General Market Conditions Thread

by a searcher

1 year ago

I'm sensing that a lot of sellers are dropping out of processes at this point and focusing / preparing for economic headwinds. It's getting more difficult to obtain assurance that sellers are prepared to close if there's any mention of reduced valuation multiples, even though there is clear deterioration in the core businesses.

Just wondering if others are experiencing this as well, and how your strategy might have changed since, say, 6-12 months ago.

5 likes
275 views
21 comments

searcher from Western University

Following

1 year ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

In my exerience over 35 years as M&A Intermediary, in down and uncertain market, a) Multiples do go down, and b) Multiple do NOT go down. Both are true statements. This has to do with % composition of good and marginal businesses in down and uncertain economy. A good business owner will hang on to the business for a while longer rather than take a lower price. whereas, the marginal business owner wants to off-load before it gets worse. This changing mix reduces the average multiple, but NOT that for good businesses. Experienced buyers understand this. They will buy a good business in down market and pay the prevailing price (which will still be lower than that in an up market under auction). They also increase their equity % to make up for tighter lending in a down market.
I am currrrnetly working on an under-performaimg asset. We just accepted a significantly lower offer. On the other hand, a Seller I was trying to get a listing for the last 3 years, just sold last week for 7.5x.

1 year ago | like reply | 4 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.