August 11, 2011
Business: Timing is Everything!
Times change fast. Especially in business and economics. Perfect conditions for one set of decision making today, cracks in the foundation tomorrow. The balance between moving fast and assessing risk is not easily found. Strong nerves are required.
So what was different from today's issue of the WSJ and one from a couple of months ago: no acquisition talk. I pulled out the WSJ issue from May 10th, 2011. LinkedIn was promoting its upcoming IPO and four mergers and acquisitions were discussed:
1) Microsoft looking to acquire Skype for $8.5 billion.
2) Southwest Airlines closing on AirTran acquisition for $3.2 billion.
3) Hertz making a $2.1 billion offer for Dollar.
4) Nvidia Corporation acquiring Icera for $367 million.
A total of $14 billion changing hands [generally speaking]. What has changed? There was already notable discussion of the European debt crisis at the time. Concerns over Italy's economy were front and center. Since then the words debt and crisis have appeared [I venture a guess here] at least 10 times each in each issue on any given day. In variations of course, sometimes pertaining to Spain, to Italy, to Greece, the U.S., and now to France. [For latest news on France's credit rating: go here.] The stock market has been up and down since then. Ideal timing for IPOs seems to have passed. Acquisitions will be considered more carefully now. Timing is everything.
It would be interesting to take a closer look at which industries are expected to continue to grow and which ones will suffer most. And why? You could argue that consumer spending and spending choices have been more conservative since the recession of 2007. Yet smartphones for example have only grown in adoption despite the sometimes hefty price tag. So certain industries seem to be somewhat exempt from and immune to the overriding economic trends and are still able to post promising growth. Is that because of the evolution of consumer needs (no one can live without smartphones) and standards of living? How much has to do with branding i.e., Apple turning the iPhone into somewhat of a cult object? Trends change and whether you are able to predict how significant the impact on your respective business is and when the impact will occur is essential. It is impossible to always predict what is going to happen. It takes good instincts, good business sense, creativity, faith, guts, and $$$ to take advantage of emerging trends. Sad are the stories of those left behind. After reading an article on Eastman Kodak today, I realized that the company's stock is trading at $1.77 per share. WOW. Junk bonds are valued at $0.80 cents per $1.00.
The current economic conditions are rather unsettling. Personal consequences are frightening, but still hard to predict. [See and take the poll!!!] From a business perspective, it seems that branding remains key to maintaining some kind of profit margin in these down times along with relevant innovation in emerging technologies. Most of all for any kind of bold move, whether an investment or acquisition the morale of the story is: Timing is everything….and guts!