Will the cost-of-living crisis and recession affect my business sale and exit strategy?

Andy Denny

In a recession, M&A activity in the lower mid-market is typically resilient, especially if your business continues to perform well within a niche market.

Pricing may be affected by confidence, but strategic buyers (who may have significant reserves and are therefore not reliant on third-party funding) will likely be more concerned about the opportunity cost to them. A buyer might ask themselves: “How would not buying this business impact our longer-term strategy and are we prepared to take that risk?”

Buyers may be more risk averse, and even more vigilant during a Due Diligence exercise

You should expect some complications and challenges, however. In a more uncertain macro-economic environment, you could reasonably expect to encounter buyers who are more risk averse, who will be even more vigilant during a Due Diligence (DD) exercise to ensure they minimise risk and protect their interests and those of their stakeholders.

Inflation is another important factor, but your ability to respond and interact with your customers to mitigate the impact of these price increases will have a bearing on your ability to realise a sale for maximum value. If you are successfully passing on increases in input costs and maintaining sales growth and margin, this should provide buyers with considerable comfort.

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