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The Coming Boom

I’ve already made mention of this emerging trend in my post on the next Gold Rush. While this NYT piece focuses on middle-market M&A, rest assured that there’s also going to be activity at the lower end of the markets–which is where we focus. Mr. Roberts predicts that the resurgence of deal-making will begin within the next six months to a year as the economy improves and the middle-market mergers-and-acquisitions cycle pulls out of its current contraction.

This time, though, in his view, the recovery will get extra thrust from the convergence of four other trends: burnout in the ranks of baby-boomer business owners, rapid technology advances that are driving market consolidation, long-term growth in the appetite of foreigners for United States companies and a buildup of cash at the nation’s 4,000 to 8,000 private equity groups.

“There is tremendous, pent-up demand on both the buy and sell side,”
he said. “These middle-market firms account for two-thirds of gross national product. And they aren’t going anywhere.”

Mr. Roberts, the investment banker, says baby boomer burnout will be a driving force in the M.& A. boom that he sees on the horizon. Of the 1.2 million middle-market businesses, more than 800,000, with a total market value of $3 trillion, are owned by people born in the years 1946 through 1964, he calculates. He estimates they will sell or leave to heirs 560,000 companies with a value of $2.5 trillion, and shut down or otherwise dispose of the others.

The process has already begun, as some of the owners retire, become sick or disabled or find a sudden need for cash. “Those entrepreneurial fires can die more quickly than you’d think,” Mr. Roberts said. “One day you’re suddenly tired.” (source)

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