After witnessing a record-breaking year for mergers and acquisitions in 2021, business owners and leaders are optimistic about another busy year to come. However, it may not be quite as prosperous as last year. A recent PwC article pointed out, “While optimism remains high for a strong 2022, headwinds from higher interest rates, rising inflation, increased taxes, and greater regulation could pose structural or financial hurdles for completing deals in 2022.”
Many have become more concerned about interest rates, as it’s still too soon to tell how many times the central bank will hike rates throughout the year. According to CNBC, “The Federal Reserve is set to hike interest rates this year for the first time since 2018 to address the worst inflation in 40 years spurred by the coronavirus pandemic.”
When compared to historical levels, interest rates are still relatively low. But our current rates are not likely to last much longer. Citigroup economists expect “three further hikes in 2023, following 1.5 percentage points, or 150 basis points of hikes in 2022.”
While these hikes might be incremental, even minor adjustments to interest rates may negatively impact business valuations. For a confidential consultation on the impact of rising interest rates on your company’s value, please contact us today.
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