Positive environment for capital raising among the US middle market
US investors and middle market executives are confident about access to capital and potential for transaction activity in 2016.
Middle market companies and investors are ready to pull the trigger on capital raising transactions aimed at growing their businesses and creating jobs in 2016, according to a recent survey by Nexia International’s US member firm CohnReznick of investors and middle market executives. More than 75% of those surveyed were confident or very confident in the strength of the business environment in the US, indicating a strong forecast for growth heading into 2016.
Of those surveyed 70% believed that a strategic investor (competitor or corporate) would offer the greatest price for their business, compared to 30% believing the best deal would come from a financial investor (private equity, venture capital or family office).
For those looking to raise capital, 26% of the executives and investors would choose a private equity firm, while 21% would opt for a commercial bank, and only 2% would pick a public offering.
Additional findings include:
- Nearly 73% of those surveyed believed their business would participate in a capital raising transaction in 2016 and 43% believed their business would participate in a merger or acquisition in 2016.
- Taking current market and economic conditions into consideration, 96% of those surveyed felt now would be a good time for middle market companies to raise debt capital.
- Of those surveyed, 28% felt the biggest concern when selling a controlling interest in their company would be negotiating a favorable transaction. However, 24% believed selecting the right buyer with the right fit was the biggest concern.
- Despite the high levels of confidence about the US business environment, only 33% of those surveyed were confident about the strength of the global business environment.
What do these results tell us?
The survey’s findings echo the theme of increasing optimism that is currently being experienced in the American marketplace. Growth continues to be the mantra of middle market companies and investors. Organic growth has been difficult to achieve and, as the survey shows, there is clearly an emphasis on growth through mergers and acquisitions. Barring unexpected market or economic events, there is likely to be a healthy pace in overall transaction activity in 2016, which is also a strong indicator for broader US economic growth in the middle market.
While there is heightened interest from investors in originating and closing quality deals, and a lot of money on the sidelines, valuations are high, and there’s a shortage of quality investment opportunities. Investors that position themselves as the ‘buyer of choice’ will be in the best position to put money to work in 2016.
For more information, contact:
CohnReznick LLP, US
T: +1 646 625 5716