M&A advisers expect deals to increase 60% in 2016

National advisers who assist in mergers and acquisitions had a busy year in 2015, and 2016 is expected to put even more on their plate, according to the quarterly Market Pulse Survey, published by the International Business Brokers Association, M&A Source and the Pepperdine Private Capital Market Project.

The survey, which was completed by 348 business brokers in 38 states, found business sales were particularly strong in the main-street market, which refers to small-business sales of under $2 million, and the lower-middle market, deals valued between $2 million and $50 million.

According to the survey, over 60 percent of advisers last year met or exceeded their 2014 closure records. Outlooks are positive and M&A advisers who aid business owners and buyers in transactions expect a 60 percent net increase in new deals in 2016. Compared to a year ago, optimism has grown and advisers participating in the survey anticipate greater deal flow, increased business exit opportunities for sellers and opportunities for business growth in 2016.

Respondents completed 410 transactions in the fourth quarter last year.

“Advisers are optimistic that general business conditions will be solid again this year,” M&A Source Chairman Joe Lindsey said in a news release. “Only 19 percent of the survey respondents indicated some pessimism that conditions will deteriorate, which may be attributed to the upcoming election, a continued slump in oil prices or the early 2016 drop in the stock market.”
 
While advisers were beating their expectations last year, the Market Pulse Survey showed fourth-quarter deals took longer to close across all sectors. Closing times nearly doubled in the main-street market, while the lower-middle market also saw increases of up to four months. Also, in every sector except the smallest, deals took three months to close after a signed letter of intent, the release said.
 
Main-street businesses sold for roughly 91 percent of their asking price in the fourth quarter. By comparison, lower-middle market businesses—which typically aren’t listed with an asking price— received 99.5 percent of the internal benchmark set by the adviser and seller.
 
Service companies led main-street market activity last quarter, while manufacturing companies were first in the lower-middle market category.