M&A DEALS CONTINUE TO FLOW FREELY..... BUT WHEN IS THE RIGHT TIME TO MAKE A DEAL? The numbers are in and 2018 was definitely a bumper year for Deal Making in North America with over 11,200 deals completed at a value well in excess of $2 Trillion.

As the Charts below clearly indicate – this is the 4th consecutive year that the $2 Trillion Deal Value point has been achieved. What’s more the averaged Valuation Multiples are still hovering at or close to 10 times across many industry sectors.

Looking ahead to 2019 as it rolls out, the prospects remain largely positive. The “Dry Powder” driving the funding of Private Equity deal making projects a sustained capital overhang. Add the continued strength of the US dollar compared to other major currencies and the prospects for cross border activity are strong with Canada cited as the clear #1 target for US companies making strategic acquisitions. The only potential barriers to continued growth being the possibility of a significant interest hike or major governmental instability.

What are the key strategic deal-making and success drivers?

According to Deloitte’s 2019 M&A Trends report, business expansion via broader geographic coverage (20%) and the addition of new services or products (19%) will be the key deal drivers this year.

Deloitte also reported that critical ingredients of sustained M&A success were:

  • Relevant Target Identification – 14%
  • Fair and Accurate Valuations – 18%
  • Planned and effective ‘post-deal’ Integration Processes – 23%

No surprises there!! Should be obvious that establishing “FIT” and ensuring a positive, blended operational working environment will best deliver incremental results.

Too often, however, experience shows that the importance of shared management philosophy, compatible talent resources and a common cultural approach between two organizations is pre-empted by the glowing spotlight beaming down on the potential ‘amalgamated’ total revenue streams and even mega-deals can end in eventual disaster. The chart below illustrates how inadequate preparation and sub-par deal execution factors can negatively impact potential M&A success.

To specify the requisite ‘FIT’ parameters requires that the Parties – both Buyers and Sellers – have a very clear and honest view of who they are and what they want/need out of any deal. The development of a clearly defined Strategic Pathway and a thorough examination of the critical Risk Factors remain an imperative and foundational Building Block for eventual Deal Success.

What are the critical Risk Factors?

This is where an experienced Advisor should play a vital role and demonstrate real value in examining each of the following RISK FACTORS that can significantly affect the potential value of businesses.

  • FINANCIALS
    How has the company performed over the last 3-5years and what is the projected pro forma for the current/new year?
  • STRATEGY & BRAND
    How visible are the company and its products/services in the industry? Is there an impactful web and social presence?
  • CLIENTS
    What is their Client Retention rate? How dependent are they on their top 3 or 5 clients?
  • LEADERSHIP
    Will Management stay on and for how long? Is there a practical Succession Plan in place?
  • PEOPLE
    What is the staffing breakdown? What is their workplace reputation in market? Are lay-offs predicted post-deal?
  • SYSTEMS
    How compatible are their accounting and operating systems? What about Data security?
  • PROPRIETARY PROCESS
    Does the company have any differentiating and valuable Patents or Trademarks?
When the Stars Align….

To target potential Buyers or identify and target potential Sellers, Advisors and their Clients should follow the Risk Factor survey and ideally eliminate significant risk before entering into direct communication. Business Owners can then make an educated decision as to when or if SELL is the right strategic option to choose?

In our experience the key triggers should be when an owner has lost his all-consuming passion for the business – feeling that younger blood is needed to combat the industry turmoil that competitive inroads and disruptive new marketing and technical approaches have created and perhaps when the lure of enjoying the spoils of their years of hard work significantly outweighs the on-going burden of financial risk and personal guarantees.

Alternatively, where multiple shareholders are involved, and the original owner(s) want to exit, a succession plan enabling key colleagues to buy the business out over time and HOLD & BUILD on the company’s financial results, management team and premium marketing reputation to maximize value for an eventual sale.

Equally for Buyers an objective assessment of the business may clearly indicate that a current flattening out of a company’s growth curve dictates the need to consider a BUY commitment to address competitive gaps, diversify product or service offerings, gain expanded geographic coverage and potentially to enhance bench strength within the management team.

THE BOTTOM LINE…..Get some Professional Advice

If you run or manage a quality firm of any size, you will be approached by buyers interested in acquiring you or sellers looking to be acquired by you. As Business Owners or professional managers, you need to be prepared, or you could get drawn into a bad deal for you, and for your firm.

Always remember the age-old adage – “You don’t know what you don’t know”, so don’t go it alone if you decide the time is right for you to sell, raise investment funds, or are ready to acquire.

Appoint an Advisor, MultiVisory or someone else if you prefer….. it will pay back!



Kevin Astle is the Founder and Managing Partner of MultiVisory International. Having worked on both sides of the Atlantic and on both sides of the Client/Agency desk across North America, he brings an international perspective and deep, multi-sector knowledge and network to his Clients.