The start of summer is still nearly a month away, but merger and acquisition activity has already reached a boiling point. And by all indications, the level of activity may actually be increasing in the weeks and months to come.
While on the subject, make sure you check out a story penned by industry M&A stalwart Jim Kahrs of Prosperity Plus Consulting that will appear in our June issue. The first of a two-part series, Kahrs examines some of the critical mistakes owners should try to avoid when preparing their companies for a sale. This is necessary reading for any owner that is entertaining the idea of leveraging the value from what is, for many, a lifetime investment. In another sense, it stands as a caveat:
Slow down, take a breath and relax.
This isn’t the first time an M&A frenzy has gripped the industry, but given the business conditions we currently find ourselves in, it stands as a cautionary tale against resisting the urge to pull the trigger too quickly. When reading the headlines other dealers are making on a weekly basis, or so it seems, a subtle pressure can sometimes build to leap headfirst into a bull market. This is particularly true when we read stories about deals that are born and struck within a six-month window. While these deals do happen, as Kahrs eloquently points out, it can take years of planning to get the optimal return on your investment.
I won’t steal Mr. Kahrs’ thunder; his sage advice is more valuable than most. But it’s interesting to note the conditions that have produced an environment conducive to M&A. Or is it in spite of conditions? You be the judge.
- Inflation is reaching a 40-year high. Consumer prices climbed 8.3 percent in April compared to the previous year, according to the New York Times.
- Interest rates continue to climb as the Federal Reserve seeks to arrest inflation.
- A number of experts convened for this week’s World Economic Forum annual meeting in Davos, Switzerland, conceded that there is cause for concern regarding a global recession. Spiraling gas and food costs, not to mention availability, have done little to allay fears. Some have predicted a “mild” recession, though under current circumstances, that seems of little comfort.
- The three-month military conflict undertaken by Russia, the resulting aid offered to Ukraine by NATO countries, including the U.S., with sanctions removing the former Soviet Union as a source of energy and other supplies.
- Global supply chain issues (see above).
Everything is cyclical, including and especially the economy. Wars end, prices subside and the machine of commerce invariably clicks on all cylinders. Politicians and pundits come and go, but a true democracy will only stumble through the darkness for so long before finding a sliver of daylight.
An old professor of mine—a cranky, always-agitated fellow—liked to note that “fear is a great motivating factor,” and while it was hardly an original thought, it bears repeating here. Don’t let that fear rule your long-term decision making. Now, more than ever, a deliberate and methodical approach will win the day, and yield the greatest return on your most valued investment.
