Macro Level Thoughts

April 04, 2025

by a searcher from The University of North Carolina at Chapel Hill - Kenan-Flagler Business School in Austin, TX, USA

I'm just thinking out loud here:

As searchers, a lot of us look at LMM businesses with MM or public customers. You can see the uncertainty in the markets and economy right now by looking at all the red on trading screens. Uncertainty usually means avoiding large investments, which could translate to a slow year for most sectors.

Do we (searchers) want to buy a highly-levered business right now knowing that they will probably have a slow first year....or do we want to buy a solid business AFTER a slow year (due to systematic risks) from an exhausted owner at much better multiples and deal terms? I understand that most traditional searchers and independent sponsors with mandates might not have the luxury of hitting the pause button for 6-9 months. Or maybe they can with the right conversations with their investors.

What are your thoughts? I really want to hear perspectives from searchers, sponsors, and investors on this.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I like many of the comments already posted. As I said to a client today, whether you buy a business today, tomorrow or five years from now, you never know what economic or global change will be coming around the corner. Whether it will be something like tariffs, a recession, supply chain issues, war, or a pandemic. If you buy the right business and are on top of managing that business, you should be able to adjust and survive. Some might say this is the best time to buy. Others might say it is the worst time. If you find the right deal and can get comfortable with it in the current market conditions, I don't think the current tariff concerns are a reason alone not to buy a business (unless that specific business has long term impacts from the tariffs). Also, even businesses impacted by tariffs, they are not the only ones. Much of their competition might be in the same boat.

Personally I think any manufacturing company that can replace certain types of overseas production because the cost structure is not too far off is likely a great buy right now.

Just my two cents from the peanut gallery. Good luck everyone.

Reply by a searcher
from The University of Texas at Austin in Austin, TX, USA

Great post — I completely agree with the logic behind waiting for a better entry point, especially with systematic risk being what it is right now. Buying after the storm passes from a fatigued owner at better multiples sounds ideal in theory. That said, I do think there's a risk in waiting too long and letting the game pass you by. A good analogy is Austin real estate. Plenty of people in 2000 thought it was overpriced and figured they'd wait for a correction... they’re still renting. The market never gave them the perfect re-entry point, and now prices have run away from them. The same can happen in SMB acquisition. While conditions today might not be perfect, momentum, learning, and building relationships can compound even in a slower year. Sitting out entirely could mean missing the right deal simply because you're waiting for macro clarity — which may never come. Curious to hear how others are thinking about this trade-off between timing and taking action.

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