KUHN CAPITAL Sunday, February 25, 2018
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Life under Damocles' Sword


While the latest stats on mid-market M&A show remarkable stability, one can't help but wonder....

ThomsonReuters reports that the number of US information and communication industry deals closed through September 2008 -- 1,199 -- is actually slightly up over the 1,112 consummated last year same month. Dollar volume is predictably down with the abrupt exit of highly leveraged players: their type won't return until the next debt boom and bust cycle gears up, probably many years away.

But we expect quantitative confirmation of a decline in deal headcount shortly. It will be most evident among public company buyers whose market caps first evaporated and have been engaged in a wildly volatile ballet since. The combination of share price decline and continuing unpredictability badly reduces these buyers' ability to use equity in transactions and forces them to consider cash, a precious commodity they are loathe to spend in such uncertain times. We already have anecdotal evidence of how these circumstances have killed deals .

Next -- if a recession actually materializes -- we expect to see declines in private buyer activity as well. Few buyers want to buy nor sellers want to sell when either party's revenues are heading south.

Meanwhile and ironically, we've never been busier, keeping our heads down, under the sword of Damocles.

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