Chet Walden M&A Moderator at World Congress Health Care Summit 2013

U.S. Chamber economic forecast: slowly improving with debt threat

U.S. Chamber economic forecast: slowly improving with debt threat 

By John D. Schulz, Contributing Editor 
January 11, 2013 

The nation faces a balancing act between the need to spend more on infrastructure while finally addressing the ballooning national debt, which the nation’s top business lobbyist calls the biggest single threat to the U.S. economic future. In his annual State of American Business address yesterday, U.S. Chamber of Commerce President and CEO Thomas J. Donohue urged Washington to finally tackle the enormous fiscal challenges and build a new prosperity that offers opportunity for all Americans. “The imperative of economic growth should not be an afterthought. It must be Job One,” Donohue said. “As a nation and a people, we must finally face up to the single biggest threat to our economic future—and that is our exploding national debt, driven by runaway deficit spending, changing demographics, and unsustainable entitlements. Congress and the administration must make this a priority, Donohue said, because economic growth will not be strong enough to solve all of our problems. “But without growth, we will not be able to solve any of them,” Donohue warned. Donohue also called for a slight increase in the federal tax on fuel (currently 18.4 cents on gasoline, 23.4 cents on diesel, unchanged since 1993). He said it is time to “quit fooling around” and sufficiently finance and Highway Trust Fund, which has been supplemented by revenue from the general treasury each year since 2008. “You don’t need a lot,” Donohue said during a press conference after his speech. “You do a little bit a year for a couple years and it’ll make a big difference.” Buoyed by recoveries in the all-importing housing and automotive sectors, the nation is in recovery and will not fall back into recession, Donohue predicted. The Chamber is forecasting growth of 1.5-to-1.75 percent for the first half of the year, gradually accelerating to 2.5 percent by the end of 2013. In his address, Donohue unveiled the Chamber’s 2013 American Jobs and Growth Agenda. It’s a five-point plan to help generate stronger economic growth by producing more American energy, expanding American trade, modernizing our regulatory system, reforming immigration and slowing growth of runaway spending through cuts in entitlement programs and an overhaul of the tax code.
“The over-riding objective of this ambitious plan is to generate stronger economic growth in order to create jobs, lift incomes, and expand opportunity for all Americans,” he said. “America needs big solutions so it’s time to put the smallness of politics aside.

We call upon all of America’s leaders in and out of government to put country first.” Donohue, a veteran Washington power broker, says he has “no illusions” that putting our country on a sound and responsible fiscal course will be easy.
“Our government is divided and conflicted because the American people are divided and conflicted,” he says. “But we cannot ignore this crisis any longer. Nor can our leaders.”
With a stopgap two-year highway bill in place through 2014 with federal spending of $55 billion annually for infrastructure, Donohue did not take a hiatus from publicly calling for greater spending on the nation’s highways and bridges.
“Anyone who knows me or the Chamber, knows how deeply committed we are to rebuilding America’s infrastructure,” said Donohue, a former president of the American Trucking Associations. “If we don’t expand our infrastructure and make it more efficient and seamless, we can’t grow our economy. Congress and the president took some positive steps last year and we must build on them in 2013.”
Behind the scenes, the Chamber still is leading the charge to improve the quality of America’s infrastructure—transportation, energy, or water networks—all of which directly impact the nation’s ability to compete in the global economy.
In fact, the Chamber is hosting its first “national transportation infrastructure summit” in Washington next month. Rep. Bill Shuster, R-Pa., the new chairman of the House Transportation and Infrastructure Committee, is one of the invited speakers.
The Chamber feels that by modernizing our national infrastructure, the U.S. can improve commercial efficiency, increase its competitiveness in the global economy, and create much-needed jobs in the near term. It recently reported that over two years, one dollar spent on infrastructure construction produces roughly twice as much ($1.92) in direct and indirect economic output.
Increasing public and private investment in roads, bridges and public transportation could save nearly two billion hours in travel time, and save every family over $1,000 per year in fuel and other savings. Successful construction of the 351 energy projects identified in the Project No Project inventory could produce a $1.1 trillion short-term boost to the economy and create 1.9 million jobs annually, according to the Chamber. Approximately 56 percent of all crude petroleum, 15 percent of all coal, and 24 percent of other fuel oils are transported over the nation’s inland waterways. The Chamber says that in 2010, more than 76 percent of America’s international exports reach global markets though marine ports. Donohue called the nation’s latest official unemployment figures (7.8 percent) “mediocre.” He noted that only 63 percent of the U.S. eligible workforce is even participating. Donohue said he doesn’t see much improvement in unemployment through the year. All told, 23 million Americans are unemployed, underemployed, or have stopped looking for work. A record 47 million people are poor enough to be on food stamps. “So while our economy may be growing, it is fragile growth and not nearly strong enough to create the jobs Americans need or to expand their incomes,” Donohue said. As important as economic growth is, Donohue concluded, “We can’t grow our way out of this problem and we certainly can’t tax our way out.”

Walden Jacksonville: The More Things Change…

Jim Snodgrass, Walden Jacksonville 

The More Things Change…

We all know the old French proverb, “the more things change, the more they stay the same.”  To say the least, we have navigated a period of unprecedented change over the past few months! 

During this time, one of the things that has changed is the perceived business climate for small business.  We are bombarded daily with media reports of the supposed retrenchment for small and medium size businesses resulting from uncertainty over the effect of tax increases, healthcare cost increases, regulatory changes, and numerous other unknowns.  One writer called it “a trifecta of uncertainty.”  To be honest, it reminds me of the inscription on ancient maps in the margins where no one knew what lay beyond: “there be dragons.”

But now for the good news!  During this same period, some things haven’t changed!  There is still lots of activity in the Mergers & Acquisitions field.  Indeed, industry experts note that Merger & Acquisition activity increased every quarter during 2012 and “conditions are ripe for a strong M&A market in 2013.”

What are these conditions?  There is an ever-present need for firms to:

·        Fill out their geographic reach

·        Augment their service offerings

·        Secure new customers

·        Acquire new management talent

These needs remain constant ­in spite of the uncertainties being touted by the media!

If you’d like to explore what this stronger M&A market means for your firm, contact me at (904) 687-8648 or via email at js@Waldenbus.com.

Fiscal Cliff Sparks a Rush to Sell Small Businesses. Forbes 12/29/12

Elaine Pofeldt

ENCORES

Dec. 29 2012 — 8:20 am 

Fiscal Cliff Sparks a Rush to Sell Small Businesses

(Photo credit: Diana Parkhouse)

The past few years have been hard on entrepreneurs who were ready to sell their small businesses and move on with their lives. In the post-recession years, many owners struggled to achieve the level of financial performance that makes buyers willing to pay top dollar. As a result, some entrepreneurs have patiently waited for better selling conditions.

But now the tide may be turning for some, according to a recent survey of brokers and M&A advisors by the International Business Brokers Association (IBBA); M&A Source, an organization of intermediaries in middle market deals; and Pepperdine University’‘s Graziado School of Business and Management.

Some business owners, particularly those with businesses valued at $5 million or more,  hurried to sell in 2012 because they were worried about the fiscal cliff and potential tax increases–and found they were in a seller’s market, according to the third-quarter Market Pulse Survey Report.

Baby boomers own half of the businesses in the U.S. and many use the sale of a business to fund their retirement, according to the researchers. Owners of more valuable businesses realized that they would net more by making a deal in 2012.

“Businesses over $5 million in value had more money to lose and were more keenly aware of the large potential tax increases coming in 2013,” Chet Walden, president of M&A Source, said in a news release about the report.

Even owners of some smaller businesses found selling conditions improving. Brokers of smaller, Main Street businesses were less likely to say it was a buyer’s market than in the second quarter, the researchers found. As the size of deals rose, brokers and other advisors were increasingly likely to say it was a seller’s market. For deals of $5 million or above, advisors said it was a seller’s market by a 2:1 ratio, with 41% saying it was a seller’s market, vs. 20% saying it was a buyer’s market.

The IBBA speculated that economic uncertainty led to fewer sellers–resulting in a higher ratio of potential buyers for the businesses that were on the market.

Not all sellers were willing to jump into the market. Among respondents to the survey, 57% thought fewer sellers would put their businesses on the market until they had more clarity on the future. Only 26% thought more sellers would try to make a deal before new taxes take effect.

John Paglia, Ph.D, director of the Pepperdine Private Capital Markets Project and associate professor of finance at the Gradiazo School, said that among businesses waiting to sell, many may be looking to log another year of sales. “Most sellers had poor financial performance in 2009 and moving past that may make their businesses more sellable,” he said in the news release. “They’re hopeful that better numbers will net them a little better value–even with the tax implications in consideration.”

One interesting finding of the survey was that more buyers were coming to the table with cash. In the second quarter, cash at close made up 50% of  financing for deals across industries. But that percentage jumped to 75% by the third quarter.

Seventy–five percent of the buyers of Main Street businesses were individuals. And 60% were first-time buyers. Typically, they were people based in a 20-mile radius of a business, until the deal size got to $5 million and private equity firms swooped in.

I’m curious about why individuals are now willing to sink such substantial amounts of cash into a Main Street business right now. Is it because bank and seller financing is hard to come by–and the only way for them to buy a business is to pay cash? Are they looking at buying a business as an alternative to investment vehicles that are generating poor returns? Or is buying a business a way to ensure that they have work in a lackluster employment market that is taking years to improve? Understanding what’s motivating today’s buyers may be helpful to other owners who hope to cash out in 2013–but don’t have large enough businesses to attract private equity firms.

For full story:
http://blogs.forbes.com/elainepofeldt/