Rising interest rates, inflation, and the potential for an economic recession have caused many business leaders and consumers alike to hold on to dealmaking and spending. While business leaders are feeling the pressure of lower numbers and profitability, this could be an excellent opportunity for buyers and sellers to divest and give new energy to assets.
Although economists and strategists predict a mild recession for 2023, company balance sheets are stronger than in previous recessionary periods. Larger companies looking to bolster their core operations are expected to take advantage of lower valuations, whereas companies looking to regain profitability will likely sell assets, such as brands and property.
What is the common theme amongst buyers and sellers? Growth via M&A.
High-performing companies that regularly review which business units are strategic and which no longer fit their core business plan will have the opportunity to divest those assets and reinvest capital into transformative areas that will catapult business profitability.
On the flip side, strategic buyers looking to acquire discarded brands or early-stage companies will have the advantage of doing deals at a position of strength. These acquisitions could be transformative for C-suite leaders looking to generate shareholder value.
Major companies have already started to sell assets that no longer align with their long-term business objectives. Designer Brands’ acquisition of Keds and VF’s impending sale of iconic backpack brands, including JanSport, are just two examples of companies looking to make strategic moves in 2023.
Lower valuations, a decline in competition for deals, and new assets coming to market are all areas where healthy organizations can make transformational deals that will strengthen their business and shape it for ongoing success. On the other hand, organizations looking to free up capital and expand their offering into other areas will be able to utilize this time to sell any unwanted assets, enabling new growth areas.
M&A will play a pivotal role in the growth of organizations this year. Having the right team who can connect you with qualified buyers and navigate the complexities of a sale will play an instrumental role in sellers’ success. At Aberdeen, our team has the insight, expertise, and network to ensure a seller reaches their goals. Reach out to us for a free consultation.