In case you have been asleep, I must inform you that the stock market has been unusually volatile as of late. Besides being influenced by the economy’s and financial markets’ typical ups and downs, the market has been reacting to major policy changes, especially those relating to tariffs, coming from Washington. Many frantic buyers and sellers worry that, in the words of Chicken Little, “The sky is falling!” This behavior only multiplies the disruptive effects already present in the economy in general and stock market in particular.
Our clients ask how they should alter their day-to-day management and M&A strategies in light of what is happening. While we understand their short-term apprehension, we remind them of the Greek Stoic philosopher Epictetus’ quote, “We cannot choose our external circumstances, but we can always choose how we respond to them.” Frantic businesspeople would do well to ponder this phrase as they contemplate today’s volatile public markets. Although their concern is certainly understandable, they should calm down and attempt to assess the situation and manage the variables within their control.
Will the stock market’s erratic swings influence the short-term M&A markets? Of course they will. Will the uncertainties make it more difficult for some buyers to get financing and therefore be unwilling/unable to pay the prices they otherwise would have paid for businesses? Most likely, yes. But these are almost certainly a temporary phenomenon. The wise businessperson, buyer or seller, takes a broader perspective on how to recognize, create and preserve value. This means:
- Continuing to invest in technology, equipment and people based on their long-term importance to the enterprise.
- Understanding that commercial and M&A markets are highly unlikely to “disappear” because of what happens in our nation’s capital.
- Working to calm managers, staff, suppliers and customers that one’s business is stable and directed toward its essential parameters, not the latest financial page headline.
- Understanding and taking advantage of the new tariff policies where possible.
- Being alert to opportunities that will inevitably result from competitors’ and suppliers’ nervousness.
- Taking advantage of new government tax, training and other incentives that might result from the current environment.
- Recognizing that erratic policies have a way of smoothing out based on their effectiveness. In other words, if the tariffs don’t work or if they enable our leaders to negotiate more favorable arrangement with our trading partners, the politicians will have every reason to change them.
The essential qualities that buyers value in businesses have not changed. History has shown that value will be affected by short-term dislocations, but usually only temporarily. The foolish thing is to lose perspective by obsessing on the macro-headlines that one cannot control rather than on the micro-opportunities for stability and improvement that one can control.
Yes, it is upsetting to see the stock market gyrate. But wise owners and managers continue to strategically and tactically build value in their businesses, confident that Epictetus’ wisdom rings true to this day. ●
Mark A. Filippell is Managing Director at Citizens
