Why is our M&A activity up substantially?
While the number of transactions last year grew, I believe we are poised for even more this year.
Why is this happening?
- Most printers and mailers are having trouble growing organically. Volume from existing clients may be increasing due to the economy being on an upswing but not enough to make up for the traditional loss of sales from existing clients. I have always preached that we should expect about a 10% decrease in existing clients sales due to a variety of reasons – they close, they move, our contact leaves, they merge, they get acquired, a competitor takes their business due to price/better service or their business model changes.
- Printers and mailers are diversifying their product and service offerings to increase sales. Printers are doing more mailings and mailers are doing more printing. Printers are buying mailers and mailers are buying printers. Both are looking to buy marketing or sign companies. Again it’s harder and it takes time to start from scratch in adding the equipment and expertise to grow by adding complimentary products and services.
- Printers and mailers want to retire. The average age of the owners is around 60 years old. Many bought, inherited or founded their companies in the 1970’s or the 1980’s. Many owners don’t have an heir apparent that will take over the business or they need money to retire.
- Change in technology is driving many companies to sell. The cost to upgrade their equipment and systems is very high and they face the challenge of how long it will take to recoup their investments or if they can ever recoup them. Why spend money or borrow money when they are at the tail end of their career?
Now is a great time to market your business especially if sales and profits have leveled off. There is a tremendous market of buyers who are looking. The deals that I see today indicate that buyers are paying real money for businesses. Values have inched up due to the short supply of businesses for sale. Most of the highly distressed businesses have either liquidated or closed.
One of the last deals that I marketed, had 5 written offers. Another had 3 suitors literally bidding for the business. Now may be an ideal time to look at your owner options. Find out what your company may be worth and either decide to market the business or improve to increase the value.