Five Questions With Pat Crocker of Harris Williams & Co. –

1. How would you describe the market right now?

Hot to white hot. It’s about as strong as we’ve seen, certainly since our firm was founded, and it just continues to chug along. We see no reason to expect any change in the real near term.

We’ve seen that seller expectations have been chasing the market, which is good for us, and as a result we and our clients have seen the purchase prices and multiples be higher than we originally expected.

The one thing I’m concerned about is that seller expectations are increasing. They have begun to increase dramatically in the last six to 12 months, and as a result, there are fewer margins for error.

2. What kind of purchase price multiples are you seeing?

Of course, it depends on industry, but 10x is no longer a really rare multiple. It just seems like a year, year and a half ago 8x was really the top market multiple. We’re now seeing deals being done at 10x, 12x or even higher, which is great, but definitely surprising. The multiples are continuing to move up in this market.

3. Are there any sectors that have been more popular than others? Which and why?

Consumer, energy and healthcare continue to be strong. The reasons for interest in consumer may be the response to the bubble bursting in the tech sector. People are now investing in areas they know, have some comfort in and have had proven longevity. Healthcare seems like it has been on a positive track for a number of years. It is such a huge part of the economy that a lot people are interested in investing in it.

However, energy really stands out in my mind. We have had some good success recently with some energy related transactions, in part, because oil is at about $65 per barrel right now. Due to the high price of oil there is a renewed focus on exploration and development, and all of the companies that support that are seeing some tremendous growth. So that’s what has been fueling (no pun intended) interest in the energy sector.

4. Being that the market is very favorable to sellers right now, what trends have you seen in the exit market?

In the last 12 months, we’ve seen the strategic buyers get a lot more active and a lot more aggressive as opposed to 18 to 24 months ago when strategics were doing more defensive acquisitions. We’re now seeing strategic buyers really get assertive with more out of the box, growth-oriented acquisitions and they are paying higher multiples accordingly. The reason could be that, with the improvement in the economy, the strategics are seeing their stocks move up into higher levels, so that currency is cheaper. There is just more focus on growth. They have spent the last couple of years addressing problems, and now they’ve got their houses in order and are feeling pressure from the public markets to deliver growth-acquisitions are certainly one way to do that.

5. Is there anything we should be looking out for?

The things that we worry about are major dislocations-which can be anything from a natural disaster, terrorist event or a dramatic change in interest rates. But, barring that, we feel pretty good about the next six to 12 months.