2018 is on track to be another banner year for M&A activity. Key factors driving this trend include over $1 trillion in “dry powder” standing ready to be deployed from private equity funds, lower U.S. tax rates contributing to additional economic growth and liquidity, a continuing trend of technological disruption across industries and geographies and perhaps most pertinent to US based middle market companies the ongoing transfer of ownership necessitated by “baby boomer” retirements. In aggregate, these micro and macro economic trends are conspiring to create a robust middle market M&A environment. A full 50% of middle market companies engaged in some type of M&A activity over the past three years and leading indicators portend increased activity in the coming months.
M&A transactions provide unparalleled opportunity for astute management teams to grow revenues and profits, enter new markets and acquire critical technological capabilities. That said, the road to an ultimately profitable transaction is fraught with risk and uncertainty. Nearly half of buy and sell-side, middle market, M&A participants report that both valuation and integration are “very difficult” and often preclude the success of a transaction in that they fail to generate the expected operational synergies and rates of return or alternatively are never consummated after significant expenditure of time and resources. In fact, by some estimates as many as 80% of mergers fail to create additional shareholder value. Clearly M&A activity thrusts the immutable risk/return maxim into stark relief. However, it is possible to mitigate a substantial portion of risk inherent to these transaction given the proper people, planning and processes.
So how exactly can middle market organizations best position themselves to capitalize on M&A opportunities in 2018? AchieveNext and The CFO Alliance convened a Special Task Force comprised of 22 CFOs and transaction professionals to help answer that very question. The result is an M&A and Capital Markets Readiness Report that details best practices and practical guidance for planning and executing an M&A process. Key findings include the need for an extensive pre-transaction planning process, detailed financial and cultural due diligence, a streamlined communication process among deal team participants and comprehensive post-close integration planning. The report provides CFO specific insights and tools to help finance and corporate development professionals evaluate, manage and execute successful transactions. Please visit us at www.achievenext.com for more informations and access to the report.