Improved liquidity and service providers have made SMB acquisitions more accessible, despite current tightened credit and liquidity.
In the current economic situation, it can be more difficult to buy and sell firms due to tightened credit and liquidity. However, it's important to have a bigger picture perspective, especially for those new to the SMB acquisition market. Ten years ago, there was very little liquidity and few banks understood or had the credit appetite for uncollateralized leveraged buyouts of small companies. Over the last decade, the number of banks participating in SMB acquisitions has increased, and liquidity has become much stronger.
In addition, service providers and sophistication have improved. Five years ago, there were no quality of earnings providers for small deals, and the price point was too high for Middle Market and above. Now, there are five to ten very good vendors that are great forensic accountants and can help de-risk deals and make them safer. This development has allowed for greater liquidity and easier access to funds, even for small companies.
Although we are currently in a short-term tight credit situation, the long-term outlook is positive. It's expected that this credit situation will last for another 18 to 24 months, but there are reasons to be optimistic about the future. With greater liquidity, more banks participating in SMB acquisitions, and better service providers, buying and selling firms has become easier and more accessible to a wider range of individuals and companies.