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Where Will Lower-middle Market M&A Be In A Year From Now?

The Current Market

The lower-middle market has remained positive for sellers in 2019, thanks to an abundance of buyers that are giving sellers the leverage to demand favorable terms. Most business sectors are seeing strong profits, and the bullish optimism of large-cap investors has spilled over into lower and middle markets. This has resulted in heightened interest and aggressive valuation and buying from private equity firms.

There are several patterns have carried over into 2019 from a very active year in 2018.

• M&A activity has been especially strong in the healthcare and technology industries.

• Acquisitions remain a popular strategy for companies needing talent to keep up with growth.

Buy-and-build strategies are proven to be working.

• Emerging markets are being attractively valued, especially in the Asia Pacific region.

• Competition for high-quality targets is intense, particularly for businesses that are owned by the rapidly growing retiring population.

• Small business confidence is strong, resulting in increased investment by owners.

What Lies Ahead

The world faces potential changes in the political landscape as the United States 2020 presidential election nears, Britain is under new leadership through the Brexit transition, and the global economy navigates significant political unknowns in the wake of trade deals and tariffs. However, the United States election takes place near the end of 2020, which could possibly stave off any significant effects on the economy until the year 2021.

 

Ready to explore your exit and growth options?

While no one can ever be certain what the future holds, we still see the benefits of a strong year midway through 2019, yet the lower-middle market has the potential to become more complicated in 2020. The current bullish market is strong but is expected to lose momentum based on the average amount of time that historical highs have been proven that they can be sustained. Many experts warn of a downturn in the economy next year, predicting that a recession is looming. In contrast, some experts expect M&A activity to remain robust regardless of the economy.

Obviously, uncertainty in the marketplace can impede M&A activity. But a recession does not necessarily mean that selling will be impossible. The variables that drive lower-middle market M&A include:

• Lending capacity: The less money a buyer can borrow, the less money they may want to spend.

• Cost of capital: The cheaper a buyer can borrow, the more money they may want to spend.

• Buyer access to equity capital: Strong profits and surplus cash motivate activity.

• Supply and demand for deals: Aging populations entering retirement and business succession plans, strategic buyers focusing on growth, etc.

In the lower-middle market, buyers and lenders both tend to stay much more disciplined regarding their willingness to lend, cost at which they lend, and returns they target. Buyers will be seeking targets with stability, limited cyclical exposure, a business model with recurring revenue, and a history of performing well through a recession.

Should You Sell Now?

The good news is that there is still time before a possible slump in activity and optimism. If you are looking to sell your business, you may have another 12 to 18 months to benefit from the premiums today’s sellers are getting. Keep in mind; it does not mean that after this time is over, you will not be able to sell. Companies are always looking to grow through acquisitions, and the market is always changing. You do not need to feel completely discouraged by any economic slowdown.

Consider how long you are willing to wait to sell your business if the market were to drop. If you do not plan to sell within around five years or more, you can wait patiently for the next market rebound. But if you are determined to sell in the next couple of years, it may be wise to get serious about your exit strategy while conditions are still favorable. Think about what is right for you, your business, and your family when deciding when to make a move.

Contact Us

Our business acquisition experts at Benchmark International can offer exit planning advice and help you plan a solid transition for your company. We will use all the tools at our disposal to get you the maximum selling price while preserving your vision for the future. We can also help if you are looking to buy a business. Contact us today.

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Global Oil & Gas Industry Outlook

The global oil and gas industry is expected to remain relatively stable in 2019, even amid oversupply risks and volatile pricing, as oil demand continues to increase. Oil usage is expected to grow by more than 3.5 million barrels per day.

 Key Industry Trends for 2019

  • Natural gas remains a major player as a generator of lower-carbon power, especially in North America. Over the next decade, it is expected to surpass coal to become the second-largest source of fuel worldwide.
  • China and India are leading the way in overall energy demand growth. India is projected to have the largest additional oil demand and fastest growth through 2040.
  • U.S. sanctions on top exporters such as Iran and Venezuela continue to affect the global oil industry, as a retraction in the oil supply leads to inflated global oil prices.
  • Improvements in infrastructure are becoming more critical because production and the physical ability to move products directly impacts pricing.
  • The oil and gas pipeline market is predicted to grow at more than 6% by 2024.
  • Sustainability is becoming a more central issue as renewable energy draws more investment from oil companies, and both consumers and companies wish to mitigate methane emissions.
  • The industry is focusing on how digital technologies can improve capital productivity. Robotics, artificial intelligence, blockchain, and data analytics are being implemented to enhance efficiency and production.
  • The oilfield services sector will see a 10 to 15 percent increase in earnings, with a positive outlook for offshore oilfield services. There are more than 100 new projects planned for 2019 approvals and $210 billion earmarked for offshore oilfield services worldwide.
  • After years of limitations, deepwater exploration and production activity is likely to resurge this year with a spike in investments in deepwater projects.

Ready to explore your exit and growth options?

Increased Drilling Activity

2019 is experiencing increased activity in global oil and gas drilling, led by the United States due to shale production. Outside the United States, global drilling activity is expected to rise by 2.5 percent. Across the world’s eight major oil and gas producing regions, each is predicted to see a higher number of wells drilled.

2019 Forecasted Percentage Increase in Drilling Activity by Region

Africa: 8.7 percent

Saudi Arabia: 5.4 percent

North America: 5.1 percent

Western Europe: 3.9 percent

South Pacific: 3 percent

United Arab Emirates: 2.5 percent

Far East/South Asia: 2.6 percent

South America: 1.7 percent

Eastern Europe/Former Soviet Union: 1.4 percent

Iraq: 1 percent

The most growth in the overall global drilling market will be in offshore oil and gas drilling, with expected growth at around 6 percent. The most active offshore drilling regions are Brazil, Canada, Norway, Angola, Nigeria, Saudi Arabia, Abu Dhabi, China, and India.

Rystad Energy has reported that global deepwater liquid production is set to reach a record high of 10.3 million barrels per day in 2019. This is a result of new fields in Brazil and the Gulf of Mexico. Other leading deepwater producers include Angola, Norway, and Nigeria.

Ready to Move Forward?

Contact us at Benchmark International if you are interested in exploring your options and embarking on the next chapter of your business.  

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Mergers and Acquisitions in the Architecture and Engineering Industry

Over the last few years the architecture and engineering industry has seen a marked increase in mergers and acquisitions activity. Since reemerging from the depths of the recession, the industry has been ripe with activity; with everything from the expansion of the ever growing reach of firms like DLR, Perkins & Will, and HOK, to the merging of small businesses to facilitate the retirement goals of local industry experts. Considering there is typically a few year lag between economic fluctuations and corresponding changes in M&A activity, as the bull market run is approaching nine years, this type of inorganic growth activity shows no signs of slowing down.

As an industry agnostic mergers and acquisition leader, Benchmark International is in touch with leaders from a variety of industries on a daily basis. We’ve seen significant movement from corporate development teams in a number of industries which are beginning to expand their services to grow not only their customer base, but also to gain additional wallet share of their existing clients. This type of cross pollination has occurred in interior design, surveying, construction, architecture, engineering, and technology. We currently are in the midst of closing a transaction which would allow a specialized electrical engineer which focuses on the commercial and healthcare markets to broaden their end market to include the hospitality sector, and their service offerings to include the upstream design, planning, and engineering components of a building’s IT infrastructure needs.

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Something's Brewing in M&A: Craft Beer Gives New Perspective to the Industry

Who doesn’t love microbrews? The explosion of the craft-beer revolution has spread across the country.

Western cities, such as Portland, Denver, San Diego, Seattle, and Los Angeles are seeing a large increase in new jobs and establishments in small-scale breweries. This trend is spreading nationwide, and how do we explain this craft-beer boom? It’s relatively simple, the American breweries lack of distinct, indigenous brewing traditions in the past has been conducive to the rise of craft brewing. The small, independent, and traditional brewery adds to the eclectic style and diversity consumers are demanding. The niche styles of beer, particularly hoppy IPA’s, pale ales, infused blends, and specialty brews are leading the way. This changing landscape has created multiple opportunities for the M&A industry.

So, what does this craft beer boom mean to Benchmark International and the M&A industry? The sustained success of craft beer and the changing demographics of brewery ownership has led to more mergers and acquisitions and transactions than ever before. Since 2014, there has been more than one transaction per month. Global players, such as SAMMiller and InBev, are leading the way in the direct M/As of craft beers. What is more interesting in this recent trend of mergers, is the allowance of once previous competitors to combine styles and taste with new hosts to release new and creative craft beers. The rising popularity of craft beers has fueled industry growth and increased valuation multiples towards all-time highs over the last few years.

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Austin, Texas Proves to be an Engineering Hotspot

We’ve all heard it, the best measurement of a city’s growth is the number of cranes and projects going up. We’ve all heard buzzwords about Austin, TX being an “IT” city, but it’s not just Austin that is sprawling with new developments and high-rises. Stop and think about this type of buzzing activity throughout a 70 mile stretch from San Antonio, the home of the Alamo, to Austin-Roundrock. This, my friends, is the I-35 corridor, a stretch of interstate highway that connects San Antonio, San Marcos, Austin and Dallas. Almost everyone has benefited one way or another from the massive growth happening in the region. Better jobs, more activities for the young professionals, and an overall increased quality of life. The growth in the region has, of course, brought upon Central Texas its unique set of challenges that one does not think of
right away.

No, it is not practically unaffordable real estate and rent. The biggest challenge lies in making these interconnected cities feel like home 24/7. Going home sure in the knowledge that the roads will be safe, our lights will turn on, and that water will flow when we take a shower after a long jog in Town Lake (Lady Bird Lake for you non-Austinites).


With the increased growth in population over last decade, the Central Texas region, that is known as the i-35 Corridor, has experienced its unique set of challenges. While home builders and apartment complexes make fortunes from overpriced property values, there is an unsung hero behind the scenes: the engineers who make all this growth possible. As mentioned previously, everyone expects their roads to be safe, their lights to turn on, and their water to run. In Texas, these are all major engineering feats. No, we’re not just flatland sitting on enormous oil and gas reserves. Central Texas is home to the Hill Country, one of nature’s gifts to the world; and as its name implies, it has plenty of hills.

So, how does one exactly get water to flow up the hill? Well, we didn’t know the answer either, and quite frankly, we still don’t, but some of the Benchmark International teammates live on top of hills. So, not having water up there would be a problem. Engineering firms in Texas have long solved problems before the growth spurt in Central Texas. The Colorado River dam for example, or the Houston Port.

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Global M&A Activity to Reach Record Figure of £2.4 Trillion in 2018

Worldwide mergers and acquisition activity will hit £2.4 trillion ($3.2 trillion) next year, as deal-making is elevated on an increasing global economic tide, according to recent forecasts.

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