Middle Market Optimism Could Keep the Deal Pipeline Flowing

Businesses of all sizes are struggling to maintain the status quo throughout multiple challenges like supply chain issues, labor shortages, and inflation. With the looming threat of a recession, middle-market companies are preparing to weather another storm. And yet, for many, the bad news might not be as bad as they thought. Incredibly, though many middle-market business professionals are pessimistic about the economy at large, they remain optimistic about their businesses.

Big-picture pessimism driven by uncertainty

The economy has been in flux in the past few years due to the fallout from the global COVID-19 pandemic, and 2022 is no different. Unpredictability continues to impact the market, making long-term predictions uncertain and creating challenges for business leaders in the middle market. 

In a swing towards the negative, a J.P. Morgan study found that only 19% of surveyed business leaders report feeling optimistic about the U.S. economy over the next year. This is not only down from 75% just one year ago but the lowest recorded percentage of optimism in 12 years. And globally, things aren’t much better: only 9% report feeling optimistic about the global economy. 

Recent speculation about another recession makes this data even gloomier, as middle-market business leaders are already struggling with finding labor, managing supply chain issues, and rising costs related to inflation. In fact, inflation is becoming one of the most significant problems for the middle market. According to a recent Chubb study, two in five middle-market companies report being affected by rising costs for fuel, raw materials, and wages. And 62% specifically note inflation as extremely challenging to manage.

Personal optimism is driven by gradual improvement

Despite pessimism about the economy at large, middle-market business leaders are finding better odds at home. The J.P. Morgan study found that 70% of middle market business leaders are optimistic about their own company’s performance, and 73% are looking for revenue increases in the next year. 

This data could point towards a tendency for business owners to feel more in control of their businesses. Their own business is an entity that they’re extremely familiar with, with more predictability and manageability than the economy at large.

Still, the data seems to support this optimism. The Chubb study found that 73% of surveyed business professionals reported improved performance compared to a year ago.

While many middle-market businesses have already experienced the full effects of the COVID-19 pandemic, there is also a chance that this optimism comes as a result of everything that is now behind us. Market volatility is a welcome contrast to staring down the possibility of going out of business. The challenges of 2020 also taught many business leaders the importance of remaining fluid, flexible, and ready to adapt to a changing market.

The perfect combination for making a deal

This combination of economic pessimism and personal optimism could provide the right climate for those looking to make a deal. Challenges like limited labor and supply issues could lead business owners to pursue strategic acquisitions as an avenue to help drive growth.

See what your possibilities are within the middle market with Symmetrical M&A Advisory. Please contact us for a confidential discussion of your specific situation. We have experience helping business owners across a variety of industries to sell their businesses, as well as relationships with buyers who are interested in new opportunities.

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