"We believe that in value terms there is likely to be less spent on acquisitions in 2009 but the volume of deals may well increase."

This confirms our opinion that a decline in sales output is not going to have a major impact on mergers and acquisitions unless the market believes we are about to fall off the edge of the cliff. However liquidity will, so we believe that in value terms there is likely to be less spent on acquisitions in 2009 but the volume of deals may well increase. The exit price will fall and mergers will increase their share of the business over cash buys.

A trend is starting to show that exit prices are falling and whilst mergers did not feature in 2007/8 they are now taking place, but this is in a patchy market with no major deals taking place and it is too soon to properly confirm. However there is evidence that a spot of spring cleaning is taking place with the GE's divestiture of GE Homeland protection to Safran for $580m for 81% of the company. The rationale for the sale of this attractive business operating in one of the few growth markets in physical security is not particularly convincing, but the exit price on a sales multiple of 2.23 is good.

No one really knows whether or when the current economic decline will turn around. But the general financial performance of some notable security manufacturers for the first quarter of 2009 shows a marked deterioration on the last quarter of 2008. Our view is that demand across the whole range of physical security equipment will continue to fall and reach the bottom of the curve by the end of this year and will bump along the bottom for the first half of 2010, before it starts to lift off again. Some vertical markets and products will perform better and that has already been evidenced in IP Video and Biometrics which are still showing growth. However security system sales to the retail sector are experiencing very difficult times even for the well managed specialist companies like Checkpoint Systems which reported a loss in 2008, with the last quarter falling off quite dramatically.

Further evidence of difficult trading conditions is the falling prices of new and improved products. Reports of 25% decline in price is quite common and figures much higher than this are being quoted and at the same time there has been a proliferation of new IP Video offerings. However for every downside there has to be an upside at least that is the possibility open for well managed companies that are prepared to re-examine fundamental value propositions and develop new strategies.

Measures that will have a profound impact on maximising business opportunity include focusing on your good customers and spending more time in finding out about their future plans. Don't be tempted to chase any lead at the expense of reducing your contact time with the best prospects. More time spent in working your sales relationships will radically improve your chance of keeping price-conscious customers loyal. More fundamental measures to action include, reducing and restructuring debt, and preserving cash but don't stop spending on innovation: Re-direct your best people to innovation projects. Move early to anticipate emerging needs and seriously review the part that acquisition and merger of innovative start-ups can play: Only acquire ailing competitors when their heritage estate can deliver profitable sales and recoup the investment within 2 years.

You can not only ride out dour economic times, but emerge stronger and more successful, but having a positive mindset throughout is crucial.