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Georgia continues to be M&A Hotbed through 2017

Posted by sb_admin on June 19, 2017
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Recently, Georgia has been a mergers and acquisitions hotbed in the mid- to lower-middle markets. SunTrust Robinson Humphrey, an investment bank, attributes much of this boom to consolidation in the healthcare, consumer goods, logistics, and fintech sectors.[1] Businesses in the region view these deals as an essential part of their 5-year plan to grow and develop into new consumer or business segments.[2] Going forward into 2017, both macro- and micro-economic trends appear to suggest this trend will continue and therefore be a seller’s market.

On a macro level, there are three economic and political trends that are playing a key role in driving growth through acquisition. First, despite the Fed’s recent decision to raise interest rates to 1.25%, money is still relatively cheap, thus encouraging companies to finance through debt. Second, the market is saturated with companies with significant cash reserves searching for investment projects. Non-financial companies have approximately 1.5 trillion dollars of cash on their balance sheets while private equity firm has approximately 550 billion dollars of “dry powder.”[3] These firms must either deploy this capital by investing in new projects or simply return it back to their investors. Fierce competition among these firms is resulting in higher valuation multiples.[4] Finally, widespread optimism that President Trump will pursue business-friendly policies is also influencing executives to pursue growth through acquisition.

On a micro-level, Georgia’s vibrant economy sets the stage for growth through acquisitions likely. As U.S.’ 9th largest economy by GDP, Georgia has been expanding much faster than the nation.[5] Last year, the metro-Atlanta area added approximately 77,000 jobs, and thus prompted approximately 90,000 people to relocate to the area.[6] Drivers of this economic growth can be attributed to the financial sector, information industry, profession and business services, and information.[7] New industries are popping up in Georgia and thriving. For example, Georgia’s relatively new $7 billion dollar television and film industry have grown to be the third largest in the world; and its high-tech sector has boomed in fin-tech.[8]

The high degree of economic activity occurring in Georgia, combined with the overall strength of the M&A markets nationally, appear to hint that M&A growth in the Peach State will continue. Potential Sellers can still rely on favorable market conditions to exit.

To learn more about market conditions in your industry or more about our selling process, contact: Doreen Morgan (770) 936-9099

[1] See Phil Hudson, Atlanta M&A activity hot in health care, consumer goods, logistics, fintech, Atlanta Bus. Chron. (Mar. 23, 2016) http://www.bizjournals.com/atlanta/news/2016/03/23/atlanta-m-a-activity-hot-in-health-care-consumer.html. [2] Id. [3] See PNC and Harris Williams & Co., Strategic Market Insights 1Q 2017, Strategic market Insights (2017), https://www.pnc.com/content/dam/pnc-ideas/trending/2017-Q1-Market-Trends-Report.pdf. [4] See Prairie Capital Advisors, inc., Prairie Middle Market Perspective, Prairie (Winter 2017), http://www.prairiecap.com/Websites/prairiecap/images/Prairie%20Middle%20Market%20Perspective_Winter%202017.pdf.  [5] See Bureau of Economic Analysis, Regional BEA Facts for Georgia, Bureau Econ. Analysis (Mar. 28, 2017), https://www.bea.gov/regional/bearfacts/pdf.cfm?fips=13000&areatype=STATE&geotype=3. [6] See Mark Niesse, Census: Atlanta’s population approaches 5.8 million, Atlanta J. Const. (April 10, 2017), http://www.ajc.com/news/local-govt–politics/census-metro-atlanta-population-approaches-million/1pxSPBRYI6L26zn4jgVBrN/. [7] Id. [8] id.

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