Strong demand for M&A across cash-rich financial and strategic buyers is maintaining upward pressure on valuations

According to new research released in the Equiteq Knowledge Economy Global M&A report 2018, “strong demand for M&A across cash-rich financial and strategic buyers is maintaining upward pressure on valuations…”

Some further interesting data from the report shows the median upfront component of 61% has increased slightly from 58% in 2016. This means in an average sale (deal size average was $12.1m), 61% was paid upfront.

In the Australian middle-market, 98 deals were completed with an average deal size of $11.3m and an average EBITDA multiple of 6.6x (26% were cross border deals at an average multiple of 8.1x). Interestingly, Engineering and Management Consulting achieved slightly higher multiples averaging 9.9x and 11.6x respectively.

There are ongoing increases in activity by cash-rich listed buyers and larger accounting networks looking to acquire niche capabilities. For example, Accenture announced a $1.8Bn budget for M&A for the year thru to August 2018 with the budget designed to “enhance its niche capabilities across management consulting, technology services and creative media.”

Similarly, private equity remains highly active, with record levels of dry powder for acquisitions.

The key to accessing these high value buyers is preparation – they are experienced and  “fussy” buyers and are not really looking for turnaround assets (especially at these prices) –  you need to “begin with the end in mind” and work through a strategic business succession and exit plan.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.