With over 30 years of experience consulting with both up-and-coming and established financial firms, Paul Inouye understands fluctuations within the industry. In the past few years, as the world has been overcoming the challenges of the global pandemic, the realm of marketing and acquisitions has also undergone some changes. What should investors be considering for 2023? Paul explains four trends that will drive the industry this year.
1. Stabilization in the Market Due to Lower Inflation
Inflation seems to be losing steam after dipping to 6.5% at the fiscal close of 2022. This trend is possibly accelerating, and it is predicted that equity markets will bottom out somewhat during the first half of 2023.
Another area to keep an eye on is the volatility index of the stock market. Numbers in this area were high through 2022, and historically, a more stable year in the market follows. As M&A activity smooths out back to pre-pandemic levels, dealmakers are likely to have greater confidence when making financial moves in 2023.
2. Improvements in Debt Accessibility
Financing was tough to attain in the last six months of 2022, as the rising cost of debt was a deterrent. High-yield bond markets and syndicated loan markets froze up, which in turn, made getting private equity deals done more challenging. In response, private credit and smaller deals were favored by sponsors. Should these conditions continue to stabilize, there should be improvements in access to financing that will boost interest in higher-quality deals in 2023.
3. Greater Stabilization in Interest Rates
Rate hikes were viewed as inevitable in 2022, but they have applied much more aggressively than many investors ever saw coming. At the close of last year, the Federal Open Market Committee projected that further hikes may be possible. However, it’s likely that only a few interest rates will increase, and how the Feds react to them is likely to dictate the direction of interest rates and M&A activity in 2023.
4. More Deals Will Be Driven By New Legislation
The Inflation Reduction Act being put into place is likely to boost the growth of interest in clean energy. Due to the massive level of incentives that are being offered, M&A deals are likely to be propelled into this area. For example, many oil and gas companies are seemingly capitalizing on this opportunity.
Another legislative incentive involves the CHIPS and Science Act of 2022. This bipartisan law offers federal aid to both large and small companies that construct microprocessor chips in an effort to reduce the nation’s reliance on overseas supply chains. This will also boost their ability to compete with China’s competitive trade practices while staying at the forefront of technology capabilities.
Veteran Advisory Services from Paul Inouye at Western Hills Partners
Paul has enjoyed completing over 150 financial transactions during his career working with companies including Morgan Stanley, Perella Weinberg, Lehman Brothers, and Union Square Advisors. He also offers premier consulting services for software and internet companies in need of technology-based banking advice. Read more about Paul Inouye and view his portfolio of achievements on his website.
