Inflation is the word of the day; as the world slowly emerges out of the worst pandemic since 1918, the global economy saw a one-year Boom period amid social unrest and medical demands that strained and tested the global healthcare infrastructure and markets. When the dust settled, Technology, Retail, Auto, and Real-estate came back into the market with a resounding boom, and demand was high! Armed with low-interest loans and bailout money, people went on a buying spree, and as the money kept being printed, productivity had reduced. Supply chains slowed down, and workers abandoned their former careers in favor of new opportunities causing a work shortage. In addition, an aging population of baby boomers and a cultural gap between Gen X, and Millennials keep the nation-changing directions instead of finding a heading that can compete with the largest market in the world Asia. Americans do not like to admit that we are divided, but we are in many different ways; class, age, gender, race, politics, and religion, as is illustrated in the riots of 2021 and the insurrection of 2022. What do social issues have to do with inflation? Everything. Strong confidence in a currency maintains its value. Lack of confidence or value does not meet the demand; the currency is devalued, interest rates for borrowers go up so lenders can adjust to the devaluation of the money. Wars and social conflicts are always in line with a rise in inflation. It has been 40 years since US inflation has been this high, roughly from the time of the Iran hostage Crisis of 1980 to 1981.
Just like 40 years ago, politicians became highly polarized. The left and right wings of government are not united on a direction for the country but their political agendas. Throw in the war in Eastern Europe, and you have a serious national and global anxiety and confidence issue. People spend more during periods of anxiety and faltering leadership, but most of this is debt-based, with limited cash or assets to service the debt, resulting in eventual defaulting on the debt. A return to this circular pattern is currently where the US is and is forecasted to maintain for another five years. As a result, investors are urged to shift to commodities and bond markets and go bullish on fractional shares. The M&A market shows stability and growth as upper-middle market and enterprise companies will seek to grow through acquisition. While debt funding (LBO) may be less attractive to acquire targets, many middle-market founders are nearing retirement. They will seek to exit faster in times of unrest and inflation, allowing for diversity in transaction deal structure. Target companies with a strong market position and growth potential will be highly sought after in the tech, healthcare, energy, and logistics industries.
Article by, Allen Amun CM&AA
Allen Amun is a founding member of Pivot Capital LLC and is a Managing Director with the Firm. As an experienced and successful entrepreneur, Mr. Amun brings 25 years of experience in every aspect of business. He is highly experienced in business development, operations, and program/project management. He has successfully led multiple enterprise buyside & sell side acquisition integrations. He is experienced and successful at working with Fortune 20 companies in Banking, Healthcare, Telecom and Energy sectors.