In December of 2008, after a tumultuous stock market, Corum did a special holiday webcast "Worried About Your Company's Future? You Should Be!"
600 worried CEOs, owners and investors tuned in to hear us tell them they needed to cut now, and deep, in order to survive. The Fed wasn't sounding alarms, but we were. For good reason. Our thrice weekly M&A conferences around the world and daily interactions with more technology buyers and sellers than anyone indicated that businesses were seriously slowing down, the derivatives fiasco undermining the financial system. Government indicators usually lag by 6-7 months. This was no exception. Those who had the foresight to reduce expenses to preserve capital survived, others didn't.
Recently the stock market has been having wild 200-300 point swings, with downward pressure. The press always has a field day with bad news - they love to scare us. Throw in ISIS, Ebola, Ferguson, etc. to spice it up, heighten the state of fear, and people start to get concerned.
Should they be?
Corum's view is not to worry. We've been saying for months that the stock market is a bit frothy and that we would get an adjustment. We're getting it. Try booking a flight, getting a hotel room. Business is good, thank you. Ditto money supply and inflation. Sure, Europe is still flat, moderating overall growth globally to about 3.3%. But, that's still healthy.
The U.S unemployment rate is heading under 6%, the dollar is strong, and we are generating more cash than ever. Companies have to spend it - that means increased M&A. Throw in many recent IPOs (Alibaba), aggressive new Private Equity firms and cheap debt to leverage demand for good companies.
OK, so how long will the current hot tech M&A activity continue? Good question. We have been on 4-5 year uptrend with valuations starting to peak (market drops adjust the comparable valuation data.) Though we're climbing the proverbial wall of worry, there are still more deals being done at good valuations than ever. Even better, they're mostly for cash. So, it's a great time for potential sellers to calibrate their value with the new generation of buyers.
But, like all cycles, it won't last forever. This current stock market volatility only reminds us of that.