Editor’s note: Kelly Campbell is president and co-founder of Interface Technologies in Raleigh and vice president for technology of the Association for Corporate Growth’s Raleigh-Durham chapter.
RESEARCH TRIANGLE PARK, N.C. – How do companies grow revenues in what is a low-growth environment? It’s not an impossible task.
Several Triangle executives shared secrets from the success of their respective companies in a panel discussion hosted by the Association for Corporate Growth’s Raleigh-Durham chapter earlier this month to discuss the state of the economy and capital markets.
The IPO market has come to a halt. Twenty companies were planning to go IPO in August. Only three companies actually went IPO. Zero companies went IPO in September. September is usually the busiest month for IPOs.
S&P 500 companies have $1.2 trillion in cash sitting in reserves. There have been six quarters of double digit earnings growth for companies.
So what is the state of the capital markets and what does this mean for companies?
John Fennebresque is a managing director at Fennebresque & Co, an investment banking firm focused on mid-sized, profitable companies.
Rick Dowd is chairman and managing director of the middle market group and Wells Fargo Securities.
Doug Riddle is a Senior Vice President of middle market corporate banking at Fifth Third Bank.
Anil Asnani is the Vice President of strategic planning and corporate development at LabCorp.
State of Bank lending:
• Banks have dollars to lend
• Bank debt is cheap compared to other sources of capital
• Banks are assisting in deals lead by Private Equity firms
• Banks are healthier that they were 1 year ago
• FDIC backing gives companies confidence in the security of their deposits
• There is more discipline being applied to deals. Structures are tailored more to the circumstances of the individual deal versus based off of industry “norms”.
• Focused on quality companies with strong positions in their markets
• Value is in the eye of the beholder: strategic buyers may be willing to pay more because they can look for a longer term payoff.
• Companies with all their “ducks in a row” can get deals done faster.
• This is important because some deals don’t complete because market conditions change before they can get done.
Steps to prepare your business for a sale or merger:
• Get your corporate records in order
• Have your financial statement audited
• Refine your business model – great business models get attention
• Understand how you fit in the market relative to your competition
• Start early with advisors so they have time to understand your business and provide you with strategic advice
• Most entrepreneurs and founders are reluctant to seek advice from outside advisors.
In response to the question: “What about potential changes to the tax code that might come about to address the budget/deficit?”
Answer: Business factors are more important to a deal than tax concerns.
The overall uncertainty referenced by Weinberg is a lagging influence on the M&A market. It takes time for this uncertainty to impact M&A deals. By the same token, once confidence is restored, it takes time for M&A activity to pick back up.
Uncertainty is driving discipline so discipline is now the new normal in getting deals done.
Note: Lew Ebert, NC Chamber of Commerce president and CEO, will speak at the next ACG event on Thursday, Oct. 27. Visit the ACG website for details.
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