More Capital Than Ever In Human History

We are often asked, “What’s going on in the markets? What deals are hot right now?  Where is the money flowing?”

 The answer is that there is more money chasing more deals than ever before in human history.  Bain reports there is now over $2 trillion seeking deals.

What types of deals?  Buyouts continue to be the most popular deal type with sponsor-to-sponsor deals increasing in size and frequency – one private equity firm buying a company from another private equity firm – with North America and Europe dominating the deal flow.  Business services, software, distribution, healthcare and insurance are the leading industries in terms of overall investment.  Private lenders deserve an honorable mention here – this space has seen tremendous cash inflows in the last two years. 

 Why is the private equity space so active and flush with cash?  The returns justify the allocation of capital, outperforming publicly-traded equities in all major market regions:

These are heady times in the private equity markets.

 What does this mean for you as a business owner?

 It means that the party rages on, flashing a sell signal to you.  The time to sell is when markets are at a peak.  Notice the word “a” not “the” because no one knows when the tide will turn, we just know that it markets are cyclical.  The yield curve just flashed an ominous sign portending a recession.  The top red line shows short-duration US Treasuries yielding more than longer-dated US Treasuries – a perfect predictor of recession every time this has happened since WWII.

VCA Graphic from treasury.gov data

 And the time to sell is when markets are at a peak.  If you wait too long, squeezing the last bit of juice out of your capital expenditures and other investments, you risk becoming fodder for the type of “distressed” investor that dominated the market during the Great Recession:

Hint: you want to be an “opportunistic” investment target, not a “distressed” target.

 The message of the day: Run!  Don’t walk.  The time to act is now.

 Vertical Capital Advisors can help your business plan and execute strategies that enable your enterprise to thrive in all market conditions. 

 Call me.  It is time to plot your strategy to maximize the exit value of your company. 

Repeat Business & Referrals – The Ultimate Compliments

This blog was originally posted September 2, 2016

In the depths of the recession we helped scores of businesses restructure their financing so the company involved could live to fight another day.  We helped each company get lean and profitable by focusing on the core revenue and profitability drivers, especially strategic client relationships.

 Now that the economy has recovered we are seeing many business owners seeking a new round of permanent financing.  Most gratifying of all is the client who we helped survive the recession now flourishing and needing growth capital.   

In August we helped a wholesaler obtain new $1,500,000 financing at a fixed rate of 5%.  It may not seem like much but the new rate is over 20% lower than the previous rate that was over 6%.  This savings, on top of the $500,000 discount we negotiated five years ago, has transformed the company into a very profitable enterprise.  

This is a small example however this client is connected to over $10 million in other capital we have placed for other clients.  And for this particular, it means literally everything. 

We love the trust that we earn by securing sound financial futures and we love even more the repeat business and referral opportunities it generates.   To all of our clients, thank you from the Vertical Capital Advisors team!