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Capital Markets
Commentary |
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Two recent trends in mezzanine
lending are emerging.
Many market
players are accepting lower terms in the face of aggressive bank
lending, hedge fund plays and a surplus of mezzanine lending
companies. Pricing has been driven lower and there appears to be a
further bifurcation of those companies that are debt vs. equity
oriented.
Women make up 56% of all new
hires
in CPA firms and have earned at least 55% of the bachelor’s and
accounting degrees since 1999. Many CPA firms have embraced more
flexible work schedules and alternative career tracks to retain the
talent. Larger firms have gone the extra mile with leadership
development and career management programs. Change is good.
The convergence of banks,
brokerages and insurance agencies
in the financial services industry continues apace in 2006. Many
more banks are entering the asset management markets. Smaller banks are forced to be in the “wealth management”
business to meet the competition. Economics, demographics, tax laws
and more sophisticated consumers are driving this need to be in the
asset management business.
SBA Lending for 2005 set another
record
with a 21% growth in loans to $19.8B. The CAGR since 2002 has been
15%. This is phenomenal growth capital for small businesses. q
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Deal Flow |
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Acquisition Search:
Wholesale distribution companies in the novelty products
market with revenues of
$5-25MM. Any condition. North
America.
Business Sale –
Commercial equipment leasing company with $30 million annual
volume. Well managed, profitable and scalable.
Business Sale –
Specialty construction contractor in Baltimore-Washington
region. $3 million revenue and very profitable. Exclusive
dealer for 60% of revenue.
Unadvertised Deal
Flow: TCA has a number
of transactions that are not
ready for
market. Please call Brooke Tucker to
discuss.
We are
currently arranging mezzanine financing for an LBO, a
partner buy-out and an ESOP recapitalization. One down and
one to go in the business sale department. We continue to
grow the business valuation practice and are specializing in
the estate/gift/trust market, ESOPs and other employee stock
incentive/ownerships plans. q |
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Announcing |
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S. G. Brooke
Tucker recently received his designation as an Accredited Member of
the American Society of Appraisers in Business Valuation.
Mr.
Tucker has been appraising businesses since 1995. q
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On Our Website |
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New
Article --
Growth
Through Acquisitions
–
February 2006.
New
Article –
Management
Buy-Outs – Financing the Sale –
January 2006.
New Article
-
Visit our
web site to see the last six CFA newsletters and articles on
mezzanine financing, MBO financing, ESOP Financing and business valuation.
TCA Website. q |
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Privacy
Statement |
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We take your privacy very seriously.
TCA
sends periodic (not frequent) announcements and newsletters to
our friends and associates.
If you do not want to receive future mailings, please
use this
link to let us know. Thank you.q
To prevent this and other CFA email
newsletters from getting swept up by an overzealous spam filter,
please add our “From” address to your address book: (brooke@tuckercapitaladvisors.com) | |
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Another Solid Year of Buying & Selling |
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2005 was another solid year
for the M&A business with activity increasing to $981 Billion, up
15% over 2004. There were 7,300 reported transactions greater than
$10 million (up 4%). The average transaction value also increased
to $134 million, up 10.4% over 2004. Average LBO purchase price
multiples climbed to 8.5X EBITDA from 7.2X or almost 18%. For
smaller, privately held companies, with values under $10 million,
there was a significant increase in value – we estimate about 15% or
1X EBIT. Great news for CEO’s thinking about a capital transaction.
Even better, the
increase in M&A activity was in all industries vs. concentrations in
telecom, software, and financial services. The outlook for 2006 is
even better with many announced, but uncompleted transactions at the
end of 2005. Market drivers continue to be moderate interest rates,
full corporate war chests, $800B in private equity at work, more
liberal bank credit policies, good economics and low capital gains
tax rates.
q
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PIOs |
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Private Initial Offerings (aka
private placements)
have
replaced much of the small and early stage IPO markets. It takes
about $100 million of value to even consider a Wall Street IPO these
days. And companies that once considered reverse IPO’s (backing
into a public shell) have a ready market for their equity in the
private equity markets. Private Equity Groups took in $175 Billion
in new money last year and are estimated to have $800B under
management. Add some leverage and this class of investor has
several trillion dollars to invest in privately-held companies.
The advantages
of a PIO clearly outweigh the IPO when the liquidity and flexibility
of private equity capital is considered. Management retains
significant ownership and the growth prospects may be considerably
higher with the PEG than the Public. Valuations may be slightly
lower initially, but there is always another round and possibly the
IPO later. On the very low side, companies with $2 million in EBIT
can access this market, but the sweet spot appears to be in the
$5-15 million range. The PIO is a far easier and potentially more
lucrative method to access capital than an IPO.q
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Shift Happens! |
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Governor Mitch
Daniels (R) of Indiana got the OK
this month to lease the Indiana Toll Road to a Spanish-Australian
consortium for $3.85 billion in cash for a 75 year lease. If the
Indiana House approves, this will be the largest highway
privatization in the U.S.
The Indiana Toll Road runs east-west for
157 miles across the northern section of the state. The Toll Road
had about 55 million paying customers last year. Tolls will be
immediately increased by 76%. The State will use the money to fund
other infrastructure projects. Last year, Chicago sold the 7.8 mile
Chicago Skyway to the same group for $1.83B. In 1626, the Indians
sold Manhattan Island to the Dutch Governor for $24 worth of beads
and trinkets.
q
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Tucker Capital Advisors
LLC |
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Tucker Capital Advisors LLC (TCA) is an
investment banking and financial services advisory firm specializing
in privately-held small and middle market companies. We provide our
clients with transaction advisory services in buying, selling,
valuing, financing and expanding their businesses. q
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Disclaimer: This newsletter does not constitute professional
advice of any kind or nature. No warranty is given for data accuracy
or
completeness. |
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