You are probably well aware that 2017 was a strong year for the middle market, both in regards to company growth and mergers and acquisitions (M&A). Dr. John Binkley was fortunate to witness this up close in his role as Chairman of Generational Equity, an M&A advisory firm that enjoyed a record-setting year for deals completed.
However, you might be unsure if this positivity will continue into this year. Fortunately, Dr. Binkley firmly believes 2018 will not only maintain this growth for middle market businesses, but has the potential to improve it.
Here, you will understand why this year will be an excellent one for middle market companies, and how effective use of M&A will help owners reap the full benefits of this buoyant period.
Why It’s Great to be a Middle Market Business Owner in 2018
“For the middle market, 2017 can be summed up as a year of strong growth in both revenue and employment.” – National Center for the Middle Market
In their quarterly Middle Market Indicator (MMI), the National Center for the Middle Market outlined the growth and optimism within this vital segment of the U.S. economy. Favorable conditions in 2017 encouraged growth across all industries, both with regards to revenue, employment and confidence:
- Companies ended 2017 with year-over-year revenue growth of 7.6% (second-highest rate in MMI’s history)
- A 5.2% increase in headcount among businesses, with over half of all middle market firms adding to their ranks
- Local economy confidence at 88%, with national economy confidence close behind at 86%
The fruits of 2017, combined with the pivotal tax reforms confirmed in the year’s final months, mean middle market leaders are increasingly confident for 2018. Dr. John Binkley has met with owners who have reached out to Generational Equity, sharing this optimism. In summary, the middle market is booming right now.
Of course, when conditions are this good, it is all too easy to rest on your laurels. So, it is especially exciting that this confidence has encouraged business owners in the middle market to invest rather than save:
“The proportion of firms that would invest extra money as opposed to hold it remains near peak levels.” – National Center for the Middle Market
Dr. Binkley sees this as great news as, despite the overwhelming confidence among business owners, there are certainly areas of concern that need to be addressed. Talent management and market competition remain key challenges that middle market owners are trying to overcome.
This is where strategic investment in M&A activity, with the right advisors behind you, can help entrepreneurs benefit to the absolute fullest.
Utilizing M&A Activity in the Middle Market
The most recent Citizens Commercial Banking Middle Market M&A Outlook has indicated an increasing interest among middle market business owners for M&A. 56% of sellers are either currently involved in or open to M&A activity in 2018, which coincides with a boost in buyer confidence.
If there’s one thing Dr. John Binkley was certain to include in the M&A advice that Generational Equity offers to middle market owners, it’s that good timing is essential.
That’s why the firm encourages that you always build your business with a buyer in mind – it allows you to capitalize when the market is thriving (like right now) – and not miss out on an optimal deal.
What makes 2018 such a great time to consider M&A activity in the middle market? As previously mentioned, buyer confidence is extremely high, with investors sitting on a record amount of dry powder that is just waiting to be invested.
All these facts combined means buyers are on the lookout for opportunities – if your business is prepared, you have a better chance of receiving a premium offer for your company.
In addition, the pro-growth provisions contained within the recent tax reforms will undoubtedly encourage investment:
“There is tremendous sentiment that M&A activity in the middle market will surpass 2017 levels this year. Both the size of deals and the quantity of those deals will likely be much higher, as both sellers and acquirers look to take advantage of the act’s pro-growth provisions. It is important to realize all of the benefits and potential hurdles the act contains so that all parties will benefit from their transactions.” – Gary Wallace, Mergers & Acquisitions
As Dr. Binkley and the team at Generational Equity regularly remind company owners, M&A activity does not necessarily mean the definitive sale of your business. On the contrary, the sale of certain assets or introduction of investors could be the key to securing the capital to combat the challenges of talent management and industry competition, which as mentioned earlier are prevalent problems facing middle market companies.
Of course, if you are ready to sell your business, these conditions are equally ideal. With confidence high and capital available, your middle market company could fetch a premium price from interested investors.
To ensure that end result is achieved, Dr. Binkley encourages you to reach out to experienced M&A advisors, such as Generational Equity. Good timing is essential, but without the knowledge or tools to locate buyers and build your business valuation, you are less likely to receive the optimal return on investment for the years spent growing your company.
What will 2018 mean for your Middle Market Business?
On the whole, Dr. John Binkley predicts 2018 will be a great year for business owners in the middle market. The optimism in the national and global economies, combined with exceptional company growth in 2017 and new tax legislation, has led to a consensus of positivity.
This will be especially true for middle market business owners who make effective use of M&A over the next 12 months, either to generate capital to invest in growth, or exit their company for a return that secures their – and their family’s – financial legacy.
If your business operates in the middle market, Dr. Binkley hopes these projections prove to be true, allowing your company to grow and unlock its true potential.
Would you like to learn more about how to approach middle market M&A? Generational Equity has many articles on the subject, providing you with an insight into what you need to consider in order to sell for the optimal price. In a year such as this, information like this will prove invaluable to your business’ growth.
You can also read more of Dr. John Binkley’s views and advice on M&A, business leadership and spiritual growth on his website.