With an estimated $1.7 trillion available to invest in new deals, you can debate whether it’s a better time to be a buyer or a seller — or if it’s a good time to be both. But what local entrepreneurs, investors and advisers can agree on is that dealmakers have been busy in Central Ohio this year.
Ice Miller Managing Partner Richard Barnhart and Partner Rob Ouellette have seen a lot of capital chasing local deals. It’s a very seller-friendly market with buyers facing more competition for deals and price multiples rising as a result, they say.
“The M&A climate is the most robust we’ve seen for many years,” Barnhart says, “and it looks like it will remain so for the next six to 12 months.”
As hundreds of Central Ohio dealmakers prepare to gather in downtown Columbus on Sept. 25 for ASPIRE 2018 — the largest local conference for investors, dealmakers and entrepreneurs — Smart Business spoke with some of the players who are driving local M&A activity to learn what they’re seeing in the local marketplace.
Red hot market
Wade Kozich, partner-in-charge of GBQ’s Transaction Advisory Services group, says his firm worked on 126 deals last year. They encompassed all kinds — from sales to private equity and strategic buyers to real estate deals and corporate acquisitions.
He finds this a very seller-friendly environment with a continued proliferation of non-bank lenders and employee stock ownership plan deals.
“Sellers are having their day right now and buyers are bemoaning how tough it is out there for them to find companies,” Kozich says.
Because buyers are finding it difficult to find good companies at reasonable valuations, more buyers are going downstream to find lower multiples, he says. Buyers may have to pay more than they would like right now — yields throughout the investment world are low, so everyone is chasing yield and prices for good assets are high — but bad companies with weak characteristics still cannot sell.
Allison Finkelstein, an angel investor for more than 20 years who has served on the bo
ards of many of the companies she invests, says there’s conflicting data on the M&A climate in Central Ohio. While some say it’s down, investment data shows that it’s up.
Finkelstein was previously the assistant vice president of investments for TechColumbus (now Rev1Ventures), managing a portfolio of 13 pre-seed funds, 114 portfolio companies and $31 million in assets.
“Having tracked such data during my days at TechColumbus, I know how difficult it is to track data and how incomplete it can be,” she says. “So, I fall back on my gut feel, which is for the right technology and the right buyer, deals will happen. Our Central Ohio location may require us to be more creative to find and connect with buyers or investors. But the money is still there, especially with private equity.”
Along those lines, Kensington Hill Partners’ Founder and CEO Jeff Sopp says he’s heard of out-of-town investors opening satellite offices in Central Ohio because they want to take part in the robust startup environment. That includes smaller family office-type private equity firms or large corporations moving some of their next wave of development to the region.
Jim Hackbarth, president and CEO of Assurex Global, a risk management and commercial insurance brokerage group, sees opportunity for buyers and sellers. But while the upside for sellers can be tremendous, he’s happy to be on the buy-side as an investor.
Entrepreneurs take on a tremendous amount of stress as they manage the risk of developing a company to an exit or getting investments to take it to the next level, he says.
Whether you’re on the buy or sell side, Hackbarth has noticed all flavors of money have gotten smarter since the Great Recession.
“If an investor doesn’t have the appetite for failure of that company, then they should not even begin to play,” he says. “I think the venture capitalists and institutional investors certainly have learned that lesson, and therefore, they look for more market validation.”