Mid-States Advisors Update: May 2023
The jump from the low 70s to the high 80s means Michigan turned summer on overnight...again. While temps are high, deal flow tends to be slower. After a very slow first quarter, Mid-States is seeing a pick up in incoming requests for services in both the M&A and funding realms. Most of the attorneys and CPAs we keep in regular contact with remain active, but much of what they are seeing are migrations to smaller transactions, add-ons, or generational transitions.
Multiples are dropping, but seller expectations remain high. Earnouts are coming back to the forefront as a way to bridge the gap. Buyers are putting the onus on the seller to prove their numbers are achievable if they want to hit their selling price. We always warn sellers that they need a good transaction attorney to paper an earnout scenario appropriately, or they could have difficulty collecting.
Lenders continue to inquire. We hear mixed reviews on how busy they are based on the institution they work for but in general; they are waiting for an opportunity to get aggressive. There are some bank lenders that are staying active, others have told us top management has outright shut off lending unless its essentially a borrower who doesn't need their money in the first place (why borrow at today's rates?), and there are others that are reporting a mix (i.e., favoring some industries as opposed to others).
ABLs are reporting an uptick in activity, but many are still finding it difficult to find good prospects. Bank workout groups are reaching out to them directly in many cases to offload troubled clients, but outside of that, they have money to put to work and are seeking opportunities.
All in all, it seems as though the deal community is waiting for some good news but is staying ready to pounce once given the green light. Mid-States maintains there are still great opportunities available for the right buyers and sellers, but both parties may have to accept more risk.
This month, we focus our article on an industry in rapid change, the automotive industry. It's not going anywhere, but it is rapidly changing from a focus on ICE to EV. That means big challenges and big opportunities. Being at the forefront of the switch could mean beating out competitors, and lagging behind could mean obsolescence. Choosing your spots is key. Hopefully, this month's article helps provide some insights into how.
As always, if you are interested in learning more about this volume's content or if we can help you or a client in any way, please feel free to reach out to one of our team members.
The Mid-States Team
Joseph P. Alam III
Joe Alam Sr.
Intern - Analyst