The impacts of inflation

In a context of inflation and economic uncertainty, many entrepreneurs are asking themselves the questions: To sell? To acquire?

The valuation of companies is impacted by the weakening of the economy, the inflation and the rising interest rates. To counter inflation, central banks are raising interest rates and as a result, we are seeing erosion of company values in certain segments.

Cheap money no longer has the same definition! Businesses seeking financing must deal with rising interest rates and more demanding investors.

Inflation can be largely attributed to the following factors:

• supply chain issues;
• reduction in the available workforce;
• climate change
• socio-economic and political environment

Inflation can weaken profit margins for businesses, as it increases the cost of inputs. In the construction sector, for example, contractors have sold houses at a fixed price long before the purchase of materials and they are obliged to fulfill their contracts, even if their projects are no longer profitable.

In order to guard against the consequences of inflation, it is necessary to better control costs, or alternatively to have selling prices adjusted more frequently to protect the profit margins of the company.

This context presents interesting opportunities for savvy entrepreneurs:

• acquire to consolidate your position and take advantage of possible synergies
• merge with a competitor or a complementary company to take advantage of more resources
• sell the business while the track record is still favourable and before incurring losses

Contact us?to guide you in the process of finding a strategic buyer and to accompany you during the negotiations by maximizing the value of your company with the best terms and conditions.

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