This first slide explains in a nutshell the reason we had such a deep recession. Consumer confidence hit an all-time low, lower than it has been in the last 40 years. Once their confidence crashed, consumers quit spending money and the ripple effect of the recession started. This historically deep crash of confidence subsequently caused the deepest recession we have had in a long time.
Archive for February, 2011
According to PitchBook, Private Equity investors have invested in 77 companies in the distribution industry since the beginning of 2009. Approximately 43% of the investments were add-ons, indicating that investors are strengthening their original portfolio investments. Deal activity in the industry nearly doubled last year’s total, as distributors and wholesalers saw 47 deals, compared to 27 in 2009.
The economic recession presented numerous challenges, but it was also accompanied by an increased emphasis on efficiency which proved to be beneficial for distributors who received premiums from financial investors. Companies can be expected to continue looking for more cost effective ways to bring their products to the market, a shift that should continue to attract PE investment toward the distribution and wholesale sector.
According to a recent survey of Colorado businesses, expectations of revenue growth are high, while most expect employment and capital spending to lag behind.
The Business Outlook Survey was conducted by EKS&H, the largest Colorado-based accounting and business consulting firm. In a survey of their clients, EKS&H found that 84 percent expect revenue growth in 2011, signaling a higher level of optimism than the more cautious responses in 2010.
While 44 percent of respondents expect at least ten percent growth in revenue, only 18 percent foresee a similar jump in employment.
The survey also found that Inadequate Access to Capital dropped from the number three business concern, where it has been ranked for the last two years, to number six. While this points to a thawing of credit, it is still a higher concern than in 2008 when it was ranked number 11.
Downward Pressure on Pricing/Margins ranked as the number one business concern for a second consecutive year.
According to EKS&H analysis, this could be a prime time to consider buying a competitor. The combination of loosening credit markets and low rates this could be an ideal time to leverage acquisitions as a growth strategy.
The full article and analysis by EKS&H can be found here.
Following the worst recession in years, businesses in the manufacturing and wholesale distribution industries are reporting encouraging improvements in overall business conditions. According to a 2010 survey of 1,061 executives and managers of manufacturing and wholesale distribution enterprises conducted by RSM McGladrey, Inc. the industry is showing signs of life and appears to be on the rebound after a tough couple of years.
The hottest segments within the industry is Food and Beverage, in which nearly 50% of executives report “thriving and growing” this year. The two closely following segments are Medical (37%) and Chemical (33%). Unfortunately the outlook has not improved in all segments, as only 5% of Transportation executives report such prosperity.
The survey also indicated that the key driver to company health out of the downturn is size. For example 19% of companies with less than $25 million in revenue reports thriving and growing; whereas 32% of c0mpanies with $500+ million in revenue reports thriving and growing. Clearly, as company size increases, the outlook improves.
In 2010, only 10% of executives in the industry say their business is declining. This number is down drastically from the reported 40% in 2009. In general, 2010 was a year of recovery and growth for much of the industry.