In the October 2010 edition of Mergers & Acquisitions, published by ACG, there is an article titled, “Vultures Nowhere in Sight.” It describes the current private equity (PE) marketplace as one where the vultures, aka bottom-feeders, are almost non-existent. The article covers a number of factors and I found four that have similarities to the small and mid-sized company market.
1. PE firms are being more disciplined. This is good and is very similar to what buyers of smaller deals do as they can’t afford to no be disciplined.
2. Paying too much for a deal is what got many in trouble. The article adds that they have to ‘buy right,’ which is exactly what others have always had to do.
3. Many firms are not doing deals but working on making their current companies better. Sometimes it’s not about flipping deals. Sometimes if you act like an operator you get good results.
4. Consolidation is taking place. I’m seeing this in the small business market. I’m working with a couple people who are trying to buy other firms in their industry to get some fast growth and economies of scale.
While the larger deals get the headlines it’s interesting how when deal flow is slow they revert back to what any good businessperson would do, they pay attention to their deals and their operations.