Business professionals attending the Association for Corporate Growth Midwest Capital Connection in Cincinnati
Business professionals attending the Association for Corporate Growth Midwest Capital Connection in Cincinnati

Market Updates from the 2023 Midwest ACG Conference

An update on activity in the M&A markets. Observations from recently attended ACG Capital Connection event.

Four members of the Yellow Cardinal M&A team recently attended the Association for Corporate Growth Midwest Capital Connection in Cincinnati. This event was attended by over 250 private equity groups as well as investment bankers, M&A-related consulting firms, and business owners. It was a great opportunity to check the pulse of the M&A market.

We met directly with over 30 private equity groups, participated in some interesting panel discussions, and enjoyed the camaraderie and sharing of updates and opinions on various M&A-related topics. Judging from our conversations, there seems to be consensus on several topics, and what we heard was consistent with what we have been experiencing:

  • There is an abundant amount of capital in the market with a shortage of quality deals. QUALITY COMPANIES ARE IN HIGH DEMAND.
  • The market is experiencing a significant slowdown in Wall Street/mega deals but good activity is still taking place in the lower middle market.
  • Debt markets have tightened due primarily to tighter fixed charge coverages driven by increased interest rates.
  • That being said, buyers seem willing to fund deals with more equity, so valuation multiples are still strong.
  • Specific valuations are highly dependent on the industry and attributes of a company. Some of the attributes that will drive a strong valuation include:
    • Strong EBITDA margins
    • Predictable results
    • Recurring revenue
    • Diverse customer base
    • Differentiated product or services
    • Growth opportunities
    • Management team
  • The due diligence process continues to become more complex, and it is imperative for a seller to be well organized and have robust financial reporting systems in place.
  • Most private equity groups have developed expertise in a few niche markets and are focusing on opportunities within those areas. So, while there likely will be a number of interested buyers in almost any specific industry, it is important to understand which firms to target with a prospective deal.

As an owner, selling your business is one of the most significant decisions you will ever make. The process can be very complex, and you only have one chance to make the most of the opportunity. The team at Yellow Cardinal enjoys sharing our insights with owners and advisors. When the time is right, we’re ready to help you craft a favorable transition that rewards your hard work and investment, and positions the business for continued success. Contact us to discuss your specific situation.