Matt Gilbert
November 26, 2024
As we enter the second term of the Trump administration, business owners find themselves in a unique position to capitalize on what many experts predict will be a period of unprecedented economic growth and heightened M&A activity. This blog explores why the next 12-18 months may present a once-in-a-decade opportunity for business owners in the lower-middle and middle markets ($10M to $99M in revenue) to move toward retirement, exit entirely or even take on growth partners to transition the business toward professional management.
The Trump administration's pro-business policies are expected to create a favorable environment for business growth and valuations. According to Matt Gilbert, Co-Founder of Gilbert & Pardue Transaction Advisors, "The combination of tax cuts, deregulation, and energy infrastructure spending promised by the Trump administration is fueling economic growth and boosting business confidence".
This optimism is reflected in the stock market's performance. As noted by financial analyst Abby Moorehead, "The S&P 500 has seen a remarkable upswing, driven by investor optimism surrounding the incoming Trump administration's promises of border security, domestic energy production, and US economic growth".
The anticipated economic boom is expected to drive increased M&A activity, particularly in the lower-middle and middle markets. Brent Slinkard, Executive Director at The SCOPE™ Institute, states, "We're seeing a significant expectation of a boom in mergers and acquisitions, which will particularly benefit local businesses. This indicates that capital is readily to be deployed into available deals".
This sentiment is echoed by Kevon Sabor, Executive with Legacy Outcomes: " With the promise of reduced regulation and a more business-friendly environment, we expect to see a surge in M&A activity as regional companies look to expand and consolidate their market positions and independent business owners take advantage of the perfectly timed opportunity for a wealth creation/preservation event".
While the economic outlook is positive, it's important to recognize that this favorable environment may be time limited. As Lisa Shalett, Morgan Stanley Wealth Management's chief investment officer, points out, "The current economic landscape is different from 2016. Bond market participants are concerned about potential inflation and higher costs of debt financing, partly due to a $35 trillion debt load, which could limit the new administration's options".
This suggests that the window for optimal valuations and peak exit timing may be short-lived. Business owners who act decisively by completing transactions in the next 12-18 months may be able to capitalize on peak valuations before potential economic headwinds re-emerge.
Given these once in a lifetime market conditions, selling your business or recapitalizing to take some chips off the table by taking on a growth partner in the early part of Trump's second term could be a strategic move. George Abboud, CEO of Exponent Advisors, explains: "We're expecting valuations to reach historic highs. For business owners considering an exit, this could be the optimal time to maximize their return. Waiting could mean facing a much longer holding period before seeing similar valuation multiples again in their lifetime".
Abboud adds, "If you miss this cycle, you might find yourself needing to operate your business for another 8-12 years before such favorable conditions align again. It's a risk-reward calculation that every business owner needs to consider carefully".
If you're considering capitalizing on this unique market opportunity, it's crucial to start preparing now. The first step is to connect with a reputable M&A advisor who can guide you through the process.
Chris Yonker, Founder of The Center for Conscious Living and Fulfillment, recommends: “When we have clarity in what we want—such as deciding to sell our business—the next step is understanding exactly where we stand. A map is only useful if it shows where ‘You Are Here’ is. This is where reputable third-party advisors come in, conducting a fair market value assessment of your business, including market comparisons and insights on how lenders and capital providers view your company. Investing in this work is crucial; it pinpoints exactly what levers to pull to enhance valuation, setting you up for a solid and successful exit. Ultimately, it’s about positioning your business as attractively as possible when it’s time to enter the market.”
While the market conditions appear favorable, timing remains critical. As Phil Davis, Managing Partner at Davis & Associates, notes: "We're seeing a confluence of factors that make this an ideal time for business exits. However, market conditions can change rapidly. Business owners should prepare now so that they will be ready to move when the opportunity is right, rather than waiting to try and time the market perfectly".
The start of Trump's second term presents an unprecedented unique opportunity for business owners in the lower-middle and middle markets. With predictions of economic growth, increased M&A activity, and potentially peak valuations for well-run organizations, the next 12-18 months could be the ideal time to consider transitioning your business to secure your legacy and fund your family’s future.
To capitalize on this opportunity:
1. Connect with a reputable M&A advisor
2. Arrange a fair market value study
3. Work with an advisor to enhance your business's value
4. Prepare your business for a potential sale or partnership
By taking these steps now, you'll be well-positioned to make the most of this favorable market cycle. Remember, missing this window could mean waiting another 8-12 years for similar conditions to align.
As you navigate this decision, keep in mind that every business and situation is unique. While market conditions may be favorable, the decision to sell or take on a partner should align with your personal and professional goals. Consulting with a competent transaction advisor is crucial to making the best decision for your specific circumstances.
The Trump administration's policies are setting the stage for what could be a golden era of business valuations and M&A activity. By preparing now, you can ensure that you're ready to seize this opportunity.
If any of this resonates with you, we encourage you to complete our M&A Discovery Questionnaire and talk with us to see if your business makes the cut as one who can still command a great exit in this M&A environment. We will be in touch quickly to discuss the results. Click here to take the assessment.
Gilbert & Pardue Transaction Advisors (GaP) is a Houston-based business advisory firm serving lower middle and middle market business owners from coast to coast through representation for Mergers & Acquisitions Matt Gilbert and Bret Pardue established GaP to provide owners of privately-held businesses – those businesses generally enjoying annual revenue of $10-$100 million – with the quality of M&A representation and value-enhancement services previously only available to upper middle and large businesses. GaP brings highly experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully-integrated expertise to every engagement. No other M&A firm serving the lower middle and middle market provides the quality of representation and transactional expertise that we do.
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