Mergermarket, a leading provider of data and intelligence on the M&A market, published that the 4th quarter recorded the largest quarterly value in M&A transactions worldwide since 2007. The first half of 2020, deal value declined by 6.6%. Due to the Covid crisis, the number of deals in the same period decreased by 15.5%. Conclusion, the second half of the year was significantly better.

Will the same trend continue in 2021?

There are good reasons to believe that the market sentiment is right.

1. Lots of money in the market

There are still many players (competitors, private equity funds, family offices, MBI candidates) in the market looking for interesting opportunities.

Given the low interest rates on capital, there is still a lot of money waiting to be invested in companies. The search for higher returns is real. In addition, taking over a company is fairly interesting given the low interest rates.

One cannot rule out given the Covid crisis, that banks will show some caution and perhaps demand a higher equity or additional guarantees. Everything depends, of course, on the reputation of the prospective buyer with the bank.

2. The number of SME business leaders retiring is rising

For more than 10 years, the government has been conducting campaigns to make SME business leaders aware of the need to think about succession in their company at an early stage. Demographic figures show that the number of business leaders at retirement age will continue to rise in the coming years.

Sell your company at the time when you, as a person, are doing well (positive attitude & drive) and your business equally well (great results, growth)..

This Covid crisis is for some business leaders the crisis too much and therefore they decide to sell their company faster than expected. Don't let it get to that point.

3. Prices OK?

There are currently no indications for the Belgian SME segment that prices will have fallen by 2020. If the Covid crisis has had a significant impact on the company, it is not a good plan to sell the company anyway.

Quite a few sectors have managed to keep their business on the same level as previous years or have experienced strong growth in 2020. For these companies, there is no reason why there should be a price impact. Rather the opposite is true. These companies have been able to prove that they can withstand the crisis and at the same time there are enough candidates that are eager to acquire profitable businesses. This context is more likely to keep acquisition prices stable or even, at best, to increase.  

In short, if your company has not been effected by the current Covid crisis and you want to avoid that  2021 is the year too much, the market conditions for a successful acquisition are there: several candidates and good prices.