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2017 Mid-Year Check-In: A Good Time to be a Buyer and Seller

Posted by Lloyd Bell on Jul 18, 2017 2:42:09 PM

LloydBell-Graphic-Final.jpgLike many of you, I recently uttered the phrase “I can’t believe it’s July already.” Well, it is. So I thought I’d make a list of the things that I’ve learned over the first six months of 2017:

  • We recently completed our study of our clients’ financial performance for 2016. The total value of all goods and services of our clients, what I call the GMMP or Gross Meaden & Moore Product, fell 5% in 2016  after a drop of 0.3% in 2015. Healthcare companies fared the best while metals manufacturers suffered their second consecutive year of sales declines.

  • It is still a very good time to be a seller if your company is performing well and it is prepared for a transition. Purchase price multiples have remained at a high level due to the continued access to capital.

  • The fireworks store didn’t ask me to sign a waiver stating that I wouldn’t light anything in Ohio. Suckers.

  • I’m a bit concerned about capital investment. Capital expenditures in our client base dropped 20% in 2015 and that trend continued in 2016 with a 17% decrease. Depreciation expense now outpaces the replacement rate.  Not surprisingly, equipment manufacturers reported a 9% drop in revenues in 2016.

  • Despite what I said about it being a good time to be a seller, it’s also a good time to be a buyer. Organic growth has been lacking in many sectors, leaving acquisitions as a way to achieve meaningful growth. The demographics of aging business owners combined with a favorable lending environment leads to more opportunities. Of course, you may have to kiss a lot of frogs before finding your prince.

  • Watching golf is no substitute for practicing. I still stink.

I’ve not heard any overriding concern from clients about the look forward nor am I seeing a tightening of lending standards. Interest rates will likely rise 25 basis points by the end of this year and the Fed is targeting an additional 75 basis points in 2018.

I’m no Nostradamus, but my guess is that the second half of the year should chug along like the first, barring any external shocks.

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Topics: Corporate Finance

Lloyd Bell

Lloyd Bell

Lloyd W.W. Bell III is Director of the Cor­porate Finance Group at Meaden & Moore. He has over 20 years of experience in financial management.