• early baby-boomer corporate retirees
• corporate refugees who have suffered a downsize
• foreign buyers seeing U.S. businesses as investment opportunities while the dollar is still valued lower against their own currency
• 30-something-up-and-comers aggressively buying and building

Strategic and Investment Buyers are also actively looking for opportunities to take part in Houston’s prosperous future outlook. Increasingly, corporate America, both public and privately-held companies, are acquiring smaller firms as part of their strategy for growth and innovation. Private equity groups, too, are actively seeking add-on acquisitions in Houston for their investment portfolios.

Each of these buyer categories vary in their acquisition criteria regarding the sectors they are targeting and the revenue ranges they require. However, we have seen one major common trend occurring in both of these buyer categories. More and more private equity firms and corporations are looking for smaller businesses. These strategic and investment buyers, in increasing numbers, are considering smaller businesses with lower minimum cash flow and total revenue generation as acquisition candidates than they were just one year ago.

We expect this trend to accelerate, especially in Houston, for several reasons. But here are a few specific reasons:

• While the national credit crunch may have impacted the larger transactions, the smaller transactions are still very active because all buyer categories for privately-held, small enterprises are looking to put their money to work.
• Houston banks have been minimally affected by the credit crises. First because of the area’s relatively strong economy and second, because many banks have been spared major damage from the subprime mortgage market because most of the banks focus on servicing small businesses (Houston Chronicle Dec 2007)
• Houston is called home by the second largest number of the Fortune 500 companies in the nation, second only to New York City. Houston has been steadily adding to its collection of Fortune 500’s for the past several years, while New York’s number has declined. Houston stands well ahead at the #2 spot with Dallas, Chicago, and Atlanta lagging considerably behind.
• Houston’s pro-growth, no nonsense politics are major factors driving developers and other capitalistic-minded investors to Houston. Business experts and economists say it’s a matter of simple economics — low taxes, affordable land and an expanding labor force.
• Houston is one of America’s top recession-proof cities (Forbes, America’s Recession-Proof Cities, April 2008).
• Houston’s future outlook is predicted to flourish. The city is uniquely situated and ready to capitalize on the longstanding megatrends that are transforming the global economy (Newsweek June 2008, “Houston, We Have No Problems“).
• Houston’s is headed toward becoming not only the leading city of Texas and the South, but also a player on the global scene: it is emerging as one of the world’s great cities. (Joel Kotkin, an internationally-recognized authority on global, economic, political and social trends, in his April 2008 article, Lone Star Rising).
• Most importantly, the number of buyers looking for acquisitions far exceed the number of sellers.