The Private Business Owner is starting a new feature that provides M&A news and tips each week. Jumping right into this week’s highlights, there is good news for all of North America, as the U.S. re-shoring initiative has gained more traction and Canadian M&A activity was up the second quarter of this year. M&A activity continues to recover nicely and the last week of July had 11 IPOs, making it one of the busiest weeks in 2011.
For those interested in learning more about the process of selling a business, you can learn about the valuation, the next step after creating a sustainable business and deciding to sell it.
“Now, having made the decision to sell and having developed a well-positioned, growing, profitable company you are now ready for the first step in actually selling andyour company: the valuation. The importance of getting this step right cannot be stressed too strongly. If you have no idea what your company is worth, how will you be able to choose which offers to take for your company? You can’t. In fact, without an accurate, objective evaluation of your business, you could actually accept an offer that radically undervalues your company, forcing you to “leave chips on the table.” Far too many entrepreneurs do this and, unfortunately, they never realize it until too late.”
“Last week I came across some great news for privately held, middle-market companies in Canada. According to an article in Reuters, Canadian M&A activity (based on deals closed) reached its highest level in the second quarter since the credit crises. Data compiled by Pricewaterhouse Coopers (PwC) indicates that over 800 deals closed and were announced in Canada in the last quarter, which is a 10% increase from the second quarter in 2010. Most interesting, the value of deals closed increased by over 60% during the same time frame. The second quarter data followed news that the value of deals closed in the first quarter of 2011 was up over 80% from the same period in 2010, reaching levels not seen since 2007.
Both the increase in volume and value tells us that M&A activity in Canada has really turned the corner.”
Carl already examined the quasi re-birth of U.S. manufacturing last month. Now, it seems that the re-shoring initiative is really gaining traction. Accenture recently published a study on this topic. Here is what this means for owners of middle-market companies:
“The Accenture study found that a number of major manufacturing companies are re-examining their off-shoring and re-shoring propositions. The “new normal” of the post-recession economic world has radically changed the fundamentals of this decision. This is great news if you own amanufacturing products of any type.
CEOs considering re-shoring will first look to acquire existing facilities rather than build from the ground up. In fact, in some cases what you are manufacturing may not be the primary cause of interest in your company. You may have equipment, location, facilities, or skilledthat may be equally, or even more important, than the products you are currently manufacturing.”
“Those of us in the M&A industry continue to be surprised when we encounter middle-market business owners who believe that M&A activity is still declining. The reality is that M&A activity has rebounded nicely since the middle of last year. Most buyer groups have gotten much more active during the last 12 to 15 months, overcoming stock market volatility and related economic fears in the process…
[According to the Preqin July 2011 Private Equity Spotlight,] both the number of deals closed and the total value of those deals are up dramatically since the M&A industry began tanking midway through 2008. I always like to compare comparable quarters when looking at this data. So if you look at the second quarter of 2011 with nearly 700 PE deals closed to the second quarter of 2010 with around 600 or Q2 2009 with only 400 closed, you can see that private equity deal making has really improved.”
“Prior to the recent volatility in the stock market, this year was turning out to be one of the best years for IPOs (initial public offerings) in years. In fact, during the last week of July, 11 companies had IPOs, making it one of the busiest weeks in years for IPOs. As of the end of July, 104 U.S. companies had gone public so far this year. This puts the market nearly on the same pace with the 170 offerings last year, according to research firm Dealogic Inc. Although that is quite an increase from the average of 58 companies a year that went public in 2008 and 2009, it is well below the company average of 257 from 2004 to 2007.”
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