The Effect of the Post Recession Recovery on the M&A Marketplace

By Rick Gould, CPA, JDThe effects of the economic downturn & present phase of recovery are numerous & significant. There have certainly been fewer buyers. Holding-company owned firms are in a “wait and see” pattern. But, we were experiencing many valid inquiries regarding strategic acquisitions for specialties and/or locations and/or intellectual properties. New buyers have also evolved. Medium-sized firms ($10-25 Million) that have built up a war chest in the 2006-2007 highly profitable years have taken advantage of the scarcity of buyers. The pool of sellers has increased. There are many quality firms available to be sold. Several profitable firms are in play. Why is this?• Owners are looking to monetize their years of sweat equity• Relief from back office distractions is desired• Regional and/or International reach is being sought• Expansion of brain trust & depth of staff is needed to grow• Owners’ preference to once again practice PR vs. build and manage the firm • Complementary specialties sought to gain additional clients• Efficiencies of scale by sharing labor and operations expenses• Cross-selling • More disciplined financial practices sought • The expansion of the firm’s capital base and borrowing capacity through consolidation. • Maximization of profits. Recessions are historically followed by periods of economic growth. The latest recession is deeper than anything in recent memory. But eventually, we believe in 2010, the economy will revive. If history repeats itself, then a new cycle of consolidation will be off and running. Firms that have already begun the advanced preparation of being acquired in early 2010 will net the best deals. All current indicators we’ve encountered and interpreted indicate that 2010 will signify the rebound of PR agency M&A.