What started as an abundant supply of capital, low interest rates, and a stable economy has grown into a fear for buyers missing out on business opportunities and acquisitions. We have seen this over and over again just within the last few months. This fear has caused a change in investors’ criteria. What used to be very specific sales volume, EBITDA, trends, and industries has now become more of “let me see and review every potential deal”. The buyers that had previously informed us not to send anything to them unless the business had over $1M in EBITDA, experienced double digit growth for four consecutive years, and in a fast growing industry are now looking at businesses in most industries and their financial criteria is simply to have the potential to grow the business.
The number of private equity firms continues to increase, which only exacerbates the demand for business acquisitions. Because of this business buyers are no longer sitting on the sidelines. This has caused the speed of offers and due diligence to greatly increase, which has obviously caused the time from listing to closing to shorten.
Make no mistake about it the fear of missing out appears to be sweeping across the board. Most notably, the consolidation is playing out in the insurance industry. All one has to do is read the news to see mergers and acquisitions occurring in the insurance industry on what seems like a daily basis.
As the clock ticks on currently low interest rates, private companies are increasingly abandoning pure organic growth strategies and pursuing acquisitions. The consensus is eat or be eaten, because it’s yet to be determined who will be left standing and what opportunities will be available when the dust settles.