The NorthView Compass

May 2021 Edition

Happy May 2021 Compass readers,

For your daily time-flies-when-you’re-having-fun reminder, it has been 14 months (!) since we started this COVID mess and the light is finally starting to appear at the end of the tunnel. The days have certainly been long, but the year, or in the case, the 1.17 years feels, dare we say, short.

Vaccines are being administered at an extremely rapid rate and states like Florida, Texas and others have been open for some time, but even those more reluctant to do so, like New York, New Jersey, and Illinois are also beginning to loosen COVID restrictions.

M&A activity is on fire and continues to be the talk of 2021 with Q1 setting the second-largest quarter on record in terms of total value (a 160% increase from Q1 2020) and doesn’t seem to be slowing down. Bolt-on/tuck-in transactions (smaller deals that would easily be absorbed by an acquirer due to immediate strategic value) and large, big-ticket acquisitions seem to be the primary drivers of the M&A craze. Based on our discussions with buyers of companies with EBITDA ranging from $5-20MM, who have plenty of capital and interest in participating in the M&A wave as well, simply aren’t seeing a lot of activity.

Conversely, the companies in that same range have, like during the pandemic, continued to “kick the can” in hopes of earning their way out of a hole or capitalizing on the newfound momentum. This goes for financing these businesses as well. Lenders have been, for the most part, very understanding during the last 14 months, but we’re starting to see them play hardball a bit more with their problem borrowers.

Do lower and middle market companies begin a more committed ride on the M&A wave?

What happens when the Biden administration tax hikes take hold? Does overall M&A activity pause to digest higher capital gains treatment?

Do banks and other lenders stand their ground more forcing companies to make tough decisions?

All questions that we’d love to get your feedback on so shoot us a note. Either way, it should be interesting to see these things play out. 

Lots going on this month, but don’t forget Mother’s Day is May 9th, Cinco de Mayo is…May 5th, and May the 4th be with you! 

 

Click Here to view the May 2021 Edition – May the 4th be with you!