Baby boomers taking advantage of ‘seller-friendly’ M&A market

OPTIMISTIC OUTLOOK: Tim Hebert, standing, CEO of Atrion, a Carousel Co., speaks with Steven Santos, service-level manager. Hebert feels Atrion is well-positioned for growth. / PBN PHOTO/MICHAEL SALERNO
OPTIMISTIC OUTLOOK: Tim Hebert, standing, CEO of Atrion, a Carousel Co., speaks with Steven Santos, service-level manager. Hebert feels Atrion is well-positioned for growth. / PBN PHOTO/MICHAEL SALERNO

Merger and acquisition SPECIALISTS say there are windows in the market and economy during which business owners can realize the most value from selling their companies.

And the window has been open for a few years now, as private-equity firms are increasingly playing a bigger role in the M&A market, while strategic buyers are constantly looking for options to use capital to grow operations through acquisitions.

“It’s been a seller-friendly market,” said Michael F. Sweeney, president and co-founder shareholder of Duffy & Sweeney, a business law firm headquartered in Providence.

While the number of local, regional and global deals declined in the third quarter of last year, total deal value remained strong.

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The number of businesses listed for sale in the Providence, New Bedford and Fall River market fell 5.2 percent to 128 last year, while the median asking price grew 39.2 percent to nearly $300,000 compared with the prior-year period, according to BizBuySell.com, a web-based business-for-sale marketplace.

Meanwhile, the total number of deals in New England from Jan. 1 through Dec. 21 last year totaled 449, compared with 550 during the prior-year period, according to Pitchbook Data Inc., an M&A data-research company. And although there were 101 fewer deals in 2016, the average amount invested per deal was 7.6 percent greater than 2015.

Globally, M&A volume peaked in 2015. But through the third quarter of last year, there was nearly $1.7 trillion in M&A value, representing a 10 percent increase compared with the prior-year period, according to Pitchbook.

And while there were fewer transactions last year, the deals have been getting sweeter for sellers.

Guy Asadorian, wealth director and M&A expert who works with transitioning business owners at BNY Mellon Wealth Management in Providence, says the trend is likely to continue.

“Today’s sellers are baby boomers with no successors ready to continue on with the business,” Asadorian said. “They’re viewing today’s environment, and where we are in the cycle right now, as the opportune time to pull the trigger.” So what’s so great about the environment right now?

The number of private-equity firms in the M&A field is growing, Sweeney explains, meaning what was once a unique facet to the overall market has now become mainstream.

“It’s now a permanent piece of the pie,” he said. “It’s here to stay.”

By example, Providence Strategic Growth LLC, an affiliate of Providence Equity Partners LLC, a global equity and credit investment firm based in Providence, in December closed its second fund with $640 million in equity commitments. The firm made six investments, helping its portfolio companies complete 38 add-on acquisitions.

At the same time, the amount of money raised for such deals is growing and that’s money that needs to be spent.

“People have to spend the cash,” Sweeney continued. “Now you’re seeing the large deals being announced.”

Interest rates remain low, and despite the U.S. Federal Reserve in December raising federal rates 25 percentage points – marking only the second time rates have increased since the Great Recession – rates are still a far cry away from unreasonable, Sweeney said.

“The pressure to buy is still there,” he added.

Last year, one of the more notable deals in Rhode Island was Exeter-based Carousel Industries of North America Inc.’s acquisition of the information and technology company Atrion Inc. of Warwick. The two companies together realize about $525 million in annual revenue.

For Oscar T. “Tim” Hebert, former chairman, president and CEO of Atrion, the stars aligned for him and his company in 2016.

“Timing is everything,” he said.

Hebert over the last three years entertained four “serious conversations” – besides Carousel – about making a deal for his business. But he’s thought about succession for more than five years.

“For the last five years, it’s been a constant effort to bring our maturity to a whole new level,” he added.

Information technology as of late has been the strongest sector in M&A activity, according to Pitchbook, which notes Dell’s $60 billion buyout of EMC and Softbank’s $32 billion purchase of ARM Holdings.

“As many existing tech stalwarts have experienced declines … corporate development teams are assiduously examining the markets for companies that can give them the exposure they need to emerging technologies, a trend that will help support IT M&A moving forward,” according to Pitchbook.

So what should business owners thinking about succession expect in 2017?

Optimism about the incoming Trump administration helped fuel a year-end run-up in the market, creating some buzz among business owners who see his promise to lower corporate taxes as a positive for the bottom line. The optimism, Sweeney said, could translate into a sellers’ market extension.

“The market [increase] gives everyone a feeling of more wealth,” he said. “I think the 60-70-year-old [business owners] are looking at the tea leaves and the income tax and the corporate tax and saying, ‘I’m ready.’ ”

Hebert, who feels confident his company, now known as Atrion, a Carousel Co., is well-positioned for growth, also expects the market to improve for a while longer.

“We caught it on the rise,” he said. “You want to catch it before it peaks, and I feel like we hit the market at a pretty good time for what we were able to do.” •

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