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2017 in Review: The Market is Shifting

As we move through the first quarter of 2018, it seems appropriate to look back on the mergers and acquisitions market in 2017. Overall, 2017 remained healthy quarter-over-quarter, with strong valuations and an all-time high in transaction multiples. The other side of the coin is that the demand for businesses to acquire is greater than the number of businesses available.

The Firm has continued to see a real shift from start-ups to a focus on purchasing turnkey businesses. The lower interest rates make purchasing easier and more attractive, and the effects of the tax bill provides even greater incentives. But, with demand outpacing opportunities we see a decrease in the number of deals year-over-year.

This is a great time to get a business valuation. With buyers actively looking for opportunities, limited opportunities will cause multiples to increase. Sellers should also keep in mind that buyers will be selective, waiting for the right opportunity to come along.

We do have to balance this news with the fact that there is also an uptick in retraction rates. Harvard Business School has stated that the transaction failure rate is 70-90 percent after an offer is accepted. The Firm isn’t seeing those same levels in the Midwest; in fact, the average retraction rate here is 46 percent. A transaction not completed is disappointing to the parties involved, but is a great opportunity for buyers “waiting in the wings.” So, this is really a double-edged sword, and should ultimately get the right business to the right buyer. THE FIRM

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