Low interest rates, an improving U.S. economy, the continued availability of cash reserves and the rush in 2014 mega-deal activity all continue to strengthen the mid-market M&A space (defined as U.S.-based companies acquired for between $25 million and $1 billion). Nearly 83 percent of private equity deal activity in the first half of 2014 involved mid-market M&A deals - a high-point dating back to at least 2005.
With a reported median valuation-to-Ebitda multiple during the first half of 2014 of 10.7x, previously reticent sellers are reconsidering. But as we regularly see, post-closing consequences in the form of disputed working capital calculations and contested escrow distributions await those sellers who don't "mind-the-GAAP" (generally accepted accounting principles). However, with adequate planning, creativity and full transparency, sellers and buyers can minimize those items that are often the subject of post-closing disputes.