Newsroom
Despite Inflation, Interest Rates, Long Island M&A Activity Is Business as Usual
2 Min Read
Despite high interest rates and inflation, Long Island sole proprietors and family-owned businesses are among the biggest targets for private equity firms and investors. The level of transaction activity is defying the market’s usual cooling factors and even shows signs of increasing through the end of the year.
Partner Mehmet Sengulen highlighted two major reasons for the M&A activity among family businesses. The first, he says, is the strong customer list and track record in a growing regional market, an attractive target for both investment firms and out-of-region businesses. The second has to do with succession and exiting.
“There’s a lack of a second generation to take over businesses, and many fear that their life’s work could be lost without someone to continue it,” Sengulen said. The transaction creates an exit strategy for the sole proprietors or founders to preserve their business value through a merger or outright sale.
Before that happens though, Sengulen said it’s essential to involve a third-party to confirm the viability of the business deal. Ensuring honest value in a deal is necessary to benefit both sides in a sale or business combination, he said. This often requires an outside audit of the books to ensure there is cash flow, business stability, and no other looming issues—such as accounting or tax issues—that could hurt prospects for a deal.
For instance, if a business is selling for 10 times its earnings and claims $10 million in earnings, Sengulen ensures that those earnings are genuine. “We conduct thorough due diligence to ensure that a business’ claimed earnings are accurate,” Sengulen explained. “If a business promises $10 million in earnings, we verify that those earnings are real. We come in, put boots on the ground and look at what’s under the cover. We make adjustments to your books based on what our buy-side diligence process identifies.”
Read the full article published by the Long Island Business News.
Have a Question?
Fill out the form to speak with one of our transaction services advisors.