Your M&A advisory for 2007

My buddy Grant McMillen of McMillen & Associates Inc. reports that this is a wonderful time to consider selling your business.

In his recent yearend report he noted that M&A activity on a worldwide basis continues to boom. In the first nine months in 2006, transactions passed the $3-trillion mark!

More importantly, he says, values for mid market and smaller companies continue to improve. “This is partly driven by the financial buyers – private equity groups or high net worth individuals – who are looking for opportunities to invest their money. Many transaction values, expressed as a multiple of EBITDA, have been in the 6 to 8 range. One recent one, the acquisition of a mid-sized Canadian company by a multinational, was reportedly at a 14 times multiple.”

For 2007, “the pipeline continues to be strong for both buy and sell mandates,” says Grant. But never think that deals are easy to pull off.

McMillen characterizes 2006 as the year where “close didn't count.” He says he was involved in one transaction that “imploded” the day before closing, and another deal that was put on hold after the Letter of Intent was negotiated.

To ensure your deals don't implode, have the best legal advice possible. Maintain open communication at all times. Anticipate potential problems and head them off.

And listen to your instincts – if you sense your partners in the deal are concerned about something, approach them openly and try to get it fixed. They’re probably as afraid of surprises as you are.