M&A deal activity has recovered from its 9-month pandemic-related dip. Based on the overall strength of the stock market, we expect continued strong mergers and acquisitions activity for 2021 as well.
The total dollar value of mergers and acquisitions announced in the U.S. fell to roughly $20 billion in March as the pandemic set in, according to data from Barrons. That was a sharp drop-off—from about $180 billion in January. Yet the recovery has been equally sharp. Deal volumes reached approximately $205 billion in October according to Barron’s data.
Looking forward, Rich Jackim, managing partner at Jackim Woods & Company said, “low-interest rates, optimism about a COVID vaccine, record-breaking fundraising by Special Purpose Acquisition Companies (SPACs), and even a less contentious global trade policy will all contribute to continued strong M&A activity in 2021.”
Interest rates are currently at historic lows, reducing the cost of funding acquisitions. In addition, the good news about several COVID vaccines provides a light at the end of the tunnel and the assurance that buyers need to make a purchase.
And SPACS—special purpose acquisition corporations that raise money through an initial public offering in order to buy other companies—have raised more than $64 billion this year. SPACs raised just $13 billion in all of 2019, suggesting that SPACs will be the new driver of middle-market M&A activity in 2021.
“The M&A wave is regaining momentum and should continue for the next 12-18 months,” Jackim says. He believes the following industries will see an uptick in M&A activity in 2021.
2021 will be a year of recovery as retail and restaurant workers displaced by COVID-related closures seek other careers and gainful employment. As a result, Jackim believes the vocational/technical training and education sector will of interest to buyers and investors. The US has been suffering from a shortage of skilled workers for over a decade, so there are plenty of high paying jobs available for people with the right skills. Enrollment in vocational programs tends to rise as unemployment rises, so we expect 2021 to build on the strong results that the technical education industry saw in 2020, and to attract renewed interest from both financial and strategic buyers and investors.
The energy industry is another industry where we expect to see a lot of M&A activity in 2021. The price of crude oil has dropped to just above $40 a barrel since early summer, nowhere near the $63 a barrel price at the beginning of the year. At the same time, the rise of clean energy and potential regulation are threatening companies that focus on traditional fossil fuels. As the fossil fuel industry shifts toward a lower-growth model, exploration and production companies will be looking to generate returns through acquisitions that would yield economies of scale and other benefits, or diversify their product or service offerings away from fossil fuels.
The rapidly evolving impact of the COVID-19 virus is being felt everywhere—in the healthcare system, employment, politics, and the economy. This is certainly a time of uncertainty in our lives and businesses. The closest thing I can compare it to is the tremendous uncertainty everyone felt in October 2008 as the financial crisis was unfolding.
Then, like now, business owners are seeing the values of their business plummet. Smaller businesses are naturally more vulnerable in an economic downturn, but everyone is affected in one way or another. Strategic and financial buyers, sellers, business owners, and M&A advisors are all paying attention right now and trying to understand how this will impact them, and how they can mitigate the negative consequences.
Reflecting on the financial crisis of 2008-2009, however, helped me identify a few things that are likely as we deal with the impact of COVID-19 on the M&A market and business sales.
Like in 2008 and 2009, M&A activity will most likely contract significantly in the near future as the volatility in the stock market will likely put the M&A market on hold. For deals in the early stages, there will be a lot of anxiety on the part of sellers and a lot of caution on the part of buyers. As a result, we expect that many buyers and sellers will press the pause button to wait and see how the situation unfolds over the next few months.
But there are a lot of indicators that when the COVID-19 scare is behind us, the M&A market will rebound with gusto. Right now, strategic buyers and private equity groups are flush with capital. Not only are PE firms ‘open for business’ but many of them are accelerating efforts to close in-process deals, and even to scale future investing activities.
“I’m bullish on the outlook for M&A activity in the medium and long term once the financial markets adjust to the ‘new normal’. There is an unprecedented amount of capital that needs to be deployed, interest rates are at record lows, and the federal government’s stimulus package should make borrowing even easier. At the same time, the record high valuations that we’ve seen over the last year or two are likely to decrease, which will make financing acquisitions less risky and fuel a strong increase in M&A activity.”
Richard Jackim, Managing Partner, Jackim Woods & Co.
If you are a business owner thinking about selling, what does all this mean to you? First and foremost, it’s important to remember that while the next few months may be painful, the fundamental value of your business is likely still intact. There is no doubt that if you were waiting for the market to peak before you sell you missed the window. But that doesn’t mean your business is unsaleable or that it has no value. The value is still there because buyers buy companies for the future cash flow that business will generate. That means buyers take a long-term perspective. If your business is fundamentally sound, it is very likely that its value will rebound once the economy returns to the new normal.
Many of the business owners I’ve spoken to in the last few weeks believe that the current market conditions will scare away buyers. It is true that undercapitalized buyers will sit on the sidelines and wait for the dust to settle, but stronger financial and strategic buyers will recognize the short-term nature of the crisis and see this as a good opportunity to buy a good business at a lower multiple of EBITDA than last year.
If you’re thinking of selling your business it’s important to work with someone who understands the dynamics and changing motivations of sellers and buyers to advise you during these uncertain times. Below are our recommendations for business owners to take over the next 2-3 months if you are thinking about selling in the next few years.
- Focus on Exit Planning (talk with us about our formal process that can use this time to help you and your business get prepared for sale)
- Get an evaluation of your business (so you understand how much your business is worth)
- Understand what you can do to improve the value of your business and make it more attractive to potential buyers
- Talk to your financial advisor to understand how much you need to retire
- Work with an M&A advisor or business broker to begin putting together a data room and formal marketing materials so you can hit the ground running when the market recovers.
Our team is comprised of experienced investment bankers and M&A professionals who literally wrote the book on exit planning. We helped over three dozen companies between 2008 and 2010 help get ready for sale and then sold them for top dollar when the market recovered. We will provide you with a value-focused, hands-on approach to help you and your business develop a strategic exit plan that allows you to exit your business on your terms and for its highest possible value.
If you are interested in selling in the next three years and would like to talk to a licensed business broker and M&A professional about how this crisis affects your options, please feel free to contact Rich Jackim for a FREE, confidential conversation at firstname.lastname@example.org or at (224) 513-5142.Read More
Selecting the right valuation or damages expert can make or break your case. Knowing how to pick the right expert is key to obtaining a successful outcome.
Choosing the right expert for a litigation matter goes beyond just checking that the person has the right credentials to act as an expert on financial damages. It is equally important that the expert can connect with the judge or jury, and educate them about how the available data and other information supports your client’s position.
Know What Skills Your Expert Witness Must Have
Expert witnesses are often referred from one attorney to another, however, when you need an expert with a very specific skill set, like expertise in business valuation and mergers and acquisitions issues related to buying and selling private companies, clients and law firms do research to identify potential experts.
When picking an expert witness it is critical that you and your attorney know exactly what skills you want your expert witness to have. Richard Jackim, the Managing Partner at Jackim Woods & co, is a former mergers & acquisitions attorney and an experienced investment banker who has been involved in over 75 mergers and acquisitions in over 20 different industries, has performed over 290 business valuations, and has represented both buyers and sellers. Jackim earned his law degree with honors from Cornell University Law School and his Master of Business Administration with honors from the Kellogg Graduate School of Management at Northwestern University. Rich also developed and taught the Certified Exit Planning Advisor program offered through the Booth School of Business at the University of Chicago. A copy of his expert witness curriculum vitae is available here.
Communication Skills Are Key
In addition to the right credentials, an effective expert witness must be able to communicate in a clear, concise, and articulate manner. He must come across as knowledgeable, accessible and self-assured, but not condescending. The ability to build rapport with the judge and jury is essential; and when both sides present a strong, technically sound case, a jury often favors the side whose expert was able to communicate the issues more clearly or convincingly. To that end, we offer clients and their attorney’s a free, one-hour initial assessment of their claims so they can determine if our approach and communication style meets their needs.
Richard Jackim is a personable and knowledgeable expert and has a unique ability to present complicated issues in a clear and concise manner that connects with judges and juries.
Credibility Is A Must
An expert must also be polished and unflappable in the face of tough, sometimes seemingly stupid questions from opposing counsel. An expert witness must be able to answer questions about his background and experience to withstand a Daubert challenge. It’s critical for the attorney to have an upfront conversation with the expert to ensure they are of good character; have worked for both plaintiff and defendant; learned of any positions they may have taken that are adverse to the position taken in this case, whether through testimony or through publications of an article; and whether they have been Dauberted.
Richard Jackim’s top-tier academic credentials, plus his 30 years of business experience including practicing mergers & acquisitions law, and leadership positions at several leading investment banking firms, provides him with unique qualifications as an expert witness. His opinions are based on market realities and actual transactions, not just financial theories. As a result, he can speak to industry best practices and what is “market”.
An Expert’s Experience Wins Cases
It’s also important that you select an expert witness who has experience testifying in a courtroom or providing deposition testimony. This experience enables them to have a clear understanding of the moving parts of a case, gives them an advantage by being able to understand how litigation and depositions work, allows them to anticipate the kinds of questions opposing counsel might ask, and helps you and your attorney understand the key weaknesses in the opposing expert’s presentation.
Jackim has consulted on over thirty-two different litigation matters, testified in six depositions, and provided expert witness testimony in two trials. His experience as an industry expert and as an expert witness helped the parties settle thirty matters without going to trial. On the two matters that did go to trial, Jackim’s clients won both matters on the merits, with the judge stating in one case that Jackim’s testimony was clear and convincing and could not be refuted by the opposing expert witness.
Areas of Expertise
- Business Valuations
- Financial Damages (lost revenues & profits)
- Purchase Price Allocation
- Valuation of Personal Goodwill
- Earnout Disputes
- Lender or Creditor Disputes
- Shareholder Disputes
- Buyer & Seller Disputes
- Phantom equity and other employee incentive plans
- ESOP disputes
- Business broker & investment banker fee disputes
Engage An Expert Witness as Early as Possible
For these reasons, we encourage clients and their attorneys to contact us as early as possible. Early collaboration provides us with an opportunity to help you and your attorney to discuss strategy. Ideally, we would be engaged early enough to assist in formulating requests for discovery. As a well-versed damages expert, Jackim knows what information is needed to ensure a thorough and supportable analysis. In addition, engaging us early in the process allows time to think through the issues and help you and your attorney develop the most cost-effective strategy to present your case.
In the event we find we cannot support your position based on the information provided, knowing this early on can give you time to either revise your strategy or find a different expert. Remember, unlike attorneys who are advocates for their clients, your expert witness should be a neutral, third party whose opinion is objective and unbiased. Jackim has built an impeccable reputation by providing clients with honest, objective, advice based on the available facts and his years of industry experience.
As an experienced damages expert, Jackim is familiar with recent case law in the subject area, as well as the best business practices in mergers and acquisitions and business brokerage firms. He knows his role and can be the deciding factor in your case if you choose to use his knowledge, experience, and credentials. For a free initial consultation, please contact Richard Jackim at email@example.com or at 224-513-5142.Read More
The Best Ways to Create an Attention-Grabbing Ad to Sell Your Business While Protecting Your Privacy
A big part of selling your business is getting the word out. The more people who know your business is for sale, the more interest you’ll receive. However, the trick is to write a great attention-grabbing ad that helps you attract buyers while protecting your privacy at the same time.
Spreading the Word
At Jackim Woods & Co, we understand the importance of creating a quality and compelling advertisement. We also understand that you need to use all the technology available today to get the word out so people view the add. As a result, we use business brokerage websites like BizBuySell, BizQuest, MergerNetwork, Axial Network, DealSteam, and about a dozen others to get the word out to potential buyers. We also send emails to the buyers in our proprietary database and to the attorneys, CPAs, financial advisors, and consultants who are part of our network.
Top Tips to Generate More Interest
Over the last 25 years, we’ve discovered that there are five key things in a listing that help attract more prospective buyers.
1. Details Sell
First, the listing should be as descriptive as possible, without revealing any information that would enable a buyer to identify your business. The sales listing should provide an excellent description of your business and its unique features, including a summary of its financial performance, the opportunities for growth, and your reason for selling. As Richard Jackim, Managing Partner at Jackim Woods & Co points out, you want to “engage the buyer early.” That means, now is not the time to be vague or secretive. You want potential buyers to have a very clear idea of what kind of business you have so they can determine if it’s the right fit for them.
2. Headlines Count
Second, every listing needs a great headline. Buyers skim the Internet looking for something that catches their eye. As a result, a good listing ad should have an engaging and descriptive headline. You want to capture a buyer’s attention. We start by determining what your business’s best features are and then emphasizing one or two of those features in the headline.
3. Incorporate High-Quality Images
Third, everyone knows a picture is worth a thousand words and this is especially true on the Internet. Interesting and compelling pictures do a much better job capturing attention than a great headline. If you don’t have high-quality professional photos of your business or its products, we have access to a wide range of high-quality stock photos that we can use to create a professional image for your business.
4. Include Your Financials
Fourth, your listing post should include a summary of key financial information. The first question any serious buyer will have is what your financial results have been. Providing as much information as possible upfront about your business’s revenue, expenses, and cash flow is a good idea since most potential buyers screen their business searches based on key financial metrics.
5. Proof-read, Proof-read, Proof-read
Finally, it is essential that you proofread anything you put on the Internet very carefully. At Jackim Woods & Co, we understand that we only get one chance to make a good first impression, so we proof-read and double proof-read every posting that we put online. We realize that clients are trusting us to present them to the world of prospective buyers and we realize that buyers are discerning and detailed focused, so a listing with simple grammar or spelling mistakes will turn potential buyers off and creates the wrong impression from the start.
Creating a great listing posting is both an art and a science. The best way to ensure that you have a great listing posting is to work with an experienced business broker who understands what issues to emphasize about your business to attract the largest number of potential buyers. At Jackim Woods & Co we know what buyers are looking for, and as experienced marketing professionals, we can help you present your business to buyers in the best light possible.Read More