We are just a few days from the return of a large number of ships to the Port of Los Angeles/Long Beach.  More than 500 ships have been stuck of the coast of China waiting for ports there to reopen. Goods need to be dropped off and new good picked up.  The window to manage the backup leftover from last year’s supply chain issues has closed.  We are now starting the rollup into “high season” when Christmas retailers in the US start getting the toys and other items they’ve ordered.  As they say, now things get real.

The system will be strained this summer because of other factors.  Walmart had a huge fire at their distribution center in Indiana.  A poultry farm in Minnesota, which supplies over 3 million eggs to supermarkets, had a major fire.  The avian flu has also forced chicken farmers to cull their flocks. And for automakers, the semiconductor shortage forced large car makers, such as Toyota, to slash car production.  With the average car over 12 years old now, there is huge hidden demand.  Yet the combination of high prices and slower production has hampered sales.  At least Toyota didn’t get their data hacked like GM did, as we learned today from Upguard.

Consumer confidence continues to make new lows, even lower than the COVID lows of 2020.  They’re having to dip heavily into savings dues to food and energy (gasoline) price shocks.

To summarize, supply of goods is down but so is demand. We are closely examining the data from the Memorial Day weekend to get clues on how much to expect from consumer summer spending.  So far, what we’ve seen would indicate a weak summer for consumer spending.


The Business Perspective

Most of our clients are not consumer focused. Yet, savvy manufacturers are always looking for an edge in tastes (color, size, packaging etc.) that they can use to beat the competition.  That has not ended, and in fact has accelerated.

Businesses owners though still don’t generally appear to have made physical adjustments to output for the remainder of the year.  They have a tailwind of demand from US-based companies wanting to bring more of their production back to the US.  We think that will hold, as capacity rationalizations are likely this year.  We’ve spoken often about how producers will need to vertically-integrate more, which means keeping the post-merger productive operations and closing/laying off the less useful ones.  These are showing up in the unemployment data already; the lows in unemployment claims were in April, and claims have climbed since.


Focus On What Happens When Others Get “Crazy”

While it is difficult to generate enthusiasm for a merger or acquisition during these crazy times, that “crazy” is what has brought acquisition prices lower.   We have still not seen revenue numbers becoming ugly yet (except in retailers, and a bit in trucking).

Let us help you with discussions on potential acquisition candidates.  The recent uncertainty has brought owners offering prices more in line with buyers demands. With so many “boomer-owned” businesses looking for exits, it is a great time to at least shop.


So Many Business Buyers, So Many Sellers Today, with Steve Barnett

Steve joined us on May 17th and brought even more information on the industries and financials of businesses being bought and sold today.  Here’s the replay of “So Many Business Buyers, So Many Sellers Today” with Steve Barnett.  We commented in our prior Square Deal’s web series, that we also saw acquisition and merger activity is really high.  Steve affirmed our view.  Deal activity is high, yet buyers and sellers are afraid too.  Some transactions haven’t happened because those involved were too afraid (having never done a transaction themselves).


Climb the Wall of Fear

Education is the enemy of fear Let us know if we may educate you and your staff in a Zoom meeting, with suggestions on who to approach and how to finance it.  You can use our ideas to get conversations going.

Our pre-qualification process can help you know how much to bid and get you to where you need to be with the acquisitionmuch faster.



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Watch the replay of "The Psychology of Management During Economic Uncertainty - with Dan Stover" Click to Watch