During periods of economic turbulence, most market players switch into reactive mode: budget cuts, frozen investment projects, panic. But a falling market is a unique window of opportunity for countercyclical growth.
Let's look at three tools that turn a recession into a springboard: portfolio rebalancing, cheap M&A and negotiating arbitrage with suppliers.
Key thesis. A company that cuts only costs during a recession - but not its investments in M&A and rebalancing - takes a dominant position 12 months after the market turns. Its market share grows by +15-30%.
Portfolio Rebalancing: Kill the "Cash Cows" for the "Stars"
The leader's strategy is to reallocate resources. Your action matrix is built from three steps.
In a crisis, contribution margin matters more than revenue. Segments with a margin below 15% are outsourced or sold off.
A recession shifts demand toward "second-necessity" goods (repair instead of buying new, replacing an expensive brand with a quality equivalent). Repackage your offer: add a subscription model or installment payments - this lowers the entry barrier for the customer.
Cut your product line by 40%. Remove logistically complex products. Keep only what generates frequent repeat demand.
Result. Your portfolio becomes liquid, which is critical for the next step - buying up assets.
M&A in a Falling Market: How to Buy a Competitor for Half the Price
A falling market collapses competitors' EBITDA by 1.5-2x. Their owners are under stress and ready to sell the business at a 2-3x multiple (versus 5-6x in a growing market).
Valuation: the Nuances of "Crisis Math"
Don't use a DCF with perpetual cash flows. In a crisis, only two approaches work:
- Liquidation value. This is the price "floor".
- Multiple to normalized EBITDA. Adjust the target company's metrics to full capacity utilization, excluding crisis-driven dips.
The key trick. Include a put/call option in the sale and purchase agreement. In 6-9 months, when the market rebounds, you lock in the final price at a 30% discount to the current level.
Legal Protection in a Falling-Market Deal
By buying an asset cheaply, you take on its debts and "skeletons in the closet". Protection checklist:
- W&I Insurance (warranty and indemnity insurance) - shifts the risk of hidden liabilities onto the insurer.
- Earn-out (contingent payment). Pay 50% now and 50% when the company hits its KPIs a year later. If the target hasn't recovered - you don't pay the rest.
Integration: How Not to Kill the Asset After the Purchase
Buying is only half the job. 70% of deals fail at the integration stage.
- The 100-day rule. Appoint an integration manager on the day the term sheet is signed. They audit IT systems, HR and customer databases before legal closing.
- Tuck-in strategy. Don't change the competitor's brand if it has high loyalty. Keep it as a separate distribution channel while merging the back office (accounting, procurement).
ABC margin analysis, 40% SKU downshifting, a shift to subscriptions - the portfolio becomes liquid.
Liquidation value as the "floor", a multiple to normalized EBITDA, a put/call option at a 30% discount.
W&I Insurance against hidden liabilities, a 50/50 earn-out, a vendor loan or SPV/LBO when cash is short.
The 100-day rule, an integration manager from term-sheet signing, tuck-in: keep the brand, merge the back office.
Negotiating Positions with Suppliers: the Dictatorship of Volume
A crisis is the time when suppliers fear losing liquidity more than you do. Use it.
- Gather alternative offers (including from Turkey, China, India). Even if you don't plan to switch - it's a "we'll replace you with Alibaba" argument.
- Barter and offsets. In a crisis, "hard cash" is the most valuable thing. Offer your supplier payment in your company's goods or services. This sterilizes their receivables.
Conclusion: Becoming the Leader
A company that cuts only costs during a recession - but not its investments in M&A and rebalancing - takes a dominant position 12 months after the market turns. Competitors are wiped out or bought up.
Countercyclical strategy and end-to-end M&A support
G-Invest develops an anti-crisis strategy, values the target company using "crisis math" and provides legal support for the deal - from put/call options and earn-outs to an LBO with an entry stake from 20%.
Frequently Asked Questions
How can I buy a competitor more cheaply if I don't have cash myself because of the crisis?
Use structured deals with deferred payment (vendor loan) or bring in a partner through an SPV mechanism. G-Invest offers LBO schemes (buyout financed by the target's future cash flows) with an entry stake from 20%.
At what multiples can you realistically buy a business in a falling market?
In recent down markets, the realistic range for B2B and logistics sectors was 1.8-2.9 EV/EBITDA. Industrial assets changed hands at the liquidation value of their equipment (0.3-0.5 of book value).