M&A Talk: #1 Podcast on Selling a Business
For Professionals: What Does the Future Look Like for Middle Market Valuations?
Nov 3, 2023
Financial expert Bill Wiersema discusses the impact of the pandemic on middle market valuations and shares insights into higher interest rates, supply chain difficulties, and gauging company performance in unusual times. The podcast explores trends and challenges in valuations, uniqueness of the pandemic-induced downturn, the impact of interest rates and uncertainty, supply chain issues, and the challenges of valuation in the post-pandemic era.
34:05
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Quick takeaways
- Valuations in the middle market need careful analysis to separate temporary distortions from normalized figures, considering factors like pricing, unit margins, and historical performance.
- Buyers rely on valuations to assess risk and reward, aiming for a defensible and scientifically-based analysis that considers the impact of external factors like the pandemic and supply chain issues.
Deep dives
Impact of the Pandemic on M&A Valuations
The pandemic has greatly affected companies' performance, with record highs and lows within a short span. Revenue and margin windfalls have been observed due to fluctuating factors such as commodity prices and supply chain disruptions. However, sustaining these abnormal levels of performance is unlikely, and buyers and banks need to be cautious about future projections and avoid overpromising. Valuations now require a careful analysis to separate temporary distortions from normalized figures, considering factors like pricing, unit margins, and historical performance.
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