Watch for More Local Buyouts in 2013
Though Front Street isn't exactly Wall Street, 2013 might be a busy year for corporate buyouts and acquisitions.
Local merger and acquisition (M&A) experts tell The TCBN that along with a recovering economy will likely come heightened buy and sell activity.
In the past 45 days alone, Traverse City has seen a handful of acquisitions, including:
– Leads Screws International, purchased by an East Coast-based private equity firm
– RE/MAX Bayshore Properties Broker Bob Brick bought out his partners to assume full ownership
– Century 21 Northland acquired Elk Rapids-based Remerica Up North
All three M&A professionals wespoke to say there are a handful of small manufacturers and professional service firms in and around Traverse City now looking for buyers.
Shelly Ashmore, a CPA at Dennis, Gartland & Niergarth in Traverse City:
Improving economic conditions, strengthening financial positions and clarity in the tax law signal a "slight increase in the number of business transitions," says Ashmore. She says the manufacturing industry is expected to grab the most attention.
For businesses that weathered the economic storm? "They may now be in a position to consider expansion through acquisition," Ashmore says. On the flip side, "an increase in the value of their business may have them entertaining a sale."
What about those with less robust-looking profit statements? That could spur those owners into a sale or merger – possibly at a discount, Ashmore adds.
Deanna Cannon of Northern Michigan Angels and Cannon & Company CPAs, Traverse City:
Cannon negotiated the Lead Screws International deal, a move the buyer made to increase its manufacturing portfolio. She says the seller first contacted her in 2007, but then halted plans due to the bleak economic picture.
"It's picking up certainly," says Cannon of M&A activity nationally. "But it's difficult to get private equity companies interested in this region" due to the small size of most companies ($1-2 million range). "Most of the buyers here are high-net-worth individuals, and they have been the missing piece."
Bill Schumann of Fulcrum Partners, a business consultancy and M&A advisory firm with an office in Boyne City:
"The small metal fabrication shop, the machine shop, the third-party benefits administrator … those are the kinds of entrepreneurs we deal with and we're working with a couple in Traverse City right now," Schumann says.
He says owners considering a transition out of their businesses three or four years ago got that "deer in the headlights" look, but dynamics have changed. "I call it the 'new reality syndrome' and if owners are going to make a change [the economy] is what it is."
Other changing dynamics, according to Schumann: regional financial lenders with an interest in attracting and keeping business in northern Michigan "more willing to make a deal work," and ready and willing buyers. "There a lot of private equity/private investment groups sitting on a lot of money," he says.