Don't Understand The Volume of "Dealflow". How Many Companies Are Actually Getting Acquired?
Hey guys, I've just started an MBA in a semi-target school, reaching out to alumni, meeting professors, getting courses, reading biws 400 questions and everything - but I just do not understand how deal flow is formed or how much of it actually comes by.
How are there so many firms doing transactions and still some say they can't keep up with it. Just how many companies are getting sold every year? I do understand there are some distressed M&A / divestiture situations but no matter how much I think about it. There are a limited ### of HVAC companies in east-us, there are a limited ### of steel producers, limited ### of dental offices etc.
I just can't break down where these come from, are most of these deals PE firms just exiting from their investments, is it because boomers are retiring and they wanna hand over their businesses, is it because out of the millions of businesses statistically a certain % of them are exiting every year constantly? It's like a glitch in the matrix to me that there are so many people doing M&A and there are STILL so many companies to buy and sell.
Thank you so much in advance, and excuse my "inexperience" or "misunderstanding", I've just moved to USA 2 months ago (have lived in US before) and I'm trying to learn everything as best as I can and this question has been bogging me for 6 months on end.
Cheers.
Population growth, economic growth, technological change and shifts in tastes and trends are all disruptive (mostly related) forces that drive ongoing need for further M&A.
Imagine a company with some new technology that IPOs. Then Big Established Company thinks "woah we need those capabilities, this is the Next Big Thing, let's go buy them early", driving M&A. Fast forward a few years and they look at their legacy business lines and think "yeah now that we're a Next Big Thing-focused company, this stuff is dragging down our multiple. Let's get rid of it." driving more M&A. Then you have a bunch of sponsors going "wow, if we go buy Big Established Company's crappy little competitors and turn them into Next Big Thing companies we can drive multiple expansion and sell for a huge return" driving more M&A on the buyside, then more M&A again in five years when they exit.
Illustrative obviously but this is basically what's going on
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