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Demand exceeds supply, and this has been the case for quite a while. Financial and strategic buyers, armed with substantial capital, are eagerly pursuing deals. Unfortunately, deals have been hard to come by.
Indeed, deal count was down by 27 percent in 2013, despite the fact that U.S. private equity firms are sitting on $466 billion in uninvested capital and U.S. public companies have about $300 billion in excess cash at their disposal, according to data from PitchBook and BDO Capital Research. Adding in excess cash on private company balance sheets, it’s not a stretch to estimate there is currently over $1 trillion in uninvested M&A capital.
So where are the sellers? One would think potential sellers would see an opportunity to divest, given the evident demand, as well as the steady stream of solicitations many of them receive. Yet, they appear to be very cautious, if not completely uninterested. But why?
As advisers to both sellers and buyers, and through our involvement in numerous M&A transactions across the country on a monthly basis, we are seeing three main themes emerge regarding the imbalance of supply and demand.
Dan Shea is a Managing Director with BDO Capital Advisors LLC, a member of the Private Equity Practice at BDO and a member of ACG Los Angeles. He can be reached at firstname.lastname@example.org.
BDO Capital Advisors LLC, a FINRA/SIPC member, is a separate legal entity and an affiliated company of BDO USA LLP, a Delaware limited liability partnership and national professional services firm.