2021 has been an incredibly vibrant year for the M&A community. Blue River Financial Group grew substantially in 2021, fueled by deepening relationships with long-tenured and new clients. Sara Clevenger, Blue River’s Principal, reflected on 2021 accomplishments and shared her insights on what the future might hold for Blue River and the industry. Read on in this Q&A below.
Q. How was 2020 different from 2021 for Blue River?
A. The 2020 M&A market will be remembered for its uncertainty due to the pandemic, political climate and economic challenges. Fear of the unknown caused deal activity to slow in first half of 2020; but by the end of the third quarter, middle market investors sorted through Covid-19 impact statements and began to appreciate underlying private company value drivers. As a result, deal volume soared in Q3 and Q4. It is a testimony to the resilience and vibrancy of the private capital marketplace that middle market M&A withstood hurricane-force headwinds.
2021 built on 2020’s year-end momentum. Fueled by unparalleled acquisitive demand, highly motivated sellers, and rising business values, 2021 will go down as one of the best M&A years in North America.
Blue River serves professionally acquisitive clients on the buy-side and owners of privately held middle market businesses on the sell-side. To address increased M&A volume, Blue River invested heavily in talent and technology. In 2021, our team grew by 36%, and we more than doubled the number of closed transactions from the previous year.
Q. What caused the growth Blue River experienced in 2021?
A. The short answer is our clients. Blue River operates a nationally recognized buy-side practice that delivers consistent and proven results. We represent private equity firms, family offices, and other financial sponsors seeking to acquire platform companies and smaller add on acquisitions. We also work with large public and private corporate acquirers that rely on M&A as expansion strategies. Our clients have billions of dollars to invest with time-driven urgency to get the capital deployed, but the universe of suitable acquisition targets is finite. The essence of what we deliver to our clients is the development and execution of acquisition strategies designed to enhance the quantity and quality of deal flow. However, without our clients’ compelling messages and clearly defined investment theses, it would be difficult for us to earn an audience with busy business owners. Every one of our clients brings enormous credibility and capability to the M&A process. We enhance our client’s messaging through technology-enabled outreach, creative marketing materials, and talented, well-trained people. As a result, we have been able to bring our clients together with outstanding businesses and get deals across the finish line.
Blue River also maintains a vigorous sell-side practice representing the interests of middle market businesses in the private capital marketplace. Many owners who were considering a sale moved their timelines into 2021 to avoid potential tax hikes and ongoing pandemic uncertainties. In addition, like the public stock markets, private company values are up. So, if a business had strong financial results and the owner was ready to sell, the market was ready to do a deal.
Two factors drove Blue River’s success in 2021: 1) outstanding clients, and 2) people committed to delivering routine excellence on every assignment.
Q. How did Blue River’s client base expand this year?
A. Blue River remains active in many of the industries that we’ve worked in over the years, such as manufacturing, business services, and distribution. As industries have been positively or negatively affected by recent events, opportunities still abound for the teams that remain agile and deliberately pursue them.
While we continue to build experience in our “legacy segments”, we’ve added new mandates in preferred industries such as Industrial Automation, Home Services, and Digital Curriculum/Edtech.
Many current clients have engaged us on multiple concurrent assignments, which is always helpful; because familiarity can promote better outcomes. Interestingly, all of our new engagements came as referrals from former and existing clients. Clients can give no greater compliment than a referral.
Q. Has the pace of the current M&A market driven change in Blue River’s process and approach?
A. Now, more than ever, we must strike a balance of art with science for our processes. Research-validated preparation and systematic execution is more important than ever in order to deliver measured, predicted, accretive results. A lot has to be right to get deals done. Yet, the most powerful ingredient may be the ability to cultivate trust and transparency in the buyer-seller relationship. This requires a certain level of artfulness, including the ability to empathize with owners’ underlying needs and motivations. We have to listen carefully to identify the factors that produce successful outcomes and stronger relationships for both sides of the transaction.
Internally, our team has intentionally refined and improved workflow designs and processes. We see the fruits of that labor through more closed transactions and positive testimonials from genuinely satisfied clients.
Q. Do you expect similar growth next year?
A. Yes, and even more! Private company investors have enormous reserves of dry power to deploy. Lenders are still lending; although interest rates will probably go up. Sellers’ financial statement scars are healing. Owners may have dodged an unwanted tax increase. Private company values are extremely high. We even have better experience dealing with pandemics. So, all things considered, we believe 2022 will be another year of substantial growth.
We know the demand side of the equation will remain extremely strong in 2022. The greater question is will there be a supply of quality middle market companies ready to sell. Owners should sell when three things align: 1) the market is strong; 2) the business is ready; and 3) the owners are ready. We think more sellers will be ready this year than ever before.
To prepare for increased activity, we are actively seeking new talent; testing new technologies; and searching for creative ways to deliver better results for our clients. We plan to unveil exciting innovations in the first quarter of 2022.
At Blue River, opportunities exist whether the market is “high” or “low”. No “next year” can ever be the same; but we are committed to staying true to our strengths and becoming even more effective.
Q. Is there anything you would you like to say to our clients & team?
A. Our client relationships are precious to us. But we could never meet our clients’ needs without the enduring dedication of our long-term team members and those who have recently joined.
So, to our clients and employees, thank you. We intend to build on the trust you have shared with us. We begin the new year believing 2021’s successes will beget an even better 2022.
Sara Clevenger, Principal, provides strategic direction and oversight for the firm’s Acquisition Support Investment Banking Group. Ms. Clevenger brings over 15 years of experience in Corporate Development, Mergers & Acquisitions, Commercial Real Estate Development, Portfolio and Transaction Management. Sara’s full bio is available here.
About Blue River
Blue River Financial Group is a middle market merger and acquisition advisory firm headquartered in Bloomfield Hills, Michigan. It assists corporations, private equity groups and individuals in the sale and acquisition of businesses, and has completed assignments in multiple business segments. With over 19 years of experience spanning across 50 global industries, Blue River provides a suite of services to middle market clients including corporate development, private equity support, valuations and transaction consulting, placing a premium on relationship-centered transaction counsel and client focus.