QUARTERLY ECONOMIC AND M&A MARKET UPDATE

Making real-time decisions–while staying on track toward long-term goals–is much more difficult today compared to only a few years ago. There are no shortages of headwinds to deal with: inflation, interest rates, labor issues, supply chain disruptions, returning to the office, and on and on.

Sure, things are harder, but we entrepreneurs and leaders don’t have the luxury to stop and take a break to collect our thoughts and make peaceful decisions in a vacuum. We have to make crucial decisions–fast. This puts enormous pressure on our long-term plan and our real-time data. 

Our goal with this Quarterly Economic and M&A update is to provide you with relevant information (that is often much harder to find than it should be) so you can use it to enhance your decision-making and stay on track toward your future equity valuation targets.

ITR Economics // Brian Beaulieu 

In the first segment, our sponsor and CEO of ITR Economics, Brian Beaulieu, brings us his thoughts about the macroeconomic picture. Brian and I talk about the potential for a 2023/2024 recession (and what’s causing it), what’s going on in the labor market, interest rates, inflation, and which industries will have no problem getting through the next two years. 

My favorite part of the interview is toward the end when I asked Brian what data to pay attention to. He nails the answer. Since this interview, I picked up their book How to Make Your Move again and it is SUCH a breath of fresh air. It makes all the sense in the world why their forecasting accuracy is 94.9 percent. Since 1948, ITR Economics has provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the United States.

ButcherJoseph // Jeff Buettner 

In the second segment, I have Jeff Buettner on from ButcherJoseph, an M&A advisory firm, to discuss what is going on in the deal space. Jeff and his firm are in the weeds every day doing deals, whether that is selling a company to a third party, converting a business to an ESOP, raising debt, or helping facilitate an internal buyout. With this experience, Jeff gives us his update on how the current environment–and all the challenges with it–are impacting valuations, deal structures, deal volume, and perspective of different buyers. I loved my conversation with Jeff. He had practical and actionable insights that give us a view into the privately held deal market that is hard to come by. 

The National Center for the Middle Market // Doug Farren 

In our last segment, Doug Farren, director of The Center for the Middle Markets, comes on the show to share the results of their semi-annual Middle Market Indicator (MMI) where they surveyed 1,000 middle-market companies. I loved this addition because we got to hear how 1,000 people who are running companies feel about the future. 

Doug reviews the results of the MMI–specifically five main categories they question the participants on. He also talks about why the middle market is still doing really well as we approach a recession and what the middle market thinks about the next 12 months in key areas like labor, investment, and geopolitics. Doug explains why middle market companies can continue to thrive–and even typically outperform–even in the midst of a recession.

// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast

What You Will Learn

ITR Economics:

• What’s going on in the labor market, interest rates, and inflation.
• How ITR Economics’ forecasting compares to the Federal Reserve's forecast ;-)  
• Which industries will have no problem getting through the next two years. 
• Brian’s thoughts on the approaching 2023/2024 recession everyone is talking about.
• How the generational birth rate over time is affecting economies worldwide.
• Brian’s thoughts on the baby boomer transition with the upcoming economic trends.

ButcherJoseph:

• How inflation and interest rates are impacting the M&A market
• How deal structures and business valuations are being impacted by our environment
• The current state of activity in the M&A space
• How strategic buyers and private equity are approaching the new landscape
• Why buyers are more likely to use an earnout.
• What industries buyers are looking to invest in
• How supply chain issues are affecting the M&A market.
• How the labor shortages are affecting the M&A market.

The Center for the Middle Market

• The current state of the Middle Market Indicator (MMI) after surveying 1000 owners.
• The current state of the middle market in the five key areas.
• Manufacturing trends in the United States and how they impact inflation.
• What problems middle market companies should prepare for with the generational wealth transfer.

// USE YOUR FINANCIALS TO CLARIFY A PATH TOWARDS A MORE VALUABLE BUSINESS: Intentional Growth Financial Assessment

Interview Quotes:

13:35 - “50% of the time when the federal reserve talks, their lying. The other 50%, they don’t know if their lying or not.” - Brian Beaulieu

19:44  - “Every industrialized nation on this planet is confronted with this negative [population] demographic except for the United States because we’ve got these Millenials, which have essentially set this country up to be the innovative leader–the economic leader–for the next fifty years or more.” - Brian Beaulieu

23:08  - “The system is working. People are living better.” - Brian Beaulieu

23:56 - “If you get somebody afraid, they’ll give up some power of their own, and they’ll give some of that to you because they want you to fix it or to protect them. And that’s primarily a politician’s job.” - Brian Beaulieu

36:45 - “Stop reading headlines.” - Brian Beaulieu

42:54  - “Yeah, money’s no longer free. It was free for a long, long time but now it actually costs something.” - Jeff Buettner

44:48  - “We’re seeing less activity out of the private equity buyers.” - Jeff Buettner

53:32  - “The last 10 - 15 years there has been a proliferation of this non-banking market.” - Jeff Buettner

01:01:16 - “We’re seeing an increase in usage of earnouts in these deals and that’s one creative way of bridging value gaps.” -  Jeff Buettner

01:15:32 - “People are always bragging about what multiples of earning they sold their company for and that gross number and that’s great but… How much did you keep?” -  Jeff Buettner

01:22:00 - “Middle market continues to chug along and month over month growth.”  - Doug Farren

01:32:15 - “52% of companies said, in the last year, they’ve started bringing manufacturing back to the US internally. And another 42% said they’re bringing it back to domestic suppliers or contractors.” - Doug Farren

Links and Resources:

ITR economics

Sign up for the 2030 depression webinar with Brian and Alan Beaulieu

Butcher Joseph & Co.

National Center for the Middle Market

Intentional Growth™ Vision Board

Intentional Growth™ Online Training

Reach out to me if you have questions about the Intentional Growth™ Training or Fractional CFO services