Baby Boomer Business Exits – a Bulge in the Deal Flow Pipeline
For at least 15 years, M&A professionals operating in the middle market have been expecting a huge boom in M&A deal activity as the baby boomers begin to retire. The generally accepted view is that there’s a huge bulge in the pipeline of potential deal activity just waiting to spew out.
But it seems that the baby boomers just aren’t retiring like the generation before them. Gallup polling shows that 74% of adults plan to work past retirement age. In 1995, only 14% said they’d work after 65. By delaying retirement, baby boomers have essentially added a few extra sections of pipe to the end of the deal flow pipeline. Consequently, M&A deals haven’t materialized as expected from the generational transfer of business ownership… yet.
With that said, all business owners eventually exit. The baby boomers are no exception. The transfer of business ownership is built into the very nature of privately-held, middle market companies.
As of this writing, transaction multiples are higher than what most seasoned M&A professionals have seen over the course of their careers. In my opinion, if there was ever a time for a baby boomer to exit, that time is now. The business owner who waits too long (or gets greedy on valuation expectations) and misses this unique window of opportunity to exit, may work the next five years essentially for free.