Latest / Bloomberg Intelligence / Beatrice Mitchell on Lack of Supply in the M&A Space (Audio)

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Beatrice Mitchell on Lack of Supply in the M&A Space (Audio) · Bloomberg Intelligence

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  Speaker 1: you very much, Bill Maloney, and here live breaking news
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  Speaker 1: from the Bloomberg Breakaway. Some of it is a two
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  Speaker 1: day conference that brings together a select group of executives,
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  Speaker 1: all who lead high growth companies. And you know, one
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  Speaker 1: of the things that happens if you lead a high
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  Speaker 1: growth companies, perhaps someone would like to acquire you buying
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  Speaker 1: the growth instead of building it themselves. Well, here to
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  Speaker 1: tell us more is Beatrice Mitchell, co founder and managing
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  Speaker 1: director of Sperry Mitchell and Company, and she joins us, now,
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  Speaker 1: thank you very much for being here. Beatrice, thank you
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  Speaker 1: for having me. You know I note also that you
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  Speaker 1: are the co author of the book entitled The Complete
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  Speaker 1: Guide to Selling Your Business, and it's also been published
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  Speaker 1: in Chinese recently. Tell us a little bit about how
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  Speaker 1: you look at the middle, the small the mid market
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  Speaker 1: and this tension that exists. It's their company, they built it,
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  Speaker 1: but also there might be someone out there that wants
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  Speaker 1: to buy it. Well, the tension probably most likely what
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  Speaker 1: you see them most of is somebody who says, I'm
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  Speaker 1: really happy doing what I'm doing. I'm sixty, I'm sixty two,
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  Speaker 1: maybe i'm fifty five, and I just I really don't
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  Speaker 1: want to give it up, but I know I should.
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  Speaker 1: I should start to think about the fact that I'm
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  Speaker 1: probably not growing the company as as much as I
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  Speaker 1: should because I've got too much money tied up in it,
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  Speaker 1: and so I'm I'm feeling very risk It feels very
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  Speaker 1: risky to me to double in size, so I won't
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  Speaker 1: do that, and I know that's bad. Um Or I
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  Speaker 1: realized I should be letting a second tier management team
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  Speaker 1: come in, but I'm sort of a control freak, most
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  Speaker 1: of them are, and so I don't want to let
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  Speaker 1: that happen. That's going to hold the company back. Or
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  Speaker 1: I'm worried that I've had a health scare and I
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  Speaker 1: don't really want to face that, but I know that
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  Speaker 1: I should start to think about selling. So that's those
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  Speaker 1: are the sort of tensions or has so much tensions,
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  Speaker 1: but issues that we patterns that are repeated over and
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  Speaker 1: over again. So what is going on right now? I
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  Speaker 1: love this space, this small and medium sized enterprise space
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  Speaker 1: because I'm a macro eco kind of person, but I
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  Speaker 1: think it's so rich in terms of getting an understanding
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  Speaker 1: if it's really going on with businesses. What are you
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  Speaker 1: seeing right now? What's happening, what's not happening? Well, right now,
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  Speaker 1: the number of deals being done UH is down significantly down.
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  Speaker 1: So last quarter first quarter of sixteen, there were three
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  Speaker 1: d and thirty deals done in what we call the
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  Speaker 1: mid market space, which is companies that that will trade
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  Speaker 1: for anywhere from ten million to a hundred billion. That's
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  Speaker 1: a I know it's a big number, but that that
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  Speaker 1: is how it's defined, or most people define it. Um
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  Speaker 1: and uh. To put this in perspective, the the first
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  Speaker 1: quarter of fifteen, there were four under ninety three deals
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  Speaker 1: done and to really put in perspective and oh seven
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  Speaker 1: there were six dred and seventy one deals done. So
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  Speaker 1: there's anyway the last this year versus last year, there's
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  Speaker 1: definitely going to be a decline. There's there are less
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  Speaker 1: companies for sale, less deals getting done. Why not for
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  Speaker 1: lack of finance? That's what people this is the knee
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  Speaker 1: jerk reaction is though the banks aren't financing, That's not
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  Speaker 1: really what's going on. There's plenty of money out there.
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  Speaker 1: There's there are um lots of non bank lenders like
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  Speaker 1: I'm just you know, goal of our antiers that are
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  Speaker 1: very aggressive and happy to lend into this market. So
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  Speaker 1: it's not lack of fantasy. It's really lack of of supply.
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  Speaker 1: And I couldn't tell you exactly why there's lack of supply.
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  Speaker 1: I think maybe a lot of companies were sold last year. Um.
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  Speaker 1: What I find is that sellers are much more sophisticated
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  Speaker 1: than they used to be. When I say to somebody
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  Speaker 1: that I first met, So tell me what your ebit
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  Speaker 1: dot is and I expect them to then say what's that?
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  Speaker 1: They all say, yeah, and exactly what that is. And
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  Speaker 1: and these are what my ad backs are. I mean,
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  Speaker 1: they're they're one step ahead of the game. Um, so
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  Speaker 1: it's it's I think they probably understood a lot of
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  Speaker 1: people understood that last year, the last couple of years
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  Speaker 1: have been great times to sell. People got very scared
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  Speaker 1: after the Great Recession, and as soon as their companies recovered,
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  Speaker 1: it was like, I'm putting selling on my agenda. It's
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  Speaker 1: something I'm going to think about every year, whether I
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  Speaker 1: do it or not. But I want to do it
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  Speaker 1: or not. Um, there is so much money out there
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  Speaker 1: taste chasing people that I think people took advantage of that.
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  Speaker 1: So I think they're probably just I don't have the statistics,
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  Speaker 1: but they're just simply less companies for sale right now.
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  Speaker 1: Family businesses and succession planning when you don't have the
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  Speaker 1: next generation waiting in the wings. Walk us to a
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  Speaker 1: little bit of that process. How you can get someone
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  Speaker 1: to see that if no one in the family is
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  Speaker 1: going to take over the business, you've got to start planning. Now, Okay,
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  Speaker 1: so first of all, it's a This has always been
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  Speaker 1: a little bit of a mystery because most privately held
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  Speaker 1: companies are not family business. They're usually started by an entrepreneur.
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  Speaker 1: They don't tend to give the company to their son
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  Speaker 1: or daughter because they recognize the fact that they don't
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  Speaker 1: necessarily have the tools to be an effective president. So
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  Speaker 1: it's rare that we will sell a company that is
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  Speaker 1: second or their generation because either they don't make it
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  Speaker 1: or that transition never happened. Okay, So maybe they want
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  Speaker 1: to liquefy their position in some way. They're thinking of retiring,
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  Speaker 1: and they want to take some money out of the business,
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  Speaker 1: right right, I'm sorry, that's right. So well, just in
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  Speaker 1: a couple of seconds, are you seeing more activity in
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  Speaker 1: that level? That's always been That's always been the market.
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  Speaker 1: It's always been the market. People who have started businesses
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  Speaker 1: that want to sell and generally have not transitions to
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  Speaker 1: the second with their generation. Patriots Mitchell, thank you so
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  Speaker 1: much for joining us and giving us uh I into
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  Speaker 1: your world. Fascinating you appreciate it. She's co founder and
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  Speaker 1: managing director Sperry Mitchell and a company she's joining us
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