Page 58 - MetalForming July 2012
P. 58

If Selling Is in Your Future, Move Quickly
 keeping interest rates low until 2014.
Why a Catastrophic Event Is Likely
Here are reasons why the United States may experience a catastrophic economic and financial scenario by the end of the decade.
1) Europe’s economical and finan- cial mess is far from receding. While it appears the European Union is trying
to defer the problem, hoping it will go away, that is not likely to happen. The European banks also are in a much weakened condition. This will impact the world economy, as these banks have financial relationships with the world’s major financial institutions.
2) The United States faces several long-term challenges, including a huge budget deficit, the economic stimulus still required to get the economy back
in a self-sustaining mode, and the grid- lock between the warring political par- ties. This creates a nearly unsolvable problem, but we must continue work- ing to bring the deficit under control during the next three years, without doing anything that would push the economy back into a recession.
3) The emerging markets have driv- en the world’s economy for more than a decade. However, current problems and others on the horizon will dimin- ish the positive impact of the emerging markets on the global economy. Growth in China has slowed. And, its four major banks—all state-owned and supported by the national government —have been propping-up many failing state-owned Chinese companies. Cor- respondingly the Chinese financial sys- tem is not as healthy as it appears. This will substantially impact all countries, but particularly the resource-exporting countries such as Brazil, which is China’s major trading partner. Further, India faces its highest unemployment rate since 1983, its lowest growth rate in two years, and an ineffective and cor- rupt government. Overall, the emerging markets are not going to be the world’s growth engine, which could have a major impact on the economies of the developed world.
4) There are numerous geopolitical hot spots, namely the Middle East, including Iran with its threat of nuclear weapons. This is exacerbated by the potential of an armed conflict between Israel and Iran. There also is the nuclear threat in North Korea.
Planning and Timing a Sale During this Risky Period
Company owners contemplating selling within the next 10 years have an opportunity during the next 24 to 36 months to realize a premium transac- tion price. Miss this window and own- ers risk that their company’s value may be significantly reduced due to events beyond their control. Companies con- templating a sale should retain an investment-banking firm that can properly position the company and wisely guide and time its sale. MF
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