Overall M&A Market Commentary
Download Report PDF
The last quarter saw an increase in uncertainty resulting from the escalating trade war. New tariffs are being assessed or proposed on an increasing number of imported goods, which is further disrupting international supply chains and making it more difficult to adapt to the everchanging tariff cost structures. While the recently reported “phase one trade deal” with China may signal progress, there is still no indication that there will be full resolution to the trade disputes with China in the near-term. Furthermore, there has been an escalation in U.S. political uncertainty over the past three months. Our elected representatives in Washington, D.C. are locked in a political battle with little time to make progress on any substantive legislative agenda. In addition, the distractions of the upcoming 2020 presidential election will further reduce the possibility of any bipartisan cooperation on important legislation. Currently, the negative impacts of trade and political tensions on the economy are being offset by a strong labor market and sustained consumer spending. Consumer spending makes up nearly two-thirds of U.S. economy and as such, the continued strength in consumer spending trends provide a solid foundation to the U.S. economy, particularly heading into the holiday shopping season. Many economic prognosticators are trying to predict when the next recession will occur, but the continued strength of the consumer keeps pushing the recession timing further into the future.
While the U.S. economy is healthy, there is growing concern among business owners and CEOs. “The pessimism we are seeing is contagious, even though the actual economy is thriving. Expectations can be infected and, as a result, could turn sour,” said NFIB Chief Economist William Dunkelberg. “All the talk about an impending recession can create a false reality, but it doesn’t make it right. Main Street is continuing to produce and remains strong in spite of the headlines.”
For additional insight on middle market M&A, valuation multiples, strategic buyer / financial sponsor activity, and more please download the full copy of the Prairie Middle Market Perspective.