For some buyers, now may be a good time to make acquisitions as prices stand to take a pandemic-sized hit. But as iPipeline CEO Larry Berran points out, many buyers, for one reason or another, are hesitant to pull the trigger on a deal.
“There’s still some dealflow that we’re looking at,” Berran says. “But just from a pricing standpoint within the market, given the uncertainty, I think a lot of buyers are waiting for pricing to settle.”
The downturn may create opportunities in some, but not all, industry markets, so prices have a good chance of dropping broadly. But it’s not likely they’ll drop evenly.
Smart Business Dealmakers spoke with Berran to get his take on the deal market and how being a portfolio company has affected iPipeline’s approach to M&A.
iPipeline has done a number of acquisitions over the years — five, according to PitchBook, just between January 2017 and March 2019.
“I think we're always on the lookout for companies that will be really good tuck-ins from a product perspective or help with features that customers may want,” says Berran.
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However, iPipeline’s position as an acquirer has changed somewhat since its $1.6 billion acquisition by Roper Technologies in August 2019.
Berran says Roper’s operations are very decentralized, giving Berran and his team the independence to figure out how they’re going to steer their ship through the market. But when it comes to M&A, Roper takes a more prominent seat at the deal table.
“They’re actually very highly centralized of capital deployment,” Berran says. “There are opportunities that they may pass us to take a look at to see if it's a good fit, or there are things that we may take to them.”
Wait and see
With more eyes searching the market for deals, the pipeline for iPipeline isn’t exactly empty — Berran says there's still some deal flow that they’re looking at — but given the uncertainty, a lot of buyers are holding onto their checkbooks until pricing settles.
The wait-and-see approach could pay off. Berran says when a major downturn occurs, for all its devastation, it also creates opportunities. So, for the time being, he’s reading market segment reports to see where prices are holding strong, and where they have slipped.
“I think that private valuations tend to be a little bit delayed from what happens in the markets on both sides,” he says.
Fundamentally, the U.S. is dealing with a medical crisis that could turn into an economic crisis. A lot of industries have been really hard hit, and where that’s happened, pricing will come down, whether it's due to multiples or adjustment of earnings. But there’s going to be a lot of competition for what might later be considered troubled assets at bargain prices. He says a great deal of private equity funding is still sitting on the sidelines, eager to be deployed.
“So you also have this enormous amount of dollars chasing the same group of assets,” Berran says. “We'll see what happens.”