I enjoyed participating in last week’s Winter Conference of the Alliance of M&A Advisors.
The slides from my talk on Best Practices by Private Equity, Venture Capital, and Hedge Funds in Deal Origination are here. The slides from my talk on How to Raise Capital using Online Networks are here.
I unfortunately was able to attend very few panels because I was talking with a lot of people. I do see the opening panel; my notes follow.
IBISWorld and Westshore Capital Partners (platinum sponsors) introduced the event.
Mike Adhikari gave an overview of AM&AA. Now 10th year anniversary of the group.
A multi-disciplinary association of M&A professionals serving the middle market. 564 members.
Membership:
40% intermediaries/ibankers-usually paid on success basis.
22% M&A advisors-M&A departments of accounting firms. Tax advisory.
10% Management consultants
8% Private Equity Groups (PEGs)
5% Valuation experts
5% Attorneys
3% Corp. development-growing the fastest within AM&AA
Transaction volume of members : $20b enterprise value/year.
New credential offered by AM&AA: certified M&A Advisor. 55 members have gone thru it. Only such program with affiliation with university (Loyola).
Membership up 50% vs. 2007.
Awaiting SEC recognition of M&A credential.
2009 initiatives: continuing education (getting credential), research, growing corp. M&A practice.
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Ron Cahn, head of debt advisory at Lincoln Int’l:
Market Overview
“I believe financing sources really determine the purchase price.”
There are very few cash flow senior lenders left. The ones that are, they only interact with the name – brand financial sponsors. They charge LIBOR+600 or more, for cos. with 5-25m EBITDA. Below that size you cant get a cash flow loan at all. This won’t come back anytime soon.
Asset-based lending: big resurgence. This market is still open. Have gone up a bit in financing. We’re doing a deal now and have gotten bids from L250 to L450.
Almost all the loans we’re doing now are an asset-based loan + mezzanine loan.
There were always two second lien markets: the very large market (shut down for a year) and the general market. Have gone from LIBOR 600 to LIBOR 1000-1200. I think that when the market opens up, this is the layer that will open up first. That’s what happened in 2001.
Mezz is the big winner. They usually have long-term sources of capital. They are the only group that has the same amount of capital today that they had a year ago. They’re selective.
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Andy Greenberg, GF Data Resources
We track 104 firms. We still see multiples of 5-6x.
Buyers’ transaction costs tend to be about 3/10 of a turn.
We continue to see and hear of community banks that are in business. They’re telling ibankers that they’re open for business. They didn’t get swept up in bad loans. The maximum exposure they’ll take is $15m. They tend to be focused on smaller businesses, which by definition have less resistance to economic turmoil. Finding deals that they can get done is a challenge.
Capital availability problem has hit the large LBO hardest.
Forecast: we haven’t yet seen the full impact of institutional investors being forced to allocate away from PE. Huge exploding secondary market of LP interests.
