Inc. Magazine recently published an article touting the strength of the current mergers and acquisition market. It referenced that there was a 15 percent increase in business changing hands from the previous year. Plus, they forecasted “the market is expected to gather more steam.”
Although Inc. is a national publication and the reasons they gave for the increased activity may be national in scope, there are definitely many similarities with what is happening in our regional market.
Inc. suggested that for the first time in years, acquisitive companies have cash on hand to fund purchases. We too have experienced this concept in Northern Nevada. A local business that we just started marketing has already garnered interest from prospective corporate buyers from Minnesota as well as Texas.
On a different scale, a similar phenomenon is happening with individuals. There is a large group of individuals who have recently relocated to our area who have sold some of their real property. Many of these types of buyers are coming from all over the country with significant capital and are looking to become their own bosses.
Inc. also postulated that low interest rates make financing affordable for acquisitions. Even though they were referring to investment bank rates, the same can be said about the rate that local sellers are offering to carry a note.
With interest rates as low as they are, sellers ae able to get a higher rate from a buyer than they could get from any financial institution. This is a classic example of a win-win scenario.
A third reason that Inc. gave the for the increases acquisition activity was demand. As national companies try to leverage their resources and strengthen their market positions, they have become more aggressive in pursuing other companies where synergies can be capitalized on.
This is also happening in Northern Nevada in a number of ways, both with companies and individuals. For example, we have been involved in a number of transactions where we have helped both competitors and strategic buyers make acquisitions.
In one case, we had a large Reno-based company that was having a difficult time trying to increase their market share in Carson City. The route we helped the company go down was to acquire their large competitor in Carson City.
Another example was a construction company who wanted greater control of materials and the transportation of products that they used. To accomplish this, we helped them buy a successful company already serving this market.
Many who are disgruntled with what has happened with their stocks and bonds and realized that, as a business owner, the return on their investments can be significantly greater while successfully operating their own company. Also, there are other buyers who are former middle managers and executives who have taken early retirement packages and are eyeing the advantages of being in business for themselves.
In summary, Northern Nevada is not in a vacuum when it comes to mergers and acquisitions. Along with the rest of the country, there are a number of qualified buyers in our market looking to purchase a successful business.
Buzz Harris is a Licensed Business Broker with The Liberty Group of Nevada. Contact him at BHarris@TheLibertyGroupofNevada.com.