As expected, the Federal Reserve raised rates 75 basis points in their continued effort to curb inflation. This latest increase brings the federal funds rate to a range of 3%-3.25%, the highest since early 2008. However, even at these rates, we continue to see high levels of M&A activity due to the large supply of capital and softening valuations. For businesses with strong balance sheets, there are plenty of opportunities to acquire.
Despite the FED rate increases, inflation remains elevated, and high energy costs persist as supply chain shortages continue. In the nearly 20 years since I began Oak Street Funding, the economy has been through several downturns, and through them I’ve learned the importance of sound planning and excellent management teams. Yes, these times may call for reevaluation of balance sheets and margins, but more importantly, tough times require nimble leadership and a willingness to adapt quickly.
Additionally, tighter financial circumstances highlight the importance of building and solidifying relationships. Building strong relationships is key to retaining employees and preventing clients from shopping for services or products from your competitors. When times are uncertain, relationships become even more valuable. Letting your clients and employees know you have their best interests in mind and understand their needs is key. In this environment it is important to focus on being nimble, responsive, and attentive.
Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.