Allegiance Capital Sets New Record with Almost $500 Million in M&A Deals

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The number of middle market companies being sold is down in 2014 from previous years, but Allegiance Capital is enjoying its best year in history. The Dallas-based, middle market firm has closed seven transactions in five and a half months with a total enterprise value of $480 million.

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“We closed seven transactions in five and a half months with a total enterprise value of $480 million. That is a new, all-time record for our firm,” David Mahmood - Chairman/Founder Allegiance Capital Corporation

The number of middle market companies being sold is down in 2014 from previous years, but Allegiance Capital is enjoying its best year in history. “We closed seven transactions in five and a half months with a total enterprise value of $480 million. That is a new, all-time record for our firm,” states David Mahmood, Founder and Chairman of the 15 year-old company. Allegiance also has six companies under letter of intent that will close in the near future.

In the energy sector, Allegiance Capital’s performance is even more impressive. While M&A activity in the energy sector for North American based target companies in Q1 2014 included 161 closed deals according to data provided by S&P Capital IQ, this volume still represents a year-on-year decline in the energy sector since 2012 according to data published by industry tracker MergerMarket. Allegiance Capital has already closed four energy related transactions this year with a combined value of $350 million. One of those deals is a finalist in the New York ACG awards competition for M&A energy transactions valued at $50 to $100 million.

“Energy, and especially oil and gas services, is a hot market for us right now,” Mahmood says. “Many baby boomer owners, in all industries, realize that now is the perfect time for them to cash in on the value they have built in their company, and transfer at least part of their wealth away from the business into safer, more diversified investments. We are experts at helping them meet both their personal and financial goals.”

While energy M&A is flourishing, Allegiance Capital also works with owners in other hot sectors and has closed complex transactions in both healthcare and telecom this year as well. “We will work with any owner in any industry and many owners are very interested in exploring the wide range of options currently available in the market,” says Mahmood.

There are several factors driving middle market business owners to think more about selling all or part of the companies they own. They are as follows:

  •     Availability of investment capital – There is more than $1.1 Trillion in investment capital being held by private equity, venture capitalists and hedge funds just waiting to be invested. It is a seller’s market.
  •     Prices are up – Investors want to put their money to work. So, they are willing to pay more for high quality companies that have great potential for the future. The Warren Buffet Valuation indicator, which measures the values paid for companies, is at its highest point in 13 years.
  •     Stocks are at an all-time high – When the value of large publicly traded companies rise, so do the values of privately-held middle market companies.
  •     Baby Boomers are not getting any younger – Members of the Baby Boomer generation own thousands of companies and many are now in their mid-to-late 60’s. They survived the crash of 2008 and have rebuilt their companies. Many are ready to slow down and at least have more time to spend with family, vacation or pursue hobbies.
  •     Fear of another crash – Business owners survived the crash of 2008 do not want to go through another downturn. They view the current market peak as the perfect time to cash in.

These factors cut across every industry. “We work with a wide variety of industries ranging from high-tech, to healthcare, and from oil & gas to telecommunications. A common theme we hear from owners is their desire to diversify their wealth. They want to protect what the wealth they have developed for their future, their family and often key employees. Selling all or part of the business can make that possible,” explains Mahmood.

Allegiance Capital has seen rising success in 2014, because it takes a different approach than most M&A firms. “Three things set us apart from most firms.

Number one – we spend a lot of time educating prospective clients about the M&A process, so they understand exactly what to expect and how we are going to be there to help them through the process. This is critical, because it can take 9 – 12 months to sell a business.

Number two – we have a dedicated support staff that enables our bankers to focus on the client and getting the deal done instead of worrying about administrative duties, research, legal, PR, marketing or other issues. Most M&A firms have limited support staff and bankers have to do everything.

Number three – our entire compensation package is based upon closing deals. We get paid when the deal closes. The bankers, who executed the transaction, share in 50 percent of our total success fee.

This year, our bankers have received almost $11 million in success fees. That keeps them focused and motivated to please the client, and that is what we do best,” says Mahmood.

Many times owners will ask, “Why should I sell now, when business is booming and the company may be worth more in the future?” Mahmood has an answer. “What goes up will go down. That has been proven throughout economic history. You want to sell when the market is rising, when you can get the best prices and terms. Prices are up and the terms are the best we have seen in years. You don’t want to get caught on the down-side, because it can be a long, difficult road to get back to the peak again – just ask anyone who went through the 2008 – 2012 recession.”


About Allegiance Capital Corporation
Allegiance Capital Corporation is an investment bank that specializes in financing and selling businesses in the middle market. Allegiance Capital Corporation was recently named to American City Business Journal’s distinguished list of Who’s Who in Energy 2013, in addition to being named third on the list of 2011 Largest Investment Banking Firms in North Texas by the Dallas Business Journal. Allegiance Capital Corporation has won multiple awards recognizing the value it delivers to clients, including 2009 Dealmaker of the Year (Dallas Business Journal), 2008 Boutique Investment Bank of the Year (M&A Advisor), and 2006 Investment Bank of the Year (Dallas Business Journal). Subscribe to the Capital Ideas blog by visiting: Follow Allegiance Capital Corporation on LinkedIn and Twitter: @ALLCAP.

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