By George H. Reddin
As the push toward year-end begins and buyers and sellers work diligently to close deals by Dec. 31, I am reminded how due diligence has become a full-contact sport. Never has the due diligence process been so contentious. Buyers feel they are the only bidder and are paying too much. Sellers believe they are not receiving enough consideration, given their performance of a few years ago. Plain and simple, there is not enough “grease” in the system to facilitate a smooth due diligence.
There is a significant supply of sellers and a reasonable number of buyers; however, matching buyer and seller objectives is currently at an awkward point. The only thing going for many deals is the pressure coming from lenders who are encouraging sales and asset divestitures. As one can imagine, this external pressure from the banks adds to the contentious nature of the deal process.
The case for optimism is that, by the end of the first quarter in 2013, we will be past the November elections, past the “fiscal cliff” challenges, and, hopefully, have a few more months of encouraging economic news. The 2012 Dodge Construction Outlook was recently released, and its executive summary starts with the mention “there has not been enough traction to say that the renewed expansion has taken hold.” Additionally, the report says, “The main obstacle to stronger growth for the U.S. economy is the pervasive sense of uncertainty, which has dampened business investment and hiring.”
While the fourth quarter should be much of the same in the merger and acquisition world, there is reason for optimism for 2013.
