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Over the past 25 years, there have been numerous changes in the acquisition market. Many of these changes, including the consolidation of most industries (which has led to a reduction of potential acquirers) and the globalization of business, have negatively impacted a U.S. seller’s ability to obtain a premium price. There are also many tried and tested techniques available to a selling owner to overcome these obstacles and garner premium prices and protective deal terms.
The first part of this article discusses the major obstacles faced by middle market sellers, defined as companies with a transaction price between $2 million and $250 million, in trying to obtain a premium-priced deal with strong protection in the representations and warranties, while the second part defines how those obstacles can be overcome.
Middle Market Sales Obstacles
1. The vast consolidation of many, if not most, industries has reduced the number of prospective acquirers involved in a bidding contest. Usually with only a minimum number of strategic acquirers available, the few remaining prospective acquirers tend to not be as aggressive, price-wise, as they once were.
2. Usually a middle market seller has a defined, somewhat limited, market niche that reduces the number of potentially interested acquirers.