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Merger & Acquisition Trends Matter

Friday, January 25, 2019

Poised to Take the Lead - 5 Trends to Keep an Eye On

Why Watching Mergers & Acquisitions Trends Matter To Your Business

When you read about the global economy, it’s sometimes hard to see where your business (and you) fit into the big picture. By taking notice of a few emerging trends, you can seize the opportunity to grow your own footprint in the marketplace. 

One area of interest to the signage industry is the growth of mergers and acquisitions.

According to Forbes: “Compared to year-to-date (YTD) activity during the third quarter of 2017, domestic M&A activity increased by more than 30 percent during the third quarter of 2018, for a total of $1.67 trillion YTD — the highest U.S. YTD value on record.” 

Before the ink dries on the acquisition agreements, these growing companies are looking to rebrand. Rebranding encompasses everything from updating their online presence to replacing the monument sign outside the front door of their offices. 

“When we see an opportunity in the marketplace, we want to share that with our business partners. And the current merger and acquisition environment offers our industry a wealth of opportunity,” says Michael McKeag, COO, of ImageFirst™. 

Here are 5 trends, reported by Forbes, to keep an eye on:

1. Liquidity is driving acquisition demand despite higher interest rates.

In the past economic cycle, many companies used excess capital to repurchase their own shares or pay down debt. Forbes reports that people have been more willing to be very aggressive because the need to deploy capital has overwhelmed a more conservative approach. Given the current low-growth environment a number of companies are looking externally to grow via acquisition. 

2. Demographics are favoring more M&A activity

Most private companies in the United States are owned and led by Baby Boomers. About one-third of Baby Boomers expect to transition the ownership of their businesses within the next five years, according to a survey of 500 business owners with annual revenue of $5 million to $250 million conducted by Wakefield Research for SunTrust. The majority (77 percent) plan to transition their businesses within the next 10 years.

“This trend has a lot of real-world implications,” says McKeag. “Maintaining a good relationship with your clients helps you stay in the loop when owners start thinking about retirement and transitioning their business. Knowing the client’s history, you’ll be well-poised to help the new owners transition the brand.” 

3. M&A activity is expected to be healthy across all sectors.

Innovation-heavy sectors like technology and healthcare should continue to see heightened M&A activity, Forbes reports. “Because of the liquidity in the market, we’ve seen rebranding projects grow for corporate clients as well as many health care entities,” McKeag says. “Business leaders should watch for trending industry acquisitions in their area.”

4. Trade wars may eventually affect valuations. 

The long-term impact of trade wars and new tariffs is very specific to particular industries and companies. “Generally speaking, input costs have been relatively benign, although they are starting to increase,” said George Calfo, managing director at SunTrust Robinson Humphrey to Forbes. “I was with a company recently, though, which has been impacted by the tariffs and trade war rhetoric. They’ve seen margin degradation throughout the year because steel and other metals are a significant input cost to their manufacturing business. The owners have some concern about whether that margin degradation is going to have a material impact on how prospective buyers view their business.”
Read this post on how the tariffs affect our sign business. 

5. Tax reform has been a net positive for M&A activity so far.

Forbes reports that there’s certainly more volatility associated with large transactions, but the middle market should remain steady, with M&A activity remaining robust. “Tax reform has been favorable for M&A, boosting business confidence,” say McKeag. “Again, here we have an opportunity to connect with our clients and be ready with ideas when they are ready to grow their business.”

Keeping M&A trends in mind when planning your sales strategy is a smart step to growing your business. With so many new businesses entities developing, the opportunities for rebranding projects are always on the horizon. Signage professionals who see the possibilities and are ready with rebranding solutions for their clients are sure to win the day. 

Resources for this piece (and possible links for more information)

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