M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

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.

Introduction

2min

Trends and Challenges in Valuations

6min

Uniqueness of the Pandemic-Induced Downturn and Permanent Social Changes

3min

The Impact of Interest Rates and Uncertainty on the Middle Market

10min

Supply Chain Issues and Valuations

12min

Challenges and Importance of Valuation in the Post-Pandemic Era

3min

Returning to M&A Talk, financial expert Bill Wiersema shares his thoughts on the current economic situation and the impact of the pandemic on middle market valuations. Will the pandemic continue to impact valuations? Bill’s answer is, “It depends.” He shares his insights into the impact of higher interest rates, inflated unit margins, the consequences of supply chain difficulties, gauging a company’s performance in unusual times, and trends and issues that will continue to influence valuations in the middle market.

View the complete show notes for this episode.

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Additional Resources:

Planning to sell your business? Schedule a free consultation today.
Download a free PDF copy of The Art of The Exit: The Complete Guide to Selling Your Business and Acquired: The Art of Selling a Business With $10 Million to $100 Million in Revenue.
Purchase your copy now of A Beginner’s Guide to Business Valuation | The Exit Strategy Handbook | Closing the Deal
Contact Morgan & Westfield to request a free copy of Jacob Orosz's latest book, Food and Beverage M&A: An Insider's Guide to Selling a Food or Beverage Business.
To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield.

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