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M&A Advisor Tip

Employee retention adds business value

“To win in the marketplace, you must first win in the workplace.” Those words of Doug Conant, former CEO of Campbell Soup Company, ring particularly true today.

The talent market was tight before the pandemic, but now we’re in a critical state. Finding employees is a challenge for everyone. And if you’re selling your business, it might be the buyer’s top concern.

Employee issues buyers care about right now: turnover, training, cross-coverage, leadership potential.

Talk to us about how key employees can impact market value. We can share what we’re seeing in your industry and help you evaluate the ROI of certain retention strategies – such as providing critical staff with minority equity shares, a bonus program, or stay options.

Market Pulse Survey - Q4 2021

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M&A Feature Article

With inflation comes rate hikes. Morgan Stanley predicts the Fed will raise interest rates six times in 2022. As Chiavarone pointed out, there have been 11 rate hike cycles since 1970 of three increases or more. Of those, nine were followed by a recession. (The other two were followed by a stock market crash and the Mexican peso crisis.) His prediction is that we could see a recession in the backend of 2024, or sooner if rate hikes accelerate.

Interestingly, Brian Beaulieu, the economist who spoke at our 2021 conference, predicted a recession in 2026. Beaulieu, who is CEO of ITR Economics, spoke about the risk of inflation as supply chains got shorter, and he warned that taxes would get particularly onerous around 2025.

It’s possible that current conditions have simply accelerated a slowdown that was already coming. Either way, we know what happens in a recession – people pull back on spending. Businesses tied to discretionary consumer purchases and those tied to business capital expenditures will feel the biggest pinch.

Meanwhile, inflation increases the cost of an acquisition, and that can discourage buyers. Inflation also shrinks the future value of business revenue – another factor buyers use when determining purchase offers.

As I write this, both the financial markets and the M&A market remained resilient. But geopolitical events move much faster than editorial calendars. Economic conditions can shift rapidly, and your business value can drop overnight through absolutely no fault of your own.

Last year, Beaulieu told business owners to sell in 2024 or 2025 “at the latest” to avoid a recession. This year, Chiavarone told attendees, “If you are a seller, sell.”

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