M&A deal flow insights
On October 25 and 26, 2023, the Association of Corporate Growth (ACG) of Richmond held their annual Virginia Capital Conference. ACG is the premier merger and acquisition (M&A) deal-making community with a mission of driving middle-market growth and over 100,000 middle-market professional members. The conference attendees included middle-market private equity (PE) firms, investment banks, and service providers. Further, the conference provided a space for attendees to meet one-on-one to discuss different partnership opportunities as well as discuss deal flow. Keiter had the opportunity to meet with multiple PE firms through one-on-one meetings as well as open networking opportunities.
Virginia Capital Conference key takeaways
- Internal rate of return (IRR) calculations have moved to longer periods from three to five years,
- Valuation bias is moving towards ensuring investments are low risk,
- Deals continue to progress albeit at a slower pace along with a higher breakdown percentage. The breakdown is due to a disparity in valuation between the buyer/seller perspective, especially within the due diligence process. The breakdown is more often than not attributable to issues uncovered in diligence related to sustainability of earnings and the veracity of and support for EBITDA adjustments which impact valuation.
Representation and warranty insurance (RWI) provider insights
Keiter also had the opportunity to speak with other service providers within the M&A space, including a RWI provider. The key takeaways from their recent data and claims include the following:
- Claim notification has increased year over year when looking at 2022 versus 2021,
- Claims have related to tax, laws, and litigation rather than financial statement claims,
- Additional insurance capacity has entered the market, leading insurers to offer expanded coverage and reduce retentions.
To finish the conference, Keiter had the opportunity to listen to a keynote speaker, Brad Waid, award-winning emerging technology leader, international keynote speaker, futurist, and author. Keiter listened to the future opportunities of augmented reality, virtual reality, and mixed reality. The future is technology based and includes 3-D printers as well as processes that will improve efficiencies not only on the manufacturing side but also the professional services industries. For example, safety departments are able to recreate products they build or manufacture to allow for training to occur on a virtual product rather than an actual product.
The ACG Virginia Capital Conference provided opportunities for Keiter to meet and learn more about the current state of deal flow and upcoming changes to all business industries.
Keiter ACG Attendees. Pictured from left: Overton Ragland, Audit Senior Associate; Nick Arthur, Audit Associate; Yrimenene Zaguehi, Tax Senior Associate, Yann Reichelt, Audit Senior Manager, and Carroll Hurst, Director
About the Author
Overton is focused on developing a thorough understanding of his clients’ businesses and delivering high quality client service. He primarily provides assurance services in the form of audit and review engagements, but also enjoys partnering with his clients to complete quality of earnings and working on the buy-side and sell-side of transactions to assist with appropriate pricing and overall strategy of the business. Overton is a member of the Firm’s Private Equity services team, Financial Services team, and Transaction and Turnaround Services team.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
