Novo Advisors Participates in Association for Corporate Growth Panel Discussion

Chicago (May 9, 2023) What’s the state of the M&A market given current economic pressures? Sandeep Gupta, Managing Partner of Novo Advisors, LLC spoke during a panel discussion on April 26, “M&A in an Uncertain Market,” hosted by the Chicago chapter of the Association for Corporate Growth at The Metropolitan Club.

“Given the prevalence of excess inventories, organizations must look at their assets for possible liquidity strategies and find ways to create additional cash flow,” said Gupta. “Liquidity strategies will drive M&A transactions” while “the cost of capital is going up, and that in turn causes valuations to go down,” he added.

Gupta was joined by middle-market professionals Penny Fine, Managing Director, CIT Northbridge; Brent Willson, Principal, Center Rock Capital Partners; and Michael Fixler, Senior Managing Director, B. Riley Securities, who also moderated.

As a skilled financial advisory group guiding distressed companies to resolution and stability, Novo Advisors frequently helps clients design M&A strategies and works closely with investment bankers and capital providers.

The group discussed changes in M&A volume since the pandemic, the state of various industries, as well as investment opportunities, seller expectations and thoughts on the balance of this year and beyond.

Industry Activity and the Importance of Liquidity

Change has been a given since the pandemic. In the last six to nine months, the panelists agreed that M&A volume has slowed — with various industries still experiencing Covid disruption, namely continued supply chain challenges topped by inflation and Russia’s war with Ukraine.

Management must be very decisive. They must act quickly to liquidate assets or do anything they can to thoughtfully close the spigot on cash outflows.

Sandeep Gupta

Managing Partner, Novo Advisors

M&A activity is taking place in the automotive and aerospace industries, said Gupta. In other industries such as healthcare, organizations are contending with high labor costs; CPG companies are sitting on excess inventories; and firms selling commodity goods have likely overpaid for needed resources, he explained.  Panelists concluded that some industries like CPG and retail are likely to see long-term changes in consumer behavior.

Gupta’s advice to companies facing these strains? “Management must be very decisive. They must act quickly to liquidate assets or do anything they can to thoughtfully close the spigot on cash outflows.”

Business Challenges for Balance of 2023

Panelists agreed that given the higher cost of debt, along with higher wages and cost of goods sold, business owners are more likely to encounter problems growing or managing operations at some point, requiring expert analysis and advice.

Novo Advisors currently sees strong interest in its business plan evaluation services. Through this immersive analysis, company leaders are guided in understanding what’s working and what isn’t, and if any adjustment or “cures” are needed.

Right now, some businesses that may consider selling are waiting for a market correction, while others must work to stay liquid or improve leverage rates against EBITDA.

Gupta agreed with the panel’s assessment that some companies are over-levered against EBITDA, noting “it can take quite a bit of time for business owners to recognize potential problems.”

Although no one can accurately predict the future, Gupta believes interest rates will remain high, and that is even more reason for companies and boards to remain diligent.

“Leadership must be proactive to manage through these difficulties,” said Gupta.  Having an external expert like Novo Advisors analyze — and potentially challenge — the facts can bring a fresh perspective on how a business is performing, its operational efficiencies, financial stability, and a host of other factors, leading to new solutions that can effectively carry the company through a tough economic environment.

Gupta cautioned business leaders to address these factors sooner versus later, as “waiting will only make the challenges far worse.”

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For media inquiries and to discuss Novo Advisors’ M&A or other expert advisory services, contact Anupy Singla at anupy@novo-advisors.com or 312-961-2565.