Franchising companies are being bought and sold at an accelerated pace. This merger and acquisition activity is being related to the pandemic, and the optimism that flows from overcoming its challenges. We can see that the buyers and sellers fall into groups, each having different reasons and advantages for their business decisions. Let’s take a look at the drivers and factors in the groupings. All indications are that this is a seller’s market.
Interest rates are relatively low and we have expectations that interest rates will remain low to keep financing available through the mid-term elections. Companies with pre-pandemic debt are recapitalizing to lower interest rates, or to debt which has more flexible loan covenants to allow for increased borrowing capacity and flexibility. These loans can now be used for acquisitions and stock buybacks. Stimulus money also allows redeployment of capital for other purposes.