Beatrice Mitchell on Lack of Supply in the M&A Space (Audio)

S I T E twenty sixteen dot com. Now over the first word breaking news desk for today's afternoon call, and here he is Bill Maloney. Good afternoon, Charlie. Another day of games for US stocks. Dad is currently hired by A hundred and fifty four points. SUPs gained fifteen and NAZAC rises thirty. Small cap six hundred games three points, and the US ten yield at one point eight seven

per cent. Not out of ten sub sectors are higher, led by games and energy materials and the financials only utilities declined, Doubt Transports rise fifty six and as a biotechs game twenty two and the VIX is lower by three percent. Down leads to the upside included Goldman, Sachs, IBM, and Caterpillar, while Nike led to the downside. Apple approached a hundred hours of share. Computer Science has gained as much as forty to our sixteen year high, well Ali

Baba Felle as much as seven point eight percent. The company is facing an SEC investigation over its accounting practices. After the belt Tonight look for earnings from HP and Williams Sonoma Costco reports late tonight live from the first breaking news to ascom Bill Maloney. Charlie all right, thank you very much, Bill Maloney, and here live breaking news over your Bloomberg Times Squawk s Q. You a w K on your terminal. I'm Charlie Palleton. That's a Bloomberg

business flash. You're listening to taking stock with bim Box and death Lenas on Bloomberg Radio. We are broadcasting live from the Bloomberg Breakaway. Some of it is a two day conference that brings together a select group of executives, all who lead high growth companies. And you know, one of the things that happens if you lead a high growth companies, perhaps someone would like to acquire you buying

the growth instead of building it themselves. Well, here to tell us more is Beatrice Mitchell, co founder and managing director of Sperry Mitchell and Company, and she joins us, now, thank you very much for being here. Beatrice, thank you for having me. You know I note also that you are the co author of the book entitled The Complete Guide to Selling Your Business, and it's also been published in Chinese recently. Tell us a little bit about how you look at the middle, the small the mid market

and this tension that exists. It's their company, they built it, but also there might be someone out there that wants to buy it. Well, the tension probably most likely what you see them most of is somebody who says, I'm really happy doing what I'm doing. I'm sixty, I'm sixty two, maybe i'm fifty five, and I just I really don't want to give it up, but I know I should.

I should start to think about the fact that I'm probably not growing the company as as much as I should because I've got too much money tied up in it, and so I'm I'm feeling very risk It feels very risky to me to double in size, so I won't do that, and I know that's bad. Um Or I realized I should be letting a second tier management team come in, but I'm sort of a control freak, most of them are, and so I don't want to let

that happen. That's going to hold the company back. Or I'm worried that I've had a health scare and I don't really want to face that, but I know that I should start to think about selling. So that's those are the sort of tensions or has so much tensions, but issues that we patterns that are repeated over and

over again. So what is going on right now? I love this space, this small and medium sized enterprise space because I'm a macro eco kind of person, but I think it's so rich in terms of getting an understanding if it's really going on with businesses. What are you seeing right now? What's happening, what's not happening? Well, right now, the number of deals being done UH is down significantly down.

So last quarter first quarter of sixteen, there were three d and thirty deals done in what we call the mid market space, which is companies that that will trade for anywhere from ten million to a hundred billion. That's a I know it's a big number, but that that is how it's defined, or most people define it. Um and uh. To put this in perspective, the the first quarter of fifteen, there were four under ninety three deals done and to really put in perspective and oh seven

there were six dred and seventy one deals done. So there's anyway the last this year versus last year, there's definitely going to be a decline. There's there are less companies for sale, less deals getting done. Why not for lack of finance? That's what people this is the knee jerk reaction is though the banks aren't financing, That's not really what's going on. There's plenty of money out there. There's there are um lots of non bank lenders like I'm just you know, goal of our antiers that are

very aggressive and happy to lend into this market. So it's not lack of fantasy. It's really lack of of supply. And I couldn't tell you exactly why there's lack of supply. I think maybe a lot of companies were sold last year. Um. What I find is that sellers are much more sophisticated than they used to be. When I say to somebody that I first met, So tell me what your ebit dot is and I expect them to then say what's that? They all say, yeah, and exactly what that is. And

and these are what my ad backs are. I mean, they're they're one step ahead of the game. Um, so it's it's I think they probably understood a lot of people understood that last year, the last couple of years have been great times to sell. People got very scared after the Great Recession, and as soon as their companies recovered, it was like, I'm putting selling on my agenda. It's something I'm going to think about every year, whether I do it or not. But I want to do it

or not. Um, there is so much money out there taste chasing people that I think people took advantage of that. So I think they're probably just I don't have the statistics, but they're just simply less companies for sale right now. Family businesses and succession planning when you don't have the next generation waiting in the wings. Walk us to a little bit of that process. How you can get someone to see that if no one in the family is

going to take over the business, you've got to start planning. Now, Okay, so first of all, it's a This has always been a little bit of a mystery because most privately held companies are not family business. They're usually started by an entrepreneur. They don't tend to give the company to their son or daughter because they recognize the fact that they don't

necessarily have the tools to be an effective president. So it's rare that we will sell a company that is second or their generation because either they don't make it or that transition never happened. Okay, So maybe they want to liquefy their position in some way. They're thinking of retiring, and they want to take some money out of the business, right right, I'm sorry, that's right. So well, just in a couple of seconds, are you seeing more activity in

that level? That's always been That's always been the market. It's always been the market. People who have started businesses that want to sell and generally have not transitions to the second with their generation. Patriots Mitchell, thank you so much for joining us and giving us uh I into your world. Fascinating you appreciate it. She's co founder and managing director Sperry Mitchell and a company she's joining us

here at the Bloomberg Breakaway Summit. I'm Kathleen Hayes along with Pim Fox, and this is taking Stock on Bloomberg Radio Bloomberg. Taking Stock has brought you by the New York Community Bank. Ask about there my community interest checking with free New York Community Bank online and mobile banking. Earn more, get more. Visit my n y cd dot com for details. Not