Baby Boomer Effect on Mergers & Acquisitions

We live in an aging world. Birth rates are down and the baby boomers retiring. 10,000 per day, in fact, as the stats show. It’s a staggering number. It is expected that roughly 25% of the United States population will be retired in the next 19 years. It’s going to change things a bit, especially if skilled immigration fails to keep up with the shrinking workforce–but I digress. Of those 10K boomers retiring, it is estimated that roughly 7% of them have ownership in businesses and business assets of some kind. If the following statement holds true…

You build wealth by focus, you preserve it by diversification.

…then a great deal of the assets of the boomers will be up for sale in the next couple of decades. That could mean more than just the businesses. It could mean everything from oversized automobiles to home downsizing. Many will scale back as they transition from working years into “golden” years. The baby boomer impact on M&A will be substantial. Many businesses owners who’re nearing retirement will want to take some–if not all–of the chips off the table and diversify in some type of fund–mutual or otherwise. In fact, the Exit Planning Institute estimates that somewhere around 8 million businesses will be sold in the next 12 to 15 years, due in large measure to the baby boomers heading into retirement. Here are a few fascinating statistics surrounding the retiring baby boomers thanks to Pepperdine¬†and Inc. Magazine:

  • Roughly 10 million (or 65% to 75%) of all small companies will be up for sale in the next 10 years
  • $5 trillion is the number given by some specialists who see the impending wealth transfer as the baby boomers retire and shift their business assets into liquid assets
  • Roughly 40% of family-owned companies in the U.S. will experience leadership change in the next five years
  • Just over 55% of middle-income households have saved less $100K for retirement. About 20% have saved less than $10K

The data is a bit disheartening, but also revealing. The macroeconomic changes that are shortly coming could have an impact on the supply/demand equation in a big way. While we’re currently seeing a seller’s market for M&A, this could quickly shift as the glut in supply (partially brought-on by the recession, partially by the economics we’ve been discussing) combines with potentially softer demand, but it may remain to be seen. We’ll see.

There will certainly be pain among many retiring baby boomers, but also some great wins for those who’ve prepared and built businesses that will eventually come with a significant payday. Selling a business is more than just the liquidity event, but it can often mean protecting the legacy you may have worked a lifetime to build.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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