“Middle market and lower middle market M&A (merger and acquisition) transaction volume for Q3 2015 remained paced with Q2 2015,” according to M & A Watch, a quarterly e-newsletter delivered to Pavement Maintenance & Reconstruction readers last December.
The newsletter is provided by Pursant LLC, whose CEO Mark Herbick presented a merger-and-acquisition seminar at the recent National Pavement Expo in Charlotte, NC. Herbick’s session, “The ‘Good, Bad & Ugly’ of Buying and Selling A Business: Learning by Example,” detailed how selling a business is different from running a business, and he told contractors that too many contractors wait too long to prepare their company for sale. So he outlined a disciplined process owners need to take to maximize their effort to sell what they’ve spent years building, working through real-life examples of transactions, highlighting what he termed “the phases of the sale cycle.”
As an extension of his seminar, Pursant has teamed with Pavement to provide readers quarterly updates of trends and the state of the merger and acquisition market. The e-newsletter tracks merger and acquisition volume and valuation, looks ahead to future quarters, and provides a snapshot of the state of the merger and acquisition market. M & A Watch will be sent free to Pavement readers who have provided their email address.
“Despite the tumultuous markets this summer and the growing belief that the Fed will raise rates in Q4 this year [which is what happened, ed.] deal makers remained focused on getting deals done briskly and valuations remained strong for the quarter. The flush and accommodating debt market, lack of organic growth opportunities and overall strength of the North American economy continue to fuel the M&A engine,” the December e-newsletter noted. “As 2015 winds down and more deal data rolls in, Pursant is keeping a close eye on the pace of mergers and acquisitions to see if 2015 can still trump 2014’s record deal volume and value.
“All of this means two things. First, the U.S. remains an economic oasis for investment and M&A; however, there are some partly cloudy skies on the horizon. Second, the US economy continues to improve—slowly, but improvement nonetheless—and with this sustained improvement comes the increasing likelihood that interest rates must and will rise,” according to the report.
“Current borrowing rates are not indefinitely sustainable. As we stated last quarter, this increase could precipitate a change to the current very low cost of capital, which could then initiate downward pressure on M&A volume and valuations. This turning point will route us to a new slightly lower plateau of volume and valuation.”
The next edition of M & A Watch will be sent in March.