2023- The Year of Tuck-Ins and Bolt-Ons
As predicted in 2022, M&A activity has slowed down considerably, primarily due to continuing economic uncertainty and increasing interest rates. Banks have tightened lending conditions and private equity lenders are more selective about the deals they are interested in. Many dealmakers will say that the market has flipped from a seller’s market in mid 2022 to a buyer’s market. With sellers looking at higher multiples from 2021 and buyers looking for deals with a multiple reflecting the current economic outlook, deals are taking longer and are harder to negotiate.
With this outlook, many buyers in 2023 are seeking add-on acquisitions. Add-ons leverage the platform business’ value creating strategies including cost savings, use of technology, cross-selling opportunities or expansion into new territories. Tuck-ins and bolt-ons are smaller deals that don’t require as much leverage as larger, platform deals.
With built-in flexibility on pricing, including opportunities for sellers to invest in the future of the larger platform company, quality landscaping companies with recurring revenue may be able to participate in a future liquidity event and end up with an overall multiple similar to those from a year ago.
There are several platform investment and corporate buyers that are seeking add-on opportunities. Another factor driving this focus on the smaller deals is the number of those types of businesses coming to the market. There is a significant number of smaller lower middle market landscaping businesses available for purchase, primarily due to founders seeking to exit their businesses for retirement.
If you’d like to discuss how your customers contribute to your company’s worth, or other ways your company can maximize its value, we’d be happy to have a confidential complimentary conversation with you about these or any other exit/sales/buying issues.
You can reach me via email: [email protected] or on my cell phone a: 224-688-8838.
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