By Paul B. Finch, MBA & Susan W. Finch, MS, MBA | 7/11/2023
As the US Domestic Economy continues to struggle, M&A transactions have also struggled through the first half of 2023. Data provider Refinitiv is reporting that globally, announced M&A transactions are down $1.3 trillion, or 37% from the same period a year earlier.
The likely culprits: (i) relatively high inflation led by a stubbornly strong labor market; and (ii) uncertain economic growth with Q1 2023 Real GDP growing at an annual rate of 2.0% (3rd Estimate) down from Q4 2022 Real GDP where the annual rate was 2.6% (3rd Estimate).
For many companies, the uncertain macroeconomic environment creates the perception of opportunities to strike good deals with target acquisitions. However, many acquisition targets are relucent to lower their valuations and sell at what many consider to be the bottom of the market.
To this point, many see a rebound in M&A transaction activity in the latter (Q4) second half of this year as interest rates possibly begin to ease and economic growth picks up. Prospects for short-term improvements in macroeconomic conditions are causing many sellers to wait out the storm.
That said, if macroeconomic conditions stall out in the second half of 2023, or become worse, many of these target acquisitions may be forced to lower valuations in order to make otherwise necessary deals.
Benchmark Solutions, Inc. is a boutique business advisory that provides high quality Financial Planning and Analysis, Business Valuation, and Merger and Acquisition Advisory services to some of the most innovative, creative, existing and emerging companies in the agriculture, beverage, healthcare, and hospitality industries.
Paul B. Finch, MBA, is co-founder and Executive Director for Benchmark Solutions, Inc. and is an accomplished Strategic Financial Advisor. Paul is a subject matter expert in the areas of Financial Planning and Analysis, Decision Support, Business Valuation as well as M&A Advisory where he applies rigorous corporate finance and management accounting processes/methods as a regular part of his practice. You can contact Paul at paul.finch@benchmarksolutions.us.com
Susan Finch, MS, MBA, is co-founder and Executive Director for Benchmark Solutions, Inc. and is an Economist. Susan specializes in economic modeling, specifically assessments of current and forecast macroeconomic activity as well as measures of industry/company specific product demand and supply elasticities as a means of forecasting sales, production and optimal product pricing. You can contact Susan at susan.finch@benchmarksolutions.us.com
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