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Preparing for 2021: An Acquisition Edge

October 30, 2020

Looking into making an acquisition as you prepare for business cycle rise in 2021? Look before you leap by forecasting company data - catch our newest TrendsTalk episode with ITR Senior Business Advisor Alex Chausovsky to learn more.

 

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Transcript by Rev


Hello. My name is Alex Chausovsky. I'm a senior business advisor here at ITR economics, and welcome to another edition of TrendsTalk with ITR. Today, I wanted to talk to you about a recent conversation that I had with a client. We were discussing our expectations for business cycle rise in 2021 and I was giving the client some advice about what they should be doing in order to prepare for that rising trend, from a business cycle perspective. The kind of investments they should be making, the kind of capacity plans they should be putting in place, and really the things that are going to affect their operational decisions as they go through a low point in their business cycle and prepare for that rise, not only in the macro economy, but in their own data. So it was a very fascinating conversation. It's really the core of what we do here at ITR Economics, is give people actionable and practical advice based on what we see going on in the economy.

So, as we were looking out towards 2021, I asked him about the initiatives that they were implementing in order to prepare their business for growth. And one of the things that they responded with was they're looking at a potential acquisition. And it really got me to thinking about how we can leverage our forecasting methodology to help companies in that space. So whether you are a existing business leader and you're trying to contribute to the future growth of your business by maybe partnering with somebody or bringing in an acquisition, or perhaps you're in the private equity world and you're looking to invest in a company.

What I shared with the client was the fact that we're actually able to take third party data, a different company, potentially acquisition target, and forecast that market, that industry, and that specific company revenues out three years into the future to help them get a good sense of what is a fair valuation for that business, what kind of price they should be offering to pay for that particular company, and most importantly, when the timing is going to be right.

You see, the business cycle and tracking rates of change is all about timing. So as we approach this low point in the economy, it's very prudent to remember that not all companies and not all industries are correlating to the economy on a coincident basis. Some sectors meet economic performance, others lag behind the economy. For a perfect example of this, you can look at housing market. Single family housing starts typically lead the U.S. Industrial Production Index by about 12 months, whereas, non-residential construction actually lags U.S. industrial production by 12 months.

So anytime you're determining whether to invest in something, and in particular, when it comes to acquisitions, you have to understand what is the right time to pull the trigger and what the right valuation of that particular company is. So I wanted to make sure that you realize that not only are we able to forecast your business and give you a good idea of what to expect from your top line revenue, not only today, but also tomorrow and as far as three years into the future, we can actually help you get a good price valuation and the right timing mechanism for potential acquisition that you might be considering.

So if you are in the marketplace to buy a company or to acquire or merge with somebody, certainly, think of us and think about bringing our forecasting methodology to bear to make the right decision for that investment at the right time. I hope you found that helpful. I certainly welcome you to join us on the next edition of ITR Economics TrendsTalk and I thank you for your time. Have a great day. Take care.

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