As the Covid-19 pandemic and resultant lockdowns roll on, we are starting to see a number of acquisitions in the market place, especially right now in the U.S.A with a number of high profile transactions taking place – for example:
Of course it is normal to see a round of company acquisitions after the trade show season as toy company owners meet colleagues from around the world at multiple points. Any business owner looking to sell out is likely to start conversations with potential purchasers around the toy trade shows from October through to February.
Right now though due to the unusual circumstances of the time, the usual round of company ownership changes is likely to be exacerbated and enhanced. The reason being that we are starting to see business across the board switch from positive and aggressive to conservative and self preservation mode. This leads to people not paying their bills when due, which in turn leads to cashflow problems for some companies.
Times like these can cause even highly viable and well established companies to run out of financial resources to weather such complete disruption. Therefore quite a few long established companies with well known brands and products and with significant longevity in the marketplace will seek to sell up in order to cash out and take what they can. Some won’t manage to get a transaction done in time and may go out of business, leading to their assets being sold to other toy companies.
Also, we need to consider that cashflow problems can roll on for some time in an industry with such a long sales cycle, and that typically the toughest time in a toy or games company cashflow cycle is towards the back end of the year. By this point the company has bankrolled the development, manufacturing and marketing of products shipping for Fall, along with having cashflowed overhead throughout the year until that point. That is of course in normal circumstances, and these are anything but normal circumstances right now. For some companies the outlook for the rest of the year looks good with record shipments of some types of toys and especially of games, puzzles and other toys to entertain and educate kids who are locked down at home. For others things are alas more uncertain.
Either way, there will be company owners looking to or needing to sell up and move on with at least some degree of cash for all their years of hard work, and so we predict that toy company acquisitions are going to accelerate throughout the rest of this year as those companies with big cash reserves and with significant support from investors find themselves overwhelmed with the chance to buy up good companies struggling to find a way through these uncharted waters.
Platitudes abound currently, especially those about determination and fighting through tough times, but they can really help people who are struggling, so we’d like to end with a few of our favourites:
“If you’re going through hell, keep going!” Winston Churchill
“Tough times never last, but tough people do.” Robert H. Schuller
“When the going gets tough, the tough get going” Billy Ocean ?!
P.S. Our team have advised numerous toy companies and investment companies seeking either to buy or sell companies in the toy business. If you’re looking to buy or sell, please feel free to get in touch via our Toy Business Consultancy website and we’ll be happy to discuss our Consultancy services with you: www.KidsBrandInsight.com/services