"As the year progressed and as inflation started to hit, my firm began to see a slowdown in interest on the part of what we call strategic buyers—that is manufacturing companies or other companies directly engaged in the same business," said Bill Ridenour, owner of Polymer Transaction Advisors Inc.
The economy, for most of 2022, wasn't optimal, particularly with the rapid inflation and high interest rates. And it doesn't look like those economic tensions will lessen in the months ahead.
"I think Congress has limited ability to influence the economy, particularly when each party controls one house," Ridenour said. "… So the likelihood is that this mess is going to continue for another two years."
Amid economic slowdowns, Ridenour said, strategic buyers do two things: They step back and keep an eye on the market for signs of stabilization, and/or they invest in operations by expanding, streamlining or upgrading current facilities.
And that's exactly what he saw happening in the latter part of 2022.
Companies began to think: "maybe it makes more sense to take a look at our current operations, streamline them, make them more efficient, fix them, shape up our marketing efforts and our internal development of business rather than go out and do an M&A, which is very high priced and higher risk than it normally would be," Ridenour said.
These are trends that Ridenour expects to continue into 2023. Interest rates, he said, are likely to remain high in the months ahead, material prices aren't likely to move downward and raw material supplies could be tight, making deals more risky and less appealing overall.