The Federal Reserve Meeting
The Fed met this week and announced on Wednesday that it is holding rates steady. This was widely expected. The next Fed meeting is in December, and another quarter-point rate increase remains possible. Much will depend on the inflation and employment data released between now and then.
Speaking of the Mid-Term Elections
I, for one, cannot wait for all the political ads to stop! I did, however, find this article interesting since it gives great historical context. What history tells us about this midterm election | Carlyle
David Rubenstein is the author, and he is quite an interesting person. He co-founded the Carlyle Group, owns the Baltimore Orioles, chaired the Kennedy Center from 2010 to 2025, and worked in the Carter White House. He also owns some remarkable historical documents, including a copy of the Magna Carta, a 1776 edition of the Pennsylvania Evening Post that printed the Declaration of Independence, and a copy of the Emancipation Proclamation signed by Lincoln. He has loaned these documents to museums so the public can enjoy them. David Rubenstein - Wikipedia
Financial Planning/Investment Strategy Corner:
The Great Consolidation
One of the biggest economic shifts taking place in the United States is receiving relatively little attention. Millions of small businesses owned by baby boomers will change hands over the next decade, and private equity firms see a significant opportunity. For decades, baby boomers have built businesses ranging from accounting firms and medical practices to HVAC companies, insurance agencies, and local manufacturing operations. As these owners retire, many face the same problem: they have no family member or employee interested in taking over the business.
Private equity firms are stepping in, buying these businesses and combining them into larger organizations. This strategy, commonly called a roll-up, can generate significant profits. But it also raises questions about competition, pricing, employment, and the future of locally owned businesses. Baby Boomers Are Retiring. Private Equity Is Waiting
How the Consolidation Strategy Works
A private equity firm identifies an industry with many small, independently owned businesses. It purchases one established company, then acquires smaller competitors and combines them into a larger organization.
The financial attraction is not simply the profits generated by the individual businesses. A firm might purchase businesses at five times earnings and eventually sell the combined organization at eight times earnings. Even without substantial earnings growth, the higher valuation can generate significant profits. Of course, actual returns depend on acquisition costs, debt, and how well the businesses perform.
Which Industries Are Being Targeted?
Private equity firms are targeting a wide range of industries, including home services (HVAC, plumbing, electrical), healthcare (veterinary practices, dental offices, medical specialties), professional services (accounting, insurance, wealth management), and industrial businesses.
What many of these industries have in common is a large number of independently owned businesses with established customers and recurring revenue.
How Big Is the Baby Boomer Business Transition?
A February 2026 McKinsey report provides some striking estimates.
- 6 million small and midsize businesses projected to face ownership transitions by 2035
- Up to $5T in enterprise value is associated with more than one million potentially saleable businesses
- Over 50% of small-business owners are older than 55
- 25% of small-business owners are at least 65
Not all these businesses will be acquired by private equity. Many are too small for institutional buyers, while others will transfer to employees, families, or independent entrepreneurs. Still, the opportunity for private equity is substantial. McKinsey
The Good, the Bad, and the Ugly of Consolidation-
The Good: Retiring owners receive liquidity for retirement, businesses gain access to capital and technology, and economies of scale can improve efficiency. In some cases, acquisitions may prevent businesses from closing.
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The Bad: Local ownership and decision-making disappear, cost-cutting can eliminate jobs, and standardized services may reduce the personal relationships customers have come to value.
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The Ugly: As competitors are acquired, customers may have fewer choices and face higher prices. Debt used to finance acquisitions can also threaten otherwise viable businesses.
Another potential long-term consequence: the gradual disappearance of independent, locally owned businesses. For generations, owning a small business has been a path to financial independence and wealth creation. If institutional investors consistently outbid younger entrepreneurs, that opportunity may become harder to find.
Not every consolidation is bad. Larger organizations can operate more efficiently and may provide better services. But as more locally owned businesses become part of larger investment groups, the long-term effects on competition, communities, and entrepreneurship are worth considering.
A Self-Serving Plug
As small-business owners ourselves, we grapple with this same issue, and we have a plan.
We are working diligently toward internal succession, a process that, when done right, can take a decade or more in our industry. We are in the early stages and have already welcomed both Donovan Ingle and Gerrit Petersons into the ownership group.
Our goal is to continue bringing the next generation into ownership, ensuring that RSWA remains independent and locally owned for years to come.
Quick Hits:
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Microsoft offered buyouts to 30% of its workforce… Fortune Business Insider
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SS Cornwallis in the Gulf of Maine: Shipwreck found in Gulf of Maine more than 80 years after WWII sinking
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Halloween is Saturday! Here are some recipe and decorating ideas: Spooky Halloween Recipes 41 Best Halloween Recipes for Kids 92 DIY Halloween Decorations That Anyone Can Do
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It’s that time of the year – time to put your flower and vegetable gardens to bed for the winter. 10 Tips for Preparing Your Garden for Winter Put Your Garden to Bed
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DoorDash anyone? Looks like DoorDash might be buying Instacart. Exclusive | DoorDash Is in Advanced Talks to Acquire Delivery Rival Instacart - WSJ 🍰 Axios PM: Food fight
Best of the 207:
RSWA has been nominated in the Best of the 207 for both Wealth Management and Financial Planner categories. We are honored to be recognized and appreciate your continued support. Voting is open from Wednesday, October 28th until Wednesday, November 11th. Your votes mean the world to us!
Here is a link and a QR code to our voting page: Robinson Smith Wealth Advisors, LLC
One More Election Evasion:
If you love politics but prefer the fictional kind, I wholeheartedly recommend The Diplomat. It’s a Netflix original starring Keri Russell and Rufus Sewell. And for fans of The West Wing, Allison Janney joined the cast starting in season two, with Bradley Whitford joining as her husband in season three. Season four just dropped, and it didn’t disappoint.
Quotes:
I thought about having an election quote, but they seemed scarier than the Halloween ones:
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“Believe nothing you hear, and only one half that you see.” — Edgar Allan Poe
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“We make up horrors to help us cope with the real ones.” — Stephen King
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“I don’t know that there are real ghosts and goblins, but there are always more trick-or-treaters than neighborhood kids.” — Robert Brault
Thank You for Reading
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Be well, take care, and stay safe!
