Acquisition Advisors | The Economy’s Down; M&A Activity Up?
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09 Jan The Economy’s Down; M&A Activity Up?

A common comment I get from people these days is, “your business must be good right now … with the economy being so bad.”  A little probing on my part usually procures the following logic:  There must be some business owners that are having trouble and want or need to ‘get out’.

Well, while I understand the logic … my experience being in the business runs contrary.

What I have found is that business owners are, in most cases, logical.  They want to make as much money as they can.  They want to buy low and sell high, right?  So would you.  So when the economy is bad and everyone is pessimistic and maybe their business is struggling, they know it’s not the time to sell.  It’s time to buy, if anything.  But there aren’t many sellers during down cycles.  The business owners will hang on and wait until times are good again. Wait until their business has at least a couple years of good performance to show.  Performance they can be proud of and that would support a sale for maximum value.

Make sense?  Sure, there will be some business owners that are forced to sell … but are these the desirable ones?  No, they will tend to be the weakest and … maybe the ones that just need to go out of business.  In tough times, the weak die.

Hey, the bottom 5% or 10% won’t have much value any way.  Maybe their highest value is in liquidation.

3 Comments
  • Molly Erker
    Posted at 18:15h, 09 January Reply

    Certainly is the position our company is in right now. We’d hate to have to sell on this market. Just hoping we don’t end up in that bottom 5-10% you mentioned…

  • Brett Benton
    Posted at 14:52h, 10 January Reply

    Companies with resources use economies like this one to position themselves for better times. We look for complimentary companies that may be in distress that we can buy and “tuck under” our business. If through acquistion, syneries can be created, then the factors driving poor performance (such as overhead and sales expenses) can be reduced or eliminated. This is a buyers market!

  • Mark Troxell
    Posted at 15:48h, 11 January Reply

    One of the best blogs I have ever read. David is ahead of his time.

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