Excerpts from Gilbert & Cook's "Mid-Year Outlook - Plans, Priorities & Expectations in the Public & Private Marketplace" By Steve Jacobs
What is the status of the U.S. M&A market and what is the future outlook?
Competitive environment and it is definitely a seller’s market, but buyers are doing more strenuous due diligence to make sure of what they acquire.
Prices and multiples are high for quality companies due to lack of quality businesses on the market.
PEGS and large corporates are willing to look at smaller transactions, actually making venture and angel investments to bolster R&D and technology.
Cross border deals are down 50% from last year.
Key reasons are unresolved issues like Brexit and trade policies.
U.S. economy has been surprisingly resilient as we are experiencing our longest ever economic expansion of 11 years (but global growth has slowed).
FACTSET U.S. MergerMetrics for trailing twelve months: 13,569 deals closed, up over 7% year over year.
What is impacting valuations in today’s market?
Low interest rates.
Banks hungry for earning assets (loans) – funding up to 50% or more of transaction value.
Plenty of equity capital.
Lack of quality companies on the market for sale.
Strong buyer demand for growth via acquisition.
According to Warren Buffet’s letter to shareholders the last 3 years, he shared, “Given the army of optimistic purchasers, price seems almost irrelevant.”