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The durability of the M&A market for successful private companies


Lately, I have been reflecting on how durable the market is for owners who want to sell their successful private companies. This reflection was initiated by two separate but related facts:

1. Even while the pandemic was still raging, a record number of private company transactions closed in 2021.

2. Even with Russia’s invasion of Ukraine and international tensions extremely high, we are preparing to close three transactions.

Over our 36 year history and 220 closed transactions, we have experienced stock market crashes, 9/11, a tech bubble burst, a Great Recession, geopolitical incidents/unrest, a pandemic and more. While the relative volume of transactions have varied, the M&A market for successful private companies has endured through all of these.

In understanding the M&A market following an unsettling event, what economists call exogenous shocks, it is helpful to think of a predictable sequence:

1. Market is functioning normally.

2. Exogenous event occurs.

3. M&A market goes on hold for a period (approximately one to six months).

4. Market resumes having taken into account the event and its expected impact.

The above can be seen in a real world example from the Spring of 2020 during the initial outbreak of Covid. We were preparing to close a transaction for a client in the home services space in March of 2020 just when Covid and the resulting shutdowns began. The debt provider for the transaction withdrew given uncertainty in the global banking markets. However, once the debt markets resumed the transaction closed 90 days later than previously scheduled.

Another example of the durability was in the Fall of 2020 when we were moving another home services client’s transactions towards closing and Covid cases began surging. The surge impacted the company’s performance as a number of employees including our client caught Covid. However within a few months the company’s normal operations resumed and the transaction closed as planned.

We always welcome the opportunity to have a confidential conversation with a business owner thinking of selling all or part of their company. We have a commitment to being helpful even if we never actually have a formal relationship with a company. 


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