Earlier this year, a middle-market manufacturer was at a crossroads. The company’s owners were thinking about retirement. Their business also was changing. Customers were starting to buy from larger, "one-stop" suppliers that could provide a wider variety of products and services. The owners knew they could try to compete in this changing environment, which would require added capital and significant changes to the business -- or sell the business. Weighing all factors, they decided to sell to one of their industry's consolidators, a multi-million-dollar public company. This company had strong stock valuation and offered favorable pricing and a good strategic fit.

Today, there is an unprecedented alignment of industry, economic, tax and accounting factors favorable to selling. As financial advisors to middle-market manufacturing companies, we help owners to weigh today’s positive selling climate with the state of their business and their personal reasons for considering a sale. This article briefly describes what’s driving demand for middle-market companies and summarizes the types of questions we ask of middle-market company owners considering a sale. Armed with this information, owners improve their chances of making the most informed decision possible about whether and how to proceed with a sale.

What’s Driving Demand?
A number of factors are creating what may be a once-in-a-lifetime seller’s market. These factors include:
High public company valuations. As the historic highs of today’s stock market continue, public companies with high valuations enjoy access to cheaper capital with which to make acquisitions. Moreover, many of these companies are in "acquisition mode" to achieve the earnings growth required to justify such high valuations. The result has been a buying spree -- more than 7,000 acquisitions through the first nine months of 1999, almost a third of which involved deals valued below $100 million.

High public company valuations. As the historic highs of today’s stock market continue, public companies with high valuations enjoy access to cheaper capital with which to make acquisitions. Moreover, many of these companies are in "acquisition mode" to achieve the earnings growth required to justify such high valuations. The result has been a buying spree -- more than 7,000 acquisitions through the first nine months of 1999, almost a third of which involved deals valued below $100 million.