{"id":35741,"date":"2019-08-22T14:56:50","date_gmt":"2019-08-22T21:56:50","guid":{"rendered":"https:\/\/www.enxmag.com\/twii\/?p=35741"},"modified":"2019-08-22T14:56:54","modified_gmt":"2019-08-22T21:56:54","slug":"crystal-ball-recession-or-no-ma-activity-has-healthy-short-term-outlook","status":"publish","type":"post","link":"https:\/\/www.enxmag.com\/twii\/feature-articles\/2019\/08\/crystal-ball-recession-or-no-ma-activity-has-healthy-short-term-outlook\/","title":{"rendered":"Crystal Ball: Recession or No, M&A Activity has Healthy Short-Term Outlook"},"content":{"rendered":"\n
\"\"
Chip Crunk, RJ Young<\/figcaption><\/figure><\/div>\n\n\n\n

In the last week or so, talks of a recession have become\nlouder, though not everyone agrees that the indicators are pointing toward the\nbig R. <\/p>\n\n\n\n

A story in the Wall Street Journal<\/em> earlier this week pointed out that stocks declined the previous week after the 10-year Treasury yield dropped below the two-year Treasury yield. Inversions of the yield curve have preceded all postwar recessions, the story noted, but not every instance in which this has happened has ushered in a recession. The WSJ<\/em> authors concluded that these fears are more hype than substance, given the economy\u2019s underlying strength.<\/p>\n\n\n\n

What the economy does provide is a reminder that numbers and\nconfidence are quite fluid, and sudden swings can have consequences in the\nmerger and acquisition theater. All things being equal, our panel of M&A\nparticipants see more continued, robust activity in the coming year. Beyond\nthat, the crystal ball becomes a little more clouded.<\/p>\n\n\n\n

Venture a Guess<\/strong><\/p>\n\n\n\n

Chip Crunk, president and CEO of RJ Young, is heartened by\nthe increase in interest of venture capital firms, as he believes it\nunderscores the viability of the office dealer industry. The question is, how\ndoes it play out over the long term?<\/p>\n\n\n\n

\u201cThe challenge is going to be what\u2019s going to happen in\nthree to five years, because they\u2019re going to want to be out in five years,\u201d\nCrunk said. \u201cThat\u2019s just what their model is. Who is going to be the next\nplayer to make that happen? But to me, it\u2019s nothing but a positive sign that\nthey see value in what we\u2019re doing.\u201d<\/p>\n\n\n\n

\"\"
Jeff Gau, Marco<\/figcaption><\/figure><\/div>\n\n\n\n

The industry might see a bit of slowing in the degree of\nactivity that\u2019s taken place, according to Jeff Gau, CEO of Marco. He noted the\nuptick of activity among newer players in the $25 million to $100 million\nspace, and he wouldn\u2019t be surprised to see more companies diversify into a B2B\nor commercial-type market. He also wouldn\u2019t be surprised to see a business like\nBest Buy enter the fray.<\/p>\n\n\n\n

\u201cMaybe the office supply channel makes sense to me,\u201d Gau\npondered. \u201cWe actually have a managed print arm that resells in that space. The\noffice supply channel is losing that toner to the equipment dealers who have\nthe service element, so I think we\u2019ll see more of that. That\u2019s a good acquisition\nfor an office supply or office product dealers. They\u2019ve gone through their own\nconsolidation in the last decade or so.<\/p>\n\n\n\n

\u201cWith private equity, we were in on that early on\u2014our\nprivate equity folks like the industry. We\u2019ll probably see some consolidation\nin that space as well because there are a number of equity players. I think\nthey\u2019ll potentially be in play, too, among the firms.\u201d<\/p>\n\n\n\n

\"\"
Dan Cooper, Novatech<\/figcaption><\/figure><\/div>\n\n\n\n

Dan Cooper, president and CEO of Novatech, feels the next 12\nto 18 months will represent an exciting time for industry M&A. He feels new\nand increased regional opportunities, along with aggressive private equity\ngrowth, will put added pressure on manufacturers to find distributors.<\/p>\n\n\n\n

\u201cThe leasing\ncompanies in the industry will also have to compete more for the business with\nthe larger players,\u201d Cooper noted. \u201cWe should also expect to see the\nconsolidation expand into the managed IT services area. These are exciting\ntimes, indeed.\u201d<\/p>\n\n\n\n

Stars Aligned<\/strong><\/p>\n\n\n\n

Handicapping the\nM&A market beyond the coming year is difficult considering the cyclical\nnature of business, notes Dan Ruhl, a principal with Oval Partners. To assume\nvariables will remain static is a tall order for areas such as the economy, the\npolitical environment, interest rates, leverage and buyer activity. As we\u2019re\nalready two-plus years into the buying mode, the odds of a change along any of\nthose parameters is strong.<\/p>\n\n\n\n

\"\"
Dan Ruhl, Oval Partners<\/figcaption><\/figure><\/div>\n\n\n\n

\u201cIf any of those variables change, there will still be a lot\nof fragmented dealers out there but the value of that dealership will be\nlower,\u201d Ruhl said. \u201cYou\u2019ll see dealer transactions because that dealer is\nthinking about a certain valuation today that won\u2019t be available down the road.\nIf today, all 10 out of 10 variables line up for a very advantageous market for\na dealer to move forward with a transaction, will 10 out of 10 be available 15\nor 18 months from now? Probably not 10 out of 10. That\u2019s why you\u2019re seeing so\nmany dealers considering alternatives and dealers moving forward with\ntransactions. They\u2019ve seen what the dealer universe looked like 10 years ago,\nfive years ago and now today. Chances are, everything isn\u2019t going to stay as\nrobust as it is right now.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

In the last week or so, talks of a recession have become louder, though not everyone agrees that the indicators are pointing toward the big R. A story in the Wall Street Journal earlier this week pointed out that stocks declined the previous week after the 10-year Treasury yield dropped below the two-year Treasury yield. Inversions of the yield curve have preceded all postwar recessions, the story noted, but not every instance in which this has happened has ushered in a recession. The WSJ authors concluded that these fears are more hype than substance, given the economy\u2019s underlying strength. What the economy does provide is a reminder that numbers and confidence are quite fluid, and sudden swings can have consequences in the merger and acquisition theater. All things being equal, our panel of M&A participants see more continued, robust activity in the coming year. Beyond that, the crystal ball becomes a little more clouded. Venture a Guess Chip Crunk, president and CEO of RJ Young, is heartened by the increase in interest of venture capital firms, as he believes it underscores the viability of the office dealer industry. The question is, how does it play out over the long term? \u201cThe challenge is going to be what\u2019s going to happen in three to five years, because they\u2019re going to want to be out in five years,\u201d Crunk said. \u201cThat\u2019s just what their model is. Who is going to be the next player to make that happen? But to me, it\u2019s nothing but a positive sign that they see value in what we\u2019re doing.\u201d The industry might see a bit of slowing in the degree of activity that\u2019s taken place, according to Jeff Gau, CEO of Marco. He noted the uptick of activity among newer players in the $25 million to $100 million space, and he wouldn\u2019t be surprised to see more companies diversify into a B2B or commercial-type market. He also wouldn\u2019t be surprised to see a business like Best Buy enter the fray. \u201cMaybe the office supply channel makes sense to me,\u201d Gau pondered. \u201cWe actually have a managed print arm that resells in that space. The office supply channel is losing that toner to the equipment dealers who have the service element, so I think we\u2019ll see more of that. That\u2019s a good acquisition for an office supply or office product dealers. They\u2019ve gone through their own consolidation in the last decade or so. \u201cWith private equity, we were in on that early on\u2014our private equity folks like the industry. We\u2019ll probably see some consolidation in that space as well because there are a number of equity players. I think they\u2019ll potentially be in play, too, among the firms.\u201d Dan Cooper, president and CEO of Novatech, feels the next 12 to 18 months will represent an exciting time for industry M&A. He feels new and increased regional opportunities, along with aggressive private equity growth, will put added pressure on manufacturers to find distributors. \u201cThe leasing companies in the industry will also have to compete more for the business with the larger players,\u201d Cooper noted. \u201cWe should also expect to see the consolidation expand into the managed IT services area. These are exciting times, indeed.\u201d Stars Aligned Handicapping the M&A market beyond the coming year is difficult considering the cyclical nature of business, notes Dan Ruhl, a principal with Oval Partners. To assume variables will remain static is a tall order for areas such as the economy, the political environment, interest rates, leverage and buyer activity. As we\u2019re already two-plus years into the buying mode, the odds of a change along any of those parameters is strong. \u201cIf any of those variables change, there will still be a lot of fragmented dealers out there but the value of that dealership will be lower,\u201d Ruhl said. \u201cYou\u2019ll see dealer transactions because that dealer is thinking about a certain valuation today that won\u2019t be available down the road. If today, all 10 out of 10 variables line up for a very advantageous market for a dealer to move forward with a transaction, will 10 out of 10 be available 15 or 18 months from now? Probably not 10 out of 10. That\u2019s why you\u2019re seeing so many dealers considering alternatives and dealers moving forward with transactions. They\u2019ve seen what the dealer universe looked like 10 years ago, five years ago and now today. Chances are, everything isn\u2019t going to stay as robust as it is right now.\u201d<\/p>\n","protected":false},"author":166,"featured_media":35388,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1650,82,87,1638],"tags":[3487,545,501],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/35741"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/166"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=35741"}],"version-history":[{"count":1,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/35741\/revisions"}],"predecessor-version":[{"id":35742,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/35741\/revisions\/35742"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media\/35388"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=35741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=35741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=35741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}