Corum VP Ivan Ruzic Discusses Valuations and What Buyers Want

Date: 5 April 2018
Author:
Giff Constable

Valuations are at levels we haven’t seen since 2007 and concerns are rising about the sustainability of the market and the amount of leverage the middle market is taking on. We asked six senior bankers how this was changing the advice they gave potential sell-side clients as they think about an exit.

 

“I think there have been several impacts on the mid-market as a result of higher valuations and higher leverage.

The first is that higher valuations tend to drive greater selectivity on the part of buyers. And this applies to both Strategic and Financial buyers. As a result, buyers are increasingly demanding both top line growth and some level of profitability as evidence of business model viability. This doesn’t mean unprofitable businesses aren’t being bought – merely that it is becoming easier to attract buyer attention if the seller has critical mass.

From what I can see, higher leverage seems to be largely confined to Financial buyers – naturally leading to a greater emphasis on EBITDA. Interestingly, some buyers are choosing to “de-leverage” by partnering on deals while others are moving down market – considering acquisition opportunities that are smaller and therefore less expensive.

Regardless, my advice to potential and actual clients remains the same – “Continue to drive your business as if there is no acquisition process underway, while seriously exploring the potential opportunities created by the current high-valuation environment.”

quotes I think that the one thing that, as we looked at different firms to help represent us, one of the things that really hooked us, and I believe was still a big factor, was the fact that we had a firm who understood the software side of our business, a firm specializing in software, and I think that helped us immensely in the process because we weren't having to go in and educated a firm or broker on how to speak our language to potential buyers. I think that was one of the things that made an easier decision for us to select Corum in that process. quotes

David Gorman
Clearview Staffing Software, Inc.