Several of our team members attended the IBBA/M&A Source Conference held in Denver last week. It had been many years since this semi-annual international conference was held in Colorado. While the pandemic caused cancellations and light attendance over the last couple of years, it was wonderful to see this event returning back to pre-pandemic levels with over 700 IBBA members and 200+ M&A Source members in attendance.
These conferences are packed full of both instructor-led classes and expert panel workshops to help continually educate members on important topics and trends such as financing transactions, marketing/social media options, negotiation tactics, available software/workflow tools, etc. While not all the information was relevant for our firm, as a team we returned with the following 3 key takeaways:
- Transaction Activity Remains Strong
Many of those attending expressed the same sentiment, 2021 was a record year and 2022 has not showed signs of slowing down for business acquisitions. While many are closely watching the Russia-Ukraine war, inflation spikes, and stock market turmoil, for businesses valued under $100M, the transaction market is still alive and well. Even if we look back over 12 years ago at the “Great Recession”, multiples on cash flows remained the same as most buyers understand that lower middle market businesses are still a great way to build wealth and shelter their investments from the dramatic highs/lows of Wall Street. While inflation may be driving up costs, gross sales for many businesses are increasing as well, keeping healthy profit margins.
- Transaction Complexity Has Increased
With many still recovering from the pandemic, the complexity of transactions have increased. Buyers are spending additional time addressing market uncertainty by demanding more detailed financial reports, longer and more involved lease negotiations with landlords, and asking more of their attorneys to account for new legal considerations associated with pre and post-closing matters. These include how to address possible labor shortages and different ways to retain current employees in the ownership transition.
- Defer to the Experts
With the increased complexities of transactions in today’s market, putting together a team of experts in the business sale process is more crucial than ever before. We’re hearing more frequently how transactions have failed due to the lack of expertise in certain areas such as accounting, legal, financing, negotiations, and more. For this reason, it is critical to have a firm like The FBB Group involved to help ensure the proper kind of expertise is applied at the right time in the process.
With the ever-changing market landscape, who is watching out for the sale of the business as a whole? Who is tasked with ensuring expectations are being properly set upfront and realigned along the way if necessary? The majority of our business comes from referrals and we appreciate your continued trust in our firm.