Good points, and certainly an encouraging comment on the state of the economic cycle at the moment.
One interesting element we’re seeing is the number of companies that have contemplated an ‘inorganic’ (M&A) step change for several years, waiting to see how far the bull market (including smaller, private deals) would go. Having waited a bit too long, many are now working to prepare for when prevailing conditions are stable enough to move.
We’re focusing now on exactly those transactions among smaller players which get them ‘to the next level’ without requiring a lot of cash, and there is considerabe opportunity there. Many principals of firms in the $1 million to $5 million revenue range are not aware of their options, and it’s really gratifying to work with them, and demonstrate a viable new solution to get over the hurdles many have been stuck at for years.
I agree with you both that, particularly given the way the current economics are impacting businesses, distressed assets are a poor way to target ‘cheap rewards,’ as the current sources of distress in the second tier are unusual, and suggest that those businesses were in trouble before the current wave broke over them.
As an aside, for those looking at prying open the bank vault, the guys at www.BusinessPlans.com.au specialise in building the documentation to support that exercise – as well as providing some valuable feedback on your business. And you can tell Theo I sent you…