August 04, 2023

Michael Abbott Discusses Iowa Mergers and Acquisitions With Business Record

In “After Pause, Merger and Acquisition Activity Coming Back Strong,” Business Record spoke to corporate partner Michael Abbott about the current state of mergers and acquisitions in Iowa, as well as what has changed and what the future may hold.

Commenting on the current culture surrounding the merger and acquisition market, Abbott said, “Up and through 2021, it was very much a sellers’ market. For our firm, 2021 was one of the busiest in deal volume and size that we’ve seen, and that was in an environment where sellers were getting very friendly terms and also very aggressive pricing. Then things slowed down. How I would describe the market now is one where it is a little more selective. Deals are certainly happening. Some are still competitive but not as competitive as they were. Pricing is still holding. It’s maybe softened a little, but what we’re seeing is sellers are being required to have more skin in the game. Buyers are getting more protections. Deals are taking longer because there’s more diligence.”

“Food and ag remains hot. For a while, manufacturing,” Abbott noted about industries that are faring better than others. “People were thinking about doing deals in that space, but maybe that has cooled a bit, and insurance and financial services because private equity is so interested in that space because it’s a way for them to get a platform to manage more assets.”

Regarding a sales pipeline in Iowa, Abbott explained, “There are always business owners in Iowa, companies that fly under the radar, and at some point, the question will be called. Iowa remains ripe for that opportunity for transition. The other thing is private equity has so much more of a footprint here in Iowa than it did 10 to 15 years ago, so I think that also opens up the door for potential buyers. I think it makes it easier for those deals to happen.”

“If you look at the large companies across Central Iowa, a lot of those have now happened,” Abbott noted regarding upcoming mergers and acquisitions. “If you look at other large privately held companies, they’ll be having to make those similar decisions, so that’s one thing to look at. Consolidation is happening everywhere. There are companies deciding if they think it would be time to get out or if it makes sense for them to be on the acquiring side. That’s where, strategically, those boards are making those decisions. I think we’ll see a mix of that. I think we will see bigger deals getting announced in the next few years. I would say smaller companies, more rural, they will be sellers. Others, who have a strategic mandate to double the size of their business, they will be net acquirers. I think if you’re looking at deal volume, the number of transactions, we’ll be net sellers.”

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