Greg Lafin is managing director of Oakbrook Terrace-based Wolf Capital LLC and executive vice president of the Midwest Business Brokers and Intermediaries, one of the largest associations of mergers and acquisitions advisers in the Midwest. We recently spoke with Lafin regarding the state of the M&A industry, and what its future holds.

Q:How has the M&A market been affected by the down economy?

A: "For the small, middle-market business, M&A activity peaked in 2007. Many businesses have been affected by the elongated recession and are just now starting to feel a little bit more comfortable with where their businesses are stabilizing. Much of the M&A activity in this market space in 2009 and 2010 dealt with distressed situations or hot sectors such as health care, niche manufacturing and distribution, and new technology, as few companies were continuing to grow both revenues and profits during 2008 and 2009.

"Currently, we are starting to see higher-quality companies considering the marketplace for sale. For profitable companies with sales between $5 million and $50 million, buyer demand is the greatest. Companies that meet these criteria are still selling with favorable transaction structures and pricing as supply remains limited."

Q:Are prices stabilizing?

A: "Pricing has stabilized. Most buyers realize that a seller will not accept a steep discount if they can avoid doing so."

Q:How well is the market rebounding right now?

A: "We continue to read about significant gains in M&A activity for the larger corporation. Buyers of small businesses are still struggling to find quality deal flow. This bodes well for the seller in this market as quality buyers outnumber quality sellers. The market is rebounding, but a little slower than expected."

Q:Is financing for deals becoming any easier to acquire?

A:"Financing is available for quality buyers. It remains true that lenders have been choosier with whom they back but transactions have been getting done. The M&A slowdown for the small middle market had more to do with the quality of earnings and price expectations of the seller than financing the transaction. Many sellers were still expecting business valuations for their business at peak performance, rather than at normalized performance.

"Unfortunately, buyers have a hard time not including a bad year in a business valuation model and growth forecast. One of the lessons many of us learned over the last few years is that in business planning and forecasting, everything doesn't just go up. …