Smart Business Magazine, November 2019

8 Smart Business Cleveland November 2019 Find your opportunities History suggests highly strategic deal activity will continue in 2020 Globally CFOs are predicting a significant slowdown in corporate spending with a less than 1 percent increase in capital allocation expected over the next 12 months a figure that is the lowest since the third quarter of 2016 and the second lowest growth figure since December 2009 which was smack dab in the middle of our last notable recession So bearing that sobering news in mind and layering on the added nuance that 2020 will be a presidential election year what are likely scenarios for the M A landscape next year Taking past as prologue it might not be time to become overly bearish just yet at least when it comes to deal flow Looking at the past 30 years of M A data collected youll see that demand for deals remains intact even in the face of looming downturns rate uncertainty global macroeconomic murkiness or seismic changes at the federal levels Companies still need to win market share create synergies gain talent and drive growth and metrics from 2002 and 2008 representing the last two major pullbacks tell us that smart targeted and highly strategic deal activity will remain very much intact According to Deloitte strategic buyers have dominated the landscape in the cycle since 2009 to the tune of 85 percent of deal value during that time and similarly represent 87 percent of total value in the last 25 years Next year even with a baseline profile of VUCA a term coined by the U S War College to characterize environments rooted in volatility uncertainty complexity and ambiguity will remain fertile ground for putting cash and assets into play History also says that there is a likely slowdown in mega deals as large corporations tilt toward a more conservative stance until circumstances stabilize or turn upward that could be more than offset by an increase in smaller highly focused transactions executed by smartly run companies boasting strong balance sheets cash reserves and an eye for value that can emerge during distressed moments in time Its also possible if not likely that we see some normalization of valuations and multiples which have grown outsized to empirical realities while deep dive due diligence and stress test assumptions take on even greater importance and magnitude Ruthless objectivity when it comes to deal identification and evaluation coupled with a long term view and an understanding that regression to the mean is a historical and scientific constant will help determine winners and losers in the uncertain days ahead Across the economic landscape winter may indeed be coming and with it seismic change and a potentially painful pullback that could have negative global impact for some period of time But we should also take note that spring inevitably follows and brings optimism fresh opportunities and a new chance to win Winter is coming This statement that served as the story telling backbone of Game of Thrones speaks to an unknown ominous and destructive force bringing forth catastrophic impact But it could also be applied to the potential for a significant financial pullback or recession as we look ahead toward 2020 MAKE YOUR MESSAGE COUNT CHAS D WITHERS CHAS D WITHERS CEO Dix Eaton Inc Chas is a graduate of Kent State University Leadership Cleveland and the FBI Citizens Academy and has been on teams that received the Silver Anvil Award given by Public Relations Society of America three times in his career His specialty is consulting with a diverse array of organizations corporate civic academic philanthropic to solve problems create opportunities and ensure best outcomes 216 241 0405 cwithers@ dix eaton com www dix eaton com