Ep. 308 — ITR Economics, GF Data, and ButcherJoseph: Cycles, Multiples, and Capital Stacks Behind the Headlines

6 min read

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Episode Summary

Your inbox has a Wall Street Journal alert, a banker text about rate hikes, a peer-group email about supply chain, and an LOI from a strategic buyer all sitting in the same hour. None of them tell you what to do. The Jamie Dimon clip on CNBC isn’t aimed at your 50-employee fabrication shop or your $3M EBITDA distribution company. Your CPA does taxes. Your banker manages the line. Nobody is sitting at the chart with you. So I brought three lenses to this quarterly read. Brian Beaulieu at ITR Economics on rate of change, business cycles, and why the bond market is whispering about the dollar. Bob Wegbreit at GF Data on the highest mid-market multiples they’ve recorded since 2006 and why rollover equity is the truth-teller in every deal. Jeff Buettner at ButcherJoseph on how rising rates compress what financial buyers can pay, why dry powder still finds a home, and why the ESOP option keeps getting more competitive. Macro to micro in one episode. The numbers and the context for owners actually sitting in the chair.

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## Top 10 Takeaways
  1. Trends don’t change direction on a dime. Rate of change shows the slope bending before the data confirms it.
  2. Without context, every headline becomes a decision and every decision becomes a guess.
  3. Consumers say what’s on the news. They spend what’s in their wallet. Watch behavior, not sentiment.
  4. The bottom of the cycle is when pricing and rates are most advantageous. Most owners can’t see it.
  5. The 2030s reset is debt as fuel and inflation as the match. Dead wood burns first; green shoots follow.
  6. The blended deal multiple is a starting point, not a verdict on your business.
  7. Rollover equity is the truth-teller about how much you actually believe in the business after closing.
  8. Buyers are rational. Sellers are emotional. Every premium you ask for needs to survive both lenses.
  9. What’s pausing deals isn’t the war or interest rates. It’s leverage capacity, logistics, and labor.
  10. Build a capital stack durable across cycles, not just designed for the good times.

Sound Bites

“Trends don’t change direction on a dime. The slope of the actual data will begin to bend one way or the other, all else being equal, and it’s that slope that you can most easily measure with rate of change.” (@00:07:48) — Brian Beaulieu

“If they have money in their pocket and they have a job, they can be depressed, pessimistic, say anything they want, but they’re going shopping. As long as they keep shopping, we’re fine.” (@00:12:36) — Brian Beaulieu

“The 2030s, the first half of that decade will be like an economic forest fire. It’s debt that lights that fire and inflation is the match.” (@00:22:46) — Brian Beaulieu

“We are seeing the highest multiples for adjusted EBITDA for lower middle market businesses in the last 20 years, probably ever, but since we started collecting data in 2006.” (@00:38:00) — Bob Wegbreit

“Buyers are rational, sellers are emotional.” (@00:46:30) — Bob Wegbreit

“It’s leverage and logistics. That’s what’s causing the pause in this market right now. Not logistics and labor.” (@01:04:15) — Bob Wegbreit

“There’s a little more cautiousness built into those financial buyers than maybe they may have exhibited before. The rising interest rate environment obviously makes cost of financing a little more expensive.” (@01:24:09) — Jeff Buettner

About This Episode

This is the inaugural quarterly economic and M&A market update, designed to give privately-held business owners macro-to-micro context they can’t get from CNBC. Brian Beaulieu is CEO and Chief Economist of ITR Economics, where he has led forecasting since 1987 and built a methodology grounded in rate-of-change analysis and business cycle theory. Brian co-authored Prosperity in the Age of Decline and Make Your Move with his brother Alan. Bob Wegbreit is Executive Director of GF Data, which since 2006 has aggregated detailed completed-deal information from over 250 private equity firms on more than 4,000 transactions in the $10M–$250M enterprise value range. Jeff Buettner is a Managing Director at ButcherJoseph, an investment bank specializing in lower middle market M&A, ESOP transactions, and capital markets advisory. The three-segment format will continue quarterly, building context owners can stack from one update to the next.

Resources Mentioned

  • ITR Economics — Forecasting and research firm; free Trends Talks and blog content. — itreconomics.com
  • GF Data — Source-of-truth deal data on lower middle market PE transactions. — gfdata.com
  • ButcherJoseph — Investment bank focused on lower middle market, ESOPs, and capital markets. — butcherjoseph.com
  • Prosperity in the Age of Decline by Brian and Alan Beaulieu
  • Make Your Move by Brian and Alan Beaulieu
  • Changing World Order by Ray Dalio — Referenced by Ryan as part of his macro reading.
  • Changing Fortunes by Paul Volcker — Referenced by Ryan.
  • Between Debt and the Devil by Adair Turner — Referenced by Ryan.
  • Good to Great by Jim Collins — Referenced for the “20 Mile March” concept.

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