Strong demand for M&A across cash-rich financial and strategic buyers is maintaining upward pressure on valuations
According to new research released in the Equiteq Knowledge Economy Global M&A report 2018, “strong demand for M&A across cash-rich financial and strategic buyers is maintaining upward pressure on valuations…”
Some further interesting data from the report shows the median upfront component of 61% has increased slightly from 58% in 2016. This means in an average sale (deal size average was $12.1m), 61% was paid upfront.
In the Australian middle-market, 98 deals were completed with an average deal size of $11.3m and an average EBITDA multiple of 6.6x (26% were cross border deals at an average multiple of 8.1x). Interestingly, Engineering and Management Consulting achieved slightly higher multiples averaging 9.9x and 11.6x respectively.
There are ongoing increases in activity by cash-rich listed buyers and larger accounting networks looking to acquire niche capabilities. For example, Accenture announced a $1.8Bn budget for M&A for the year thru to August 2018 with the budget designed to “enhance its niche capabilities across management consulting, technology services and creative media.”
Similarly, private equity remains highly active, with record levels of dry powder for acquisitions.
The key to accessing these high value buyers is preparation – they are experienced and “fussy” buyers and are not really looking for turnaround assets (especially at these prices) – you need to “begin with the end in mind” and work through a strategic business succession and exit plan.