Category

M&A

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January 20, 2025

Winter M&A Update for Family Businesses

Middle market M&A activity in the third quarter of 2024 showed signs of the “summer slowdown,” as fewer PE deals were reported compared to the first two quarters of the year. However, as deal activity begins to revert to pre-2023 levels, the outlook for 2025 points to signs of optimism, while some hurdles remain on the horizon. In this week’s post, we look back at middle market (defined as total enterprise value of $100 – $500 million) transaction activity in 2024 and look ahead to what may be on the horizon for middle market M&A in 2025.

August 14, 2024

Kellogg Company Case Study

Attempting to Unlock Shareholder Wealth in a Mature Business

Our Family Business Advisory team put together a powerpoint deck, “Case Study: Kellogg Company – Attempting to Unlock Shareholder Wealth in a Mature Business” which tracks key events in Kellogg’s history and comments on the transaction. There are lessons family business owners can learn from the transaction and from Kellogg’s recent moves.

June 24, 2024 Planning & Strategy Special Topics

How Does a Quality of Earnings Report Differ from an Audit?

A quality of earnings (“QoE”) report and an audit are both essential tools in the business world, but they serve distinct purposes and offer varying insights.  Audits are broader and regulatory in nature, whereas QoE analyses are more focused and strategic, catering to the needs of investors and decision-makers who require a deeper understanding of a family business’s true financial health and future potential.

June 10, 2024 Planning & Strategy Special Topics

What to Look for in a Quality of Earnings Provider

The cost of M&A failures is high for both buyers and sellers of family businesses. For buyers, overpaying for a target can hamper returns and crowd out other more attractive investment opportunities for years to come. Sellers only get one chance to sell their businesses. Failing to maximize proceeds represents a missed opportunity they can never get back. These high stakes mean that thorough and high-quality due diligence is critical. A Quality of Earnings (or QofE) analysis is an essential component of transaction diligence for both buyers and sellers. Optimizing your transaction diligence requires assembling the right team.

May 29, 2024 Planning & Strategy

A To-Do List for Evaluating Acquisition Offers

The tyranny of the urgent imposes itself on family business leaders just as it does on everyone else. In this week’s post we offer a to-do list for family business directors should they come up against an acquisition offer. The items offered for consideration will help reflect priorities for the long-term sustainability of your family business.

May 21, 2024

How Should Family Businesses Respond to an Acquisition Offer?

Successful businesses don’t have to go looking for potential acquirers—potential acquirers are likely to come looking for them. Most of our family business clients have no intention of selling in the near-term, and yet they often receive a steady stream of unsolicited offers from eager suitors. Many of these offers can be quickly dismissed as uninformed or bottom-fishing, but serious inquiries from legitimate buyers of capacity occasionally appear that require a response.

April 15, 2024

Spring M&A Update for Family Businesses

Following up on our post from a couple of weeks ago regarding the acquisition of SRS Distribution by Home Depot, we provide a brief update on private M&A markets in this week’s post.

Although middle market transaction activity remained depressed in the fourth quarter of 2023 compared to 2022, M&A activity and multiples improved a bit compared to recent quarters. Possible Fed rate cuts, a resilient economy despite 525bps of Fed rate hikes, and ample dry powder held by PE firms to deploy may be the catalysts for a stronger rebound in 2024.

April 1, 2024 Planning & Strategy

Home Depot Announces SRS Distribution Acquisition

An M&A Case Study

The Fed’s efforts to rein in inflation from early 2022 through the middle of 2023 also reined in middle market M&A activity.  Middle market transaction data provider GF Data reported data on 269 sub-$500 million acquisitions by private equity firms in 2023, compared to 464 such deals in 2021 (a 42% decrease).  Some of those “missing” deals may never happen, but we suspect most were simply deferred, leading to more robust transaction volumes as buyers and sellers acclimate to the new “normal” interest rate environment.

Home Depot’s recent announcement that it was acquiring roofing and construction material distributor SRS Distribution may signal the return of more robust deal activity.  Even if your family business has nothing to do with construction materials, there is plenty to note in this deal.

March 26, 2024 Planning & Strategy Valuation

Your Family Business Will Transact: Are You Ready?

Approximately 75% of business owners regret selling their business within the first year following the sale, according to a new report. Have you checked in on your succession plan? How does your business’s succession and exit plan stack up? We explore a new report and why planning ahead is crucial to ensuring your future business transition goes as smoothly as possible.

March 11, 2024 Planning & Strategy Special Topics

5 Reasons Sellers Need a Quality of Earnings Report

In a recovering M&A market, sellers must be prepared to present their value proposition effectively. A Quality of Earnings (QofE) report is essential for sellers to maximize their asset’s value and navigate the negotiation process with confidence. The report not only helps in presenting adjusted and future sustainable profitability but also equips sellers with crucial information for clear decision-making, fostering transparency, and ensuring a favorable transaction outcome.

February 20, 2024 Planning & Strategy

Ownership Succession and the NFL

The NFL has functioned as a family business incubator of sorts throughout its decades of existence. While other major U.S. professional sports leagues have embraced private equity ownership in recent years, the NFL has held out in favor of the family-owned model. The introduction of private equity into the league (expected at next month’s league meetings) will have far-reaching effects, both positive and negative. In this week’s post, we look at the pros and cons of private equity ownership in NFL franchises and how, like the NFL, family business owners considering private equity investment should weigh the pros and the cons before bringing PE firms into ownership groups.

January 29, 2024 Planning & Strategy Special Topics

5 Reasons Buyers Need a Quality of Earnings Report

In 2024, as the prospect of Fed rate cuts begins to attract buyers back into the market after a period of caution in 2022 and 2023, the importance of thorough due diligence cannot be overstated. Family businesses, in particular, should pay close attention to the crucial role that a Quality of Earnings (“QofE”) report can play in their acquisition decisions. From uncovering sustainable earnings and identifying cost-saving potentials to understanding revenue synergies and assessing capital needs, a comprehensive QofE report emerges as an indispensable tool for family business directors aiming to navigate the complexities of acquisitions with confidence and strategic insight.

January 8, 2024 Planning & Strategy

A 2024 M&A Update

In this week’s post, we take a look at the year that was in middle market M&A and offer a few thoughts regarding the potential for elevated deal activity in 2024. Despite depressed levels of deal activity in the middle market in 2023, there are reasons to be optimistic for increased levels of dealmaking in 2024. We’ll cover that and more in this week’s post.

January 2, 2024 Planning & Strategy

5 Questions for Family Business Directors in 2024

In 2023, family businesses experienced varying degrees of success, prompting a focus on key strategies for 2024. These strategies include assessing the economic outlook, understanding customer needs, maintaining and growing profit margins, revising M&A strategies, and adapting to emerging trends like generative artificial intelligence. Directors are encouraged to proactively address these areas to ensure 2024 is a successful year for their family businesses.

September 19, 2023

Fall 2023 M&A Update

Recent data indicates a decline in middle-market transaction activity and deal multiples for private companies in the second quarter of 2023, influenced by rising interest rates and economic uncertainty. However, the data also shows that there are still transaction opportunities for quality businesses coming to market.

August 15, 2023 Planning & Strategy

Private Equity (Still) Wants to Buy Your Family Business

Private equity and institutional investors have been increasingly targeting family-owned businesses for potential acquisition. Recent industry data shows that smaller deals account for over 61% of all private equity transactions in the first quarter of 2023, and founder-owned business purchases, especially those valued under $100 million, are rising. In this week’s post, we look at some of the pros and cons of private equity investment in your family business.

February 28, 2023 Capital Structure Planning & Strategy

Out to the Public and Back Again

The Weber Grill Case Study

A recent Wall Street Journal article highlighted the trend of newly-public companies reverting back to private ownership after a very short time in public hands.  Among the boomerang IPOs mentioned in the article was that of backyard grill maker Weber.  With the advent of grilling season, we were curious about Weber’s experience in the public markets and any lessons that family business directors might be able to draw from the tale. Among the lessons available for family business directors from the tale, we will focus on two for this post.

October 24, 2022

Fall 2022 Middle Market M&A Update

For this week’s post, we take a look at recent trends in middle market M&A. Despite turbulent economic and geopolitical conditions in the first half of the year, valuations in the middle market continued to hold their ground.  Still, whether looking to buy or sell, family business owners would be wise to act sooner rather than later, as declines in volume and value thus far in 2022 suggest tightening conditions in the middle market.

September 26, 2022 Planning & Strategy Special Topics

Considerations in Merger Transactions

This week we welcome Nick Heinz, ASA to the Family Business Director Blog. Nick is a Senior Vice President at Mercer Capital and a member of the firm’s Transaction Advisory team. This article originally appeared as part of an ongoing series, Buy-Side Considerations, from Mercer Capital’s Transaction Advisory team and highlights key considerations for family businesses looking to engage in a merger.

January 31, 2022

Transaction Outlook 2022

Dealmakers logged record levels of merger and acquisition activity in the middle market (deal values between $10 million and $500 million) in 2021. In this post, we highlight a few of the trends that bore themselves out in middle market M&A activity in 2021 that family business owners and directors should keep in mind when evaluating potential transactions in 2022.

June 21, 2021 Shareholder Engagement Special Topics

Family Business Purpose and Transactions

In this post, we offer a unique perspective from Atticus Frank, CFA who worked in his family’s business for nearly three years prior to returning to Mercer Capital and joining the team’s Family Business Advisory Group. This post focuses on the wisdom, or lack thereof, of transactions. M&A decisions shouldn’t be undertaken without understanding the meaning of the family business to the family (Is the family business a growth engine, a store of value, a wealth accumulation vehicle, or a lifestyle vehicle). Atticus tackles the topic with a story about his family business.

March 30, 2021

Middle Market M&A Amidst a Recovering Economy

For family business directors, 2021 should be an opportune time to consider making an acquisition. General indications on valuation suggest that the private company M&A market has not been priced-up at anywhere near what has been seen in the public markets. While this difference may be caused by a public market over-valuation issue that is “corrected” in the short-term, it suggests that there could be positive momentum in private company valuations as the economy continues to move through subsequent stages of the post-pandemic recovery.  A good M&A deal can be made even better with favorable financing, which should be available to many borrowers in the current environment. We can’t predict the future, but those who take a buyer’s view of the M&A market now might be rewarded with enhanced returns.  With pent up demand and a high availability of capital, we anticipate a rise in M&A activity over the next year with the best valuations and financing deals likely favoring the early bidders.

December 3, 2018

Evaluating Acquisition Offers To-Do List

In last week’s post, we explored how to respond to unsolicited acquisition offers.  This week’s to-do list is about being prepared for such offers if and when they come.

November 26, 2018

How Should We Respond to an Acquisition Offer?

Successful businesses don’t have to go looking for potential acquirers—potential acquirers are likely to come looking for them. Most of our family business clients have no intention of selling in the near-term, and yet they often receive a steady stream of unsolicited offers from eager suitors. Many of these offers can be quickly dismissed as uninformed or bottom-fishing, but serious inquiries from legitimate buyers of capacity occasionally appear that require a response.