60 Seconds with Swett: More Distress is Coming
It was great to see so many people at NIC, and we were happy to hear of deals still getting done and of some healthy transaction pipelines as well. As we have been saying, M&A activity will slow as a result of the rate increases and other economic factors, but many deals will still be made. That is because there should be plenty of willing sellers in the next few quarters (or longer). As soon as many of these owner/operators felt they were somewhat in the clear from the pandemic and even from staffing agency use, inflation hits and their margin recovery looked less likely. And after more than two years of heavy stress, plenty will say “enough is enough” and decide to sell. What is... Read More »60 Seconds With Swett: A Bad Inflation Report and Its Effects on M&A
The Labor Department’s latest inflation report was certainly not the news that everyone was hoping for, and that many were expecting. According to the report, the core consumer price index, which excludes energy and food, rose 6.3% in August from a year earlier, up from 5.9% in both June and July. That was the real shock of the report, and the Dow plummeted by more than 1,100 points at one point on Tuesday. Crucially, this is the last report released before the Fed meets on September 20 and 21, which only increases the chances of another 75-basis point increase to the federal funds rate. M&A has already been affected by the rise of interest rates this year, so another jump (along with... Read More »60 Seconds With Swett: Judging the Mood of Next Week’s NIC Conference
Next week is NIC’s Fall Conference in Washington, D.C., and we are curious to see just how inflation, rising interest rates and general economic uncertainty will affect the mood of the many dealmakers in attendance. We are on track to break a record for total transactions announced in a year, and only an especially slow fourth quarter would prevent that from happening. Given how much capital is out there for higher yielding assets (compared to multifamily that is), and the fact that rates are still historically low for now, we think we’ll break that record. There will just be a little more conservatism in most buyer’s bids and from their lending partners, which is not a bad thing. The... Read More »60 Seconds With Steve Monroe: In Memoriam: Bill Sheriff
We learned two days ago that our friend Bill Sheriff passed away over the weekend. We lost a true gentleman and a true leader in the seniors housing industry. Not many people knew Bill well, as he was a quiet, but thoughtful, man. Known to be a man of few words, I had the honor of sitting down with him, one-on-one, for a four-hour interview for ASHA’s Entrepreneurial Spirit of Seniors Housing series. And yes, it did last four hours, and yes, he did most of the talking. I had known Bill for a few decades, but mostly short conversations at conferences or on the phone. But when you spend four hours with someone, starting with when they were born all the way to the present day, with many... Read More »60 Seconds With Swett: Interest Rate Concerns Cooling M&A Market
In the last couple of months, we have heard from a number of people in the dealmaking business that rising interest rates have caused their potential buyers to hit pause, and a couple of major investors even said that pencils were down for the time being. We can’t say we’re surprised, given where wages have gone and what other issues inflation has caused. And if future earnings are affected by permanently higher labor costs alone, then the higher debt payments caused by higher rates really won’t cut it for those buyers. We have also heard that bid-ask spreads were widening, which will affect transaction volume. The terms “bid-ask spread” and “pencils down” conjure up memories of the worst... Read More »Schedule a demo
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