Are M&As Hitting the Brakes? Only the Ones that Can’t Find the Gas Pedal
Over the last several months, we’ve seen a number of articles in the general business press suggesting that last year’s boom in mergers and acquisitions may be running out of steam. While we don’t find much evidence of this occurring in the printing and packaging sectors, there’s nothing to argue with in the idea that an M&A boom, like any other sustained business upsurge, must level off eventually.
Behind some of the calls for caution is the simple fact that 2015 was such a banner year for M&A transactions. By some estimates, more than $4 trillion worth of deals were closed. A trend this dynamic, it’s argued, turns into the proverbial tough act to follow sooner or later.
Stock market volatility is said to be another deal dampener, and we certainly witnessed some notable stock price swings toward the end of last year and in the beginning of this one. Continued volatility, the pundits argue, makes business owners nervous and decreases their enthusiasm for buying and selling.
The movement of interest rates, always hard to predict, cuts both ways. When they rise, the cost of borrowing to finance deals goes up, and fewer deals get done. On the other hand, as some M&A watchers have pointed out, the anticipation of a rate increase can accelerate the pace of M&As by prompting buyers to lock in financing and close their deals before they become more expensive.
So, there are valid reasons to think of a decline in M&A activity as something that can happen and that in the long or the short run, will happen. But, as M&A counselors to owners of printing and packaging companies, we at New Direction Partners prefer to focus on opportunities in the market in the excellent state of health it continues to enjoy.
The fact is that printing and packaging haven’t experienced the pullback that has slowed down deal making in other industries. Proposals on behalf of our selling clients attract multiple offers — a sure sign that buyers are still out there and that they’re highly motivated. We’ve written before about the deals being pursued by private equity financiers looking at printing and packaging in a new light. Capital remains available. It’s a reassuring picture.
Can it change? At some point, it will have to. This is why New Direction Partners urges its clients and all other owners to get on the train before it leaves the station — our way of saying that if you know the time has come to sell your company or acquire another one, don’t put off acting on your wise decision. No matter what the M&A market as a whole may be doing, hesitation is the only thing that can slow down your personal pace as a deal maker. With market conditions as favorable as they still are, why let it?
Frank D. Steenburgh, partner at New Direction Partners, brings over 45 years of industry experience, including the past 30 years in digital and is internationally recognized as an expert in digital printing and publishing. His experience includes corporate officer at Xerox and president of Indigo’s Americas operations. Frank’s value includes a wealth of global industry contacts, a proven track record in development and implementation of business strategies that drive revenue/profit growth and a deep understanding of horizontal and vertical markets. Contact him at (610) 230-0635, ext. 709.