2023 is expected to be a stronger transaction market than the past few years for mergers, acquisitions, and majority and minority investments. Indicators suggest that the market for restaurant transactions is starting to return to some semblance of normal following the material impact of the COVID-19 pandemic. However, some concerns and headwinds are still in play, impacting how investors and buyers view the market, including inflation, supply chain issues, workforce and labor issues, and newly enacted or pending legislation (such as the California FAST Act).
The Importance of ‘Transaction Fitness’
As business investors, buyers, and sellers know, a transaction can be more like a marathon than a sprint. In the running world, one would be ill-advised to jump underprepared into a race of any length, especially a long one. The same rings true for transactions.
In transactions, time typically is not on anyone’s side, especially sellers. After signing a letter of intent or similar document, leverage can shift to the buyer, and unexpected things can happen. This has been apparent in restaurant transactions over the past three crazy years. COVID-19 materially impacted the transaction market, but a variety of other occurrences also created deal challenges. The latter half of 2022 saw numerous transactions stall, fall apart, or get re-traded due to the financial impact of commodity increases (e.g., chicken), inflation generally, and a more cost-conscious consumer, among other...
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