Banking & Finance

Experts confident in another strong year of M&A activity

Number of mergers and acquisitions nationally grew from 624 in 2016 to 784 last year.

April 12, 2019
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Max Friar
Max Friar, managing partner at Calder Capital LLC, served as the M&A adviser to West Michigan-based Precision Engineering & Manufacturing when the company was acquired last month. Courtesy Calder Capital

Buyers are actively looking to purchase businesses across the country.

According to The Statistics Portal, there were 784 mergers and acquisitions of venture-capital-backed companies in 2018 throughout the country. In 2017, there were 707 mergers and acquisitions of VC-backed companies, and in 2016, there were 624 mergers and acquisitions of VC-backed companies.

In West Michigan, executives of some mergers and acquisitions firms say the acquisition activities happening in the region continue to be strong.

Similar to the national trend, Jack Snyder, president of Grand Rapids-based Snyder Partners, said buyers still are looking to purchase businesses in West Michigan.

“From my perspective, I believe that buyers’ interest and appetite for acquisitions remain quite strong,” Snyder said. “I am not sure that they are at an upward trend, as it has been strong in this space and geographic area for some time.” 

Max Friar, managing partner at Calder Capital LLC, recently served as the M&A adviser to West Michigan-based Precision Engineering & Manufacturing when the company was acquired by individual investors last month. He said over the last few years, the market has been “exceptionally strong, in general.”

However, Friar said within the last three to six months, there have not been a lot of sellers compared to times past, but he is optimistic about this year.

“This is my own feeling, plus talking to other people like buyers, banks and so forth, there seems to be within that time period fewer interested sellers of middle-market companies,” he said. “Not companies like gas stations or restaurants … but people who own established, profitable manufacturing companies. I have had numerous buyers tell me that they just can’t find a lot of quality companies, but I think that is a short-term thing. I think more and more, sellers will come out of the woodworks, and I think it is going to be another strong year.”

Like the manufacturing industry, there also is an interest in the health care industry. Snyder said private equity firms are interested in companies that are in the medical field and companies with earnings before taxes, interest, depreciation and amortization of $1 million or more.

“There is also a strong interest from individual buyers looking to buy smaller companies in manufacturing service and distribution,” Snyder said. “However, I don't see a lot of interest for stand-alone retail establishments. This has also been somewhat consistent for some time, and I do not have any reason to think that the market is on an incline.”

Michael Greengard, president of Praxis Business Brokers, said at his firm, he is continuing to see good activity in the market, but one of the main differences is he is seeing a trend in the deals they are involved in, and that is the deals are much bigger than previous years.

Currently, Greengard said they are involved in 12 acquisitions that are either listed and being marketed or will be listed, and of those 12 businesses, the average sale price is more than twice what the average sale price has been over the past several years.

“I don’t know if that is an anomaly or hopefully a continuing trend, but we are seeing (now) fewer small deals, and the deals that we have are twice the size we are accustomed to seeing. The smallest deal of the 12 has a price tag of $1 million and the largest of the 12 has an $18 million tag. The average is $7 million and typically our range is $1 million-$5 million, and we do so down to smaller deals that are about $500,000.”

The companies that are involved in Greengard’s deals are service businesses, manufacturing businesses, testing businesses and environmental type businesses.

Snyder, Friar and Greengard agree companies within the manufacturing industry are one of the most sought after by buyers, and the acquisition market is continuing to showcase positive transactions.

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