EBITDA range, and has seen multiples average between five and seven times EBITDA in the current market environment.

Bartlett also said quality companies are earning very good multiples right now.

It’s a seller’s market, Fox said, since business owners and private equity groups can realize gains from the positive market conditions.

“If you want to sell something, now is the time from a value standpoint,” Fox said. We have a lot of sellers that we’ve been talking to for years and I think they finally realize that now is the right time to move forward.”

According to an update from Schenck M&A Solutions, which has locations across the state, a strong sell-side market persisted through the first nine months of 2014, “as buyers continue to pay premiums for well-run companies.”

Bartlett also considers it a seller’s market, and said some companies are using recent positive performance as a basis to enter the market and sell on a good story.

“There’s not enough quality sellers on the market to kind of satisfy demand that we see, although I expect this will change at some point as the baby boomer owners are expected to enter the market soon…to change ownership,” he said. “We think it will become a buyer’s market at some point when this rash of generational change in ownership hits the market.”

Fox

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Molly Dill, former BizTimes Milwaukee managing editor.

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