M&A poised to surge, now Congress needs to cooperate
These should be great times for business owners to sell their company. All of the elements are in place for a pop in the mergers and acquisitions market … if only Congress will cooperate.
That’s the outlook of a panel of M&A experts who spoke Wednesday at the Association for Corporate Growth – Cincinnati’s annual M&A roundtable. I moderated the 45-minute discussion at downtown’s Hilton Cincinnati Netherland Plaza.
These should be salad days for M&A activity, said Jeremy Hayden, a panelist who chairs downtown law firm Frost Brown Todd’s entrepreneurial services team. And they still could be. Companies have boatloads of cash on their balance sheets. The stock market has posted solid gains for four straight years, and its strength is typically an indicator of M&A strength. Financing is readily available.
“The fundamentals are there and ready,” Hayden said. “We just need the legislative piece. If we can just get some certainty from Congress, the M&A market could really take off.”
Congress staved off the fiscal cliff, but there’s still plenty of tax and government spending uncertainty involving the debt ceiling in February, and quite possibly well beyond that.
Bill Watkins, another panelist who is group head of business development at investment banking firm Harris Williams & Co. in Cleveland and isn’t related to me, said that’s putting a damper on an otherwise burgeoning M&A market.
“Everything for M&A is extremely strong,” he said. “But there’s still this uncertainty.”
He expects the first half of 2013 to start slow for acquisitions. He’s not optimistic of a huge rebound, either.
“I’d like to think that if 2013 were flat with 2012, that would be a good year,” he said.
Keith Moran, a panelist who leads Ernst & Young’s transaction advisory services practice in the Ohio Valley, also expects a slow start to the year for deals to get done. But he sees a second-half pickup, spurred by increasing consumer confidence and hopes that Congress settles some big-picture tax and spending issues.
Pricing has gotten more realistic and financing is plentiful, the panelists said.
“If you’re thinking of raising any form of debt capital, do it now,” said Watkins. “It’s a great time to do it.”
Small deals are getting done more than big ones, which is good news for most small-business owners.
Health care has been one of the hottest sectors for acquisition activity, Hayden said. Plenty of tech and energy deals are getting done, too.
Ultimately, activity is likely to pick up because buyers need to keep growing. And it’s getting tougher for firms to grow on their own because they’ve already cut costs to the bone.
“The requirement or expectations for growth are out there,” Hayden said. “If it’s not organic, then you have to buy to achieve that growth.”