2016 is shaping up to be a busy year for M&A activity for middle market companies and one of the factors behind this flurry of activity may be the aging demographics of the North American population.
The retirement of large numbers of baby-boomers will undoubtedly have a large impact on M&A activity as retiring business owners look to sell their businesses. Over the last several years, many reports have surfaced stating that a vast cohort of baby-boomers were set to retire and which predicted a surge in mid-market M&A activity, but it appears that the market check-out of this group has not been as fast to materialize as previously thought.
Citizens Bank in the US recently released its annual Middle Markets M&A Outlook wherein it reported the results of its survey of nearly 600 CEOs and business owners.
In its last annual mid-market survey, Citizens had reported that, while 7 in 10 business owners surveyed viewed their retirement date as a key factor in determining when to sell, many owners did not have the desire, or found it difficult, to retire. However, in its 2016 outlook, Citizens reported that alleviating owner fatigue is now among the top reasons for lower mid-market sales and that concerns over future market volatility may push owners to sell sooner rather than later. In fact, it is reported that a third of mid-market decision makers are open to considering a sale over the next 12 months. Bob Rubino, Executive VP and Head of Corporate Finance and Capital Markets at Citizens, has commented that sellers in the baby-boomer demographic see that “the economy is seven years out of recession and believe this may be their moment to sell before the cycle takes its next downward turn.”
Business owners looking towards retirement should focus on succession planning and building an exit strategy. For more information on the principal stages of developing a successful exit strategy, see Sara Josselyn’s article titled A closer look at exit strategies for privately held companies.
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