With the peak of the COVID-19 pandemic presumably in our rear view, the future for mergers and acquisitions in the lower middle market remains uncertain and unpredictable in the short-to-near term. Many strategic buyers (e.g. same industry or business) have adopted a wait-and-see approach to potential transactions, while financial buyers (i.e. private equity groups) have gone inward, focusing on securing and protecting their existing portfolio companies.
Potential sellers do not despair; according to the PWC report, “Succeeding through M&A in Uncertain Economic Times,” US public companies now hold more than four times as much cash as they did a quarter-century ago, and the capital that US private equity firms have available for investment but haven’t yet deployed has never been higher.
Business owners contemplating a liquidity event should start their planning early, consult with a knowledgeable M&A Team, and focus on maximizing value. A decrease in financial benchmarks from the COVID-19 crisis is expected and understandable. How your company and management team navigate this downturn will be critical to the value of your business.