After two very active years, what can we expect from the M&A market in the future?

The global economy is facing significant challenges, but I believe the M&A market will have another good year in 2023. Indeed, our 2023 CEO Survey found that 62% of Irish CEOs do not plan to delay M&A deals this year, despite the macroeconomic volatility. Private equity firms, particularly in Ireland and the UK, are well-funded and have expressed frustration at the lack of deal opportunities. There is a large number of investors in the market with capital ready to deploy into good businesses, with a four-to-seven-year investment horizon. This presents a good opportunity for companies looking to bring transactions to the market. While valuations may be impacted by the current high levels of inflation and interest rates, there are opportunities in all sectors. Additionally, companies that are taking action to address climate change will continue to be of strong interest to investors.

What is the most common mistake that business leaders make in the M&A process?

In my opinion, the biggest obstacle to success in the M&A market is a lack of preparation. Business leaders will have dealmaking firmly on their agendas for the foreseeable future as they continue to optimise their portfolios and consider how strategic M&A can help drive growth and their transformation journey. Potential sellers must therefore remain prepared for a potential sale. In that context, it’s essential to run your business with a focus on profitability, future growth and investment, succession planning and maximising value through efficient tax structures. Through this approach and by maintaining a documented track record of success of building your pipeline and converting that pipeline to profitable revenue, you’ll be able to easily demonstrate the value of your business during due diligence.

For business leaders who do have a plan in place, what challenges do they typically face?

Many business leaders may have a narrow view of potential buyers, failing to consider that buyers could come from different industries and geographies. The process of selling a business can also be highly personal and emotional, especially for those who have spent years building it from the ground up. That’s where advisors can add value, by providing an objective perspective and helping to manage the emotional aspects of the negotiation process. It’s also important to be prepared for the thorough due diligence process that buyers will typically conduct to minimise their risk exposure. Remember, the buyer has a lot at stake in the deal, so it’s important to be accurate, transparent and to provide all necessary information to underpin the value proposition of the acquisition opportunity.

What are some other things that business leaders can do to increase their chances of success in the M&A market, in addition to preparing for a potential sale?

It’s important to keep in mind that potential buyers of your business will be looking for long-term growth and returns, so it’s crucial to demonstrate your company’s ability to achieve sustained success. In addition to financial performance, a positive company culture is also highly valued by many buyers. Once a buyer has expressed interest, it can be beneficial to meet with them early on to assess the cultural fit between the two parties. If there is good alignment, the chances of a successful transaction increase significantly. This can be a win-win situation for both the buyer and seller, as well as the employees.

Finally, what’s the most valuable piece of M&A advice you share with your clients?

If you are looking to sell, regardless of market conditions, generating and maintaining competitive tension in the M&A process is key. When multiple parties are interested in purchasing a business and competing to do so, they are likely to be more efficient in their diligence and more accommodating in their negotiations. On the other hand, a bilateral process with only one interested party may take longer as buyers may feel less pressure to make decisions and may conduct a more thorough review of their target business. It is fundamentally important that you have an advisor who understands the universe of potential buyers and has the reach to market your business both locally and globally.

Learn more about the process of selling your business and how we can help here.