The State of the American Economy– The M&A Market is Taking Off for Small to Medium Sized Businesses
The State of the American Economy– The...

The most recently published data from the Bureau of Economic Analysis (BEA) prove the strength of the American economy, with a GDP that shows a growth of 3.2% in the third trimester of 2017.

The American economy remains one of the most prosperous and competitive in the world. The strength of the market, the growth in purchasing power and the decrease in unemployment rates are the USA’s main selling points for those companies who are looking to internationalize.

In fact, the USA retains a privileged position as the destination market for Italian exports. In 2017, more than 68 billion dollars in trade between the two countries were recorded (for Italy, America is the number one commercial trade partner).

The consumer sector is the most extensive in the world. In 2016, American families (with an average annual income of $59,000) spent about 13 trillion dollars on goods and services, corresponding to almost a third of global consumption.

The USA, in addition to being the leader in research and development, innovation and production of goods and services, is home to some of the most solid and competitive companies in the world. The industrial sectors that continue to demonstrate growth, success and high earnings are:

  • Automotive: mechanics, machinery and equipment.
  • Pharmaceutical: chemical and medical
  • Consumer goods
  • Energy
  • Environmental technology
  • Transportation and logistics
  • Software and IT
  • Textiles
  • Tourism and hospitality

In 2017, exports to the USA grew to reach 182.5 billion, with foreign trade from Italy to the USA trending positively.

Where do Italian companies set up shop?

As for their geographical distribution in the USA, the majority of Italian businesses are in the South (more than 37%), followed by: the North East with 28%, the Midwest with 21%, and the West with 14%.

Advantages for small and medium sized enterprises

This sector brings in between $5 and $100 million in annual income. In the USA, the small and medium sized business sector is made up of about 350 thousand companies that generally benefit from a better valuation for growth opportunity.

Baby Boomers represent the majority percentage of ownership in this sector. The statistics demonstrate a critical issue regarding the passing from one generation to the next (and along with it, opportunities) given that many offspring have chosen careers in other professional areas.

For investors and buyers, the sector in question allows for better valuations, lower costs but higher returns in comparison to the upper middle market. In particular, the average multiple of the purchase price calculated over 10 years for companies worth less than $250 million is 7.3.

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