Insights

M&A Advisor Award Nominees Share Key M&A Trends in Energy, Telecom, Healthcare, Retail and Manufacturing

Since 1998, M&A Advisor has been connecting M&A, turnaround and finance professionals through thought leadership, facilitating connections and honoring the achievements of top deal making professionals. On November 17, the organization will be recognizing the top individuals, deals and firms for 2014 at its 14th annual M&A Advisor Awards in New York City.
MAadvisorsAwardAllegiance Capital Corporation and several of our dealmakers have been nominated for a number of M&A Advisor Awards in the energy, healthcare, retail, manufacturing and telecom industries. Since our nominated investment bankers work on a wide range of deals in diverse industries, we checked in with them to see what they are seeing and hearing on the frontlines of M&A. We also asked them to share any insight that business owners seeking M&A guidance might find helpful.

M&A Trends in Energy

Bill van Wagner, managing director at Allegiance Capital’s New York office, always keeps his fingers on the pulse of the energy sector.  Energy M&A has been experiencing “a robust period of growth over the past several years, both in terms of capital expenditure for drilling activities, pipeline construction and oil production originating from hydraulic fracking.”
Bill expects this trend to continue for the foreseeable future. “At Allegiance, we’ve seen a number of owners of oil service companies recognize this trend and take advantage of this window of opportunity to sell their companies. As a result of these energy industry trends and personal factors, M&A activity will remain strong in the energy sector,” he says. Even with the recent drop in oil prices, the values of proven O&G companies has remained strong.
Factors that Bill sees driving business owners in the energy sector (and others) to sell in today’s market include: the need for an infusion of capital to support the company’s ability to meet increased market demand; the desire to diversify wealth locked up in illiquid company stock; and the need to monetize a portion of their business’s equity while expanding the shareholder base to include the next generation of management (which may or may not include family).
Check out this bonus content on the energy sector:
As Tradition Holds Strong, Technology Drives Today’s Texas O&G Industry

M&A Trends in Telecommunications

The telecom industry has also seen growth in M&A activity this year. Brent Earles, senior vice president at Allegiance Capital’s Dallas office says “the velocity at which the telecom industry moves is faster than any other industry. What happened two years ago in telecom is old news.”
One of the biggest trends Brent sees driving telecom M&A is 4G adoption. “While we all read about 4G and LTE (Long Term Evolution) with regard to ‘network speed,’ millions of consumers are moving off of 2G and 3G speeds and adopting smart phones that have the capability to fully leverage the new and evolving 4G networks. Consumers are becoming addicted to the speed of the network, and we have become a nation of data gluttony.”
Brent has also seen The Cloud become the new home base of discussion. “Almost all applications will become part of the managed cloud environment. Hurdles that existed in the past, such as scaling for computing, processing and storage are being replaced with Cloud solutions,” he says.
 

M&A Trends in Healthcare

M&A activity in the healthcare sector shows no sign of slowing down either according to Fred McCallister, senior vice president with Allegiance Capital’s Dallas location. “The ‘consumerization’ of healthcare is one of the key factors driving M&A in this sector. Consumers are progressively taking more and more control over decisions pertaining to their health today,” notes Fred.
According to Fred, “Consumers are now the decision makers when it comes to spending on health coverage and managing their ability to stay healthy. This is, as opposed to the past, where one’s employer or physician led the charge. In addition, we’re seeing a shortage of primary care physicians and healthcare specialists.”
“As healthcare consumerism continues to evolve, we’ll see physicians and specialists of all kinds join the ranks of healthcare providers, and this will drive M&A in the niche,” Fred advises.
Read more about healthcare consumerism in this earlier post:
The Rise of Healthcare Consumerism and Why It Drives M&A

 M&A Trends in Retail and Manufacturing

Pat Pollard, managing director and head of Allegiance Capital’s Chicago office has also seen an increase in M&A activity tied to the manufacturing and retail sectors. He recently closed a deal in the retail fixture niche, “which is undergoing major structural changes as private equity attempts consolidation of this traditionally diffuse market.”
In 2014, Pat has found that “continuing uncertainty has shortened lead times, intensified competition and widened the gap between winners and losers in the retail fixture industry. Timing may be the most important driver for successful middle-market M&A in niches such as the retail fixture space. The recent period of time has been positive in the space, but the winds of change are blowing.”
“M&A opportunities for manufacturers who serve retailers are bolstered by seasoned, durable customer relationships, especially with high-end retailers. Acquirers see these relationships as a very valuable commodity,” says Pat.
Learn more about trends in retail M&A in this recent post:
Market Conditions Brewing Up a Favorable Environment for Retail M&A

 The Future Looks Bright for Deal Making in 2015

With more than four decades of deal making experience, David Mahmood, Chairman and Founder of Allegiance Capital believes 2015 will be a strong year for middle-market M&A. “There are four factors that will drive deals and deal values in 2015,” David says. These include:

  1. Investors are sitting on more than $1.1 trillion they need to put to work. They are looking for good companies to work with. There’s cash on the table
  2. Values should increase, as more investors compete to purchase companies that decide to sell or raise capital. It’s simple supply and demand.
  3. It is now a global marketplace. Foreign investors need U.S. technology and expertise, and they are willing to pay a premium for successful companies.
  4. The Baby-Boomer generation of business owners is ready to retire. This will increase the number of middle-market companies for sale and boost the number of deals done in 2015.

If you own a successful, middle-market business and are considering selling all or a portion of your company, investors want to talk with you. Contact a reputable investment banker for additional insight regarding the latest M&A opportunities in your industry.
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