Demand exceeds supply, and this has been the case for quite a while. Financial and strategic buyers, armed with substantial capital, are ea- gerly pursuing deals. Unfortunately, deals have been hard to come by.
Indeed, deal count was down by 27 percent in 2013, despite the fact that U.S. private equity firms are sitting on $466 billion
in uninvested capital and U.S. public companies have about $300 billion in excess
cash at their disposal, according to data
from Pitchbook and BDO Capital Research.
Adding in excess cash on private company
balance sheets, it’s not a stretch to estimate there is currently over $1 trillion in
uninvested M&A capital.
So where are the sellers? One would
think potential sellers would see an opportunity to divest, given the evident demand,
as well as the steady stream of solicita-tions many of them receive. Yet, they appear to be very cautious, if not completely
uninterested. But why?
As advisers to both sellers and buyers,
and through our involvement in numerous
M&A transactions across the country on
a monthly basis, we are seeing three main
themes emerge regarding the imbalance of
• First, the economic doldrums have
worn on business owners. In fact, many
of them see heightened risk in completing a deal. They are concerned that an
economic shock of some sort could sideline their efforts to sell, so they would
rather not invest the time and energy in
the first place.
• Second, many business owners see
their business as the best ROI opportunity for their capital. Despite the appeal of
wealth diversification upon a sale, they
often tell us that their after-tax proceeds
may not yield an acceptable return, even
on a risk-adjusted basis. Holding on is,
in essence, a better bet in their view, especially because they have come to know
and trust the inner workings of their
business and industry.
It’s not a
Good Deals Still Hard to Come By,
but Pickup Seen in Coming Months
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