Could this be a term of our times? Are we really living in The Merger and Acquisition Age? According to recent business trends posted in the Kiplinger Letter, merger activity is on a roll. Not just in the U.S. but across the globe. Merger activity in the U.S. has hit a 15 year high in the first quarter of this year with consumer-oriented firms leading the action. But that’s not the only industry finding success in mergers and acquisitions. Pharmaceutical, technology, energy, mining, and electric utility companies are also finding success.
What’s So Appealing About Growing Through M&A?
Easy. It is a way to effectively grow or even double your business overnight and the timing could not be better!
The baby boomers have been a driving force in Middle Market M&A in the late 20th and early 21st centuries. The eldest members of the 78 million-strong baby boomer generation turned 68 in 2014. The youngest boomers will turn 66 in 2030. Many baby boomer entrepreneurs will sell the Middle Market businesses they founded, and this factor will remain the driving force in M&A for at least two more decades! To put this into perspective, consider this: Based on recent data supplied by the US Census Bureau, there are just about 1.2 million Middle Market firms with sales of $1 million to $1 billion annually. Collectively these 1.2 million firms had sales totaling $9.8 trillion and carry a conservative market value of $4.9. About 800,000 of these businesses are owned by baby boomers. Between 2014 and 2029 (15 years) an average of 43,000 of these businesses per year will be disposed of… about two-thirds of these by sale. These numbers are huge and unprecedented.
Technology is also playing a large role in today’s Middle Market. Because of the speed with which new information is being released, Middle Market firms have dramatically shortened business cycles. New technologies and approaches launched by Middle Market firms routinely disrupt and eclipse other Middle Market firms, even Upper Market firms, and sometimes entire industries. This has forced business owners to become increasingly proactive and infinitely more responsive to their clients and prospects, impacting not only Middle Market business operations, but also the timing, frequency, and execution of the sale of Middle Market companies.
Business can be described as an ecosystem. As in all ecosystems the big fish eat the little fish in order to survive. This is not a new phenomenon in M&A, but it is a more frequent one as the pace of business life continues to change. Survival of the fittest is not just a Darwinian construct for living creatures. It is equally applicable to business, especially the “Middle Market Sea”, which is the spawning ground for Upper Markets.
So are we living in The Merger and Acquisition Age? It certainly appears that way and it appears this trend will continue for the next few decades completely reshaping the way that Middle Market companies grow. If you are not thinking about the M&A marketplace… it’s time to start and LBA Haynes Strand can help you. Click the button below to download your free report and begin your M&A journey!