Recent discussions of the economy can lead to misunderstandings about acquisitions and the best timing to complete them. Ben Thompson discusses how the economy can factor into an acquisition deal and what to consider in an article that published in the May/June issue of Mergers & Acquisitions magazine.
Ben believes that distressed assets, private borrowing options, and purchasing structures that require less borrowing may drive M&A activity throughout this year. Despite the actual definitions of a recession, Ben states, “It’s possible that if enough pundits declare the worst is upon us or that the light at the end of the tunnel is rather the proverbial freight train headed right for us, we could drive ourselves into a self-fulfilling prophecy.”
Regardless of what economic factors may indicate, a business owner still needs to make decisions regarding the growth of the business. According to Ben, an acquisition strategy must include a 360-degree analysis of where the company stands, so it can navigate the exceptions of a turbulent economy.
Ben’s article also discusses how particular industries may be more impacted by potential recession effects, particularly tourism, hospitality and real estate industries. For businesses that are cash-rich and optimistic about growth, he laid out a few points to consider, including:
- Being willing to think outside of your typical preferred deal size.
- Not shying away from bankruptcy proceedings.
- Having competitive transaction costs.
- Being patient.
“There will most certainly be less activity, but what activity there is can be especially affordable and particularly valuable,” Ben said.