We've brought together the top insights into the current state of the capital markets in our downloadable eBook. Contributors include Rusty Guinn with Salient Partners, Cliff Atherton with GulfStar Group and Paul Murphy with Cadence Bancorp, LLC.

1. 2014 State of the Industry
CAPITAL
MARKETS

2. Introduction: Chairman’s Letter
In order to deliver counsel beyond
expectations, we want to be as
knowledgeable in your industry
as we are about law.
Our team is committed to delivering more than just great legal counsel.
We also bring insightful, versatile knowledge of your industry so that
we can partner with you on the strategic direction of your business.
We have experience with guiding organizations or all sizes through
complex business issues, and we know that in order to be your best
legal partner, we have to know your industry inside and out.
That’s why each year we gather some of the top minds in the
capital markets industry to share their insights and best practices.
Some of what they have shared with us and with our guests at the
BoyarMiller Breakfast Forums is presented here, along with some
additional knowledge from our own team. We hope that what
we have gathered here will be beneficial to you.
If you want to hear more about BoyarMiller’s purpose to provide
counsel beyond expectations, build lasting relationships and make
a meaningful difference in people’s lives, or if you want to find out
how our finance and capital formation practice collaborates with
clients, please feel free to contact me.
Best regards,
Chris Hanslik, Chairman
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3. TABLE OF CONTENTS
Contributors
Expert Insights
MIDDLE MARKET M&A AND PRIVATE EQUITY
HOUSTON’S MARKET: IT’S NEVER BEEN THIS GOOD FOR THIS LONG
PRIVATE EQUITY MARKETS: PLENTY TO GO AROUND
FINANCE & CAPITAL FORMATION PRACTICE LEADERS
THINK YOU’VE GOT THE MARKETS FIGURED OUT? THINK AGAIN
GOVERNMENT POLICIES AND THEIR ECONOMIC OUTCOMES
PUBLIC EQUITY MARKETS: A TALE OF TWO INVESTORS
OUR PARTNERS
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4. MIDDLE MARKET
M&A & PRIVATE EQUITY
Philip Dunlap & Bill Boyar, BoyarMiller
2014 marks the fourth consecutive year of a stable and strong period for
middle market M&A and private equity activity. This prolonged period
of growth has many people wondering how long the good times can last.
Should we be concerned about a tapering off of the capital markets for M&A
and private equity in the middle market? What, if anything, should con-
cern investors and sellers about these sectors moving forward? The answers
to these questions will guide middle market M&A activity and private
equity investing through the end of 2014 and into 2015 and beyond.
M&A
To say that the M&A market in 2014 has been good would be an understatement. The first
half of 2014 has been the strongest first half of a year for private equity deals, both in num-
ber of transactions and the dollar amount of those transactions, since 2007. If the current
pace holds true through the end of the year, 2014 could be the strongest year ever for
middle market M&A.
This robust market has served to increase the valuations for middle market M&A deals.
EBITDA multiples are as high as they have been since before 2007. In 2013, the average
middle market transaction was valued at 6.5 times EBITDA. The multiples change when
looking at different deal sizes. Smaller middle market deals (those between $10 million
and $25 million) saw an average EBITDA multiple of 5.9x in 2013, while larger middle market
deals (those between $100 million and $250 million) saw an average EBITDA multiple of
7.1x. The average EBITDA multiple for larger deals in the first half of 2014 has been 8.3x.
These multiples are anywhere from a half-turn to full-turn better than the multiples realized
in 2006 and 2007.
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5. Another bonus to the strong middle market M&A sector is the increased competition for
middle market companies. One private equity industry leader has described the market
for businesses with $30 to $75 million in EBITDA as “insanely competitive.” The prospects
for those companies classified as “lower middle market” (typically in the $5 to $15 million
in EBITDA range) are also strong. Many of these companies are coming to the market
currently, which should result in a very large number of deals for lower middle market
companies in the next six to twelve months.
In addition to the higher EBITDA multiples and a more competitive market, private equity
buyers are using more subordinate debt and less equity to finance transactions. In the first
half of 2014, senior debt accounted for an average of 40.3% of the total enterprise value
(TEV) of transactions, which is slightly higher than in recent years. Mezzanine and other
subordinated debt has accounted for 16.9% of TEV in 2014. This is significantly higher than
recent years. As a result of the higher percentages of debt available to finance transac-
tions, private equity buyers’ equity has only accounted for 42.7% of TEV for deals in the first
half of 2014. That equity percentage is the lowest since 2007.
With all of this good news, what could slow down the current market? The risk of inflation
could always affect the credit markets, which would hamper the recent pace. However,
the workout from the Fed that began in 2008 is likely a long-term workout and is not
expected to result in an immediate inflation issue. Similarly, the risk of a drop in the price
of oil is always a risk for the Houston market. However, because the price of oil is funda-
mentally linked to all other industries, a drop in the oil prices would serve as a deflationary
measure and should not materially affect the M&A activity levels.
PRIVATE EQUITY
Thanks to the new funds raised in 2012 and 2013, US-based private equity funds currently
have approximately $486 million of “dry powder” committed that has not yet been drawn
down. Of this $486 million, approximately 26% is invested in funds that have $1 billion or less
in assets under management. This overhang, which should serve the markets well through
at least 2017, coupled with the lower amounts of equity needed to finance transactions,
should continue to drive substantial activity in the private equity market.
Although there is more dry powder in private equity funds today than in recent years, there
have been fewer new funds (as a percentage of the total number of funds) launched in
2013 and 2014. Established funds continue to account for a large piece of the private
equity market and it has become increasingly difficult for new funds to raise capital and
gain traction in the market. As a result, the private equity industry has become more of an
established players-led industry.
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Middle Market M&A & Private Equity, continued

6. CONCLUSION
Although no financial boom lasts forever, four years of steady middle market M&A and
private equity activity does not mean the good times must come to an end. The market
in Texas, and especially the Houston area, is stronger now than it has been in those previous
four “steady” years. Furthermore, the prospects for the next few years look very optimistic.
The near term should be a great time for sellers to achieve a liquidity event, as valuations
and EBITDA multiples are higher than they have been in seven years. As sellers realize the
market is strong, the overall M&A activity levels should continue to rise. This fact, coupled
with the increased capital that private equity funds have to deploy, should encourage
everyone involved in the middle market that the good times can continue. While risks
related to inflation and oil prices are always present, the optimism surrounding middle
market M&A and private equity activity should not be affected by those limited risks.
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Middle Market M&A & Private Equity, continued

7. “When I look at the Houston economy today, it looks solid. The market
is very competitive. New space is coming on line and being absorbed.
We have a balanced market and a lot of good decisions are being made.”
Paul B. Murphy, Jr., Cadence Bancorp, LLC
HOUSTON’S MARKET:
IT’S NEVER BEEN THIS GOOD FOR THIS LONG
• In Houston, things have never been this good for this long, which makes some business
leaders nervous – but investors are cautiously optimistic.
• Job growth is largely a myth, as the lowering of unemployment can be attributed mostly
to non-participation. But that picture would be a lot worse if not for the innovations and
creativity of the energy industry. The fundamentals of the domestic supply of oil and gas
mean a lot more work.
• New projects being announced, including improvements to the Houston Ship Channel and
huge investments in petrochemical plant capacity along the Texas Gulf Coast. Between 2010
and 2023, chemical companies have committed $125Bn to new expansion projects in the
U.S., the vast majority of which are in Houston – this creates a positive outlook for Houston’s
future in the next five to ten years. Sources: American Chemistry Council, Exxon Mobil Chemical
• In Houston real estate, experienced developers, private equity firms and investment
banking firms are choosing to be over-equitized, a cautious and healthy approach
that is a definite shift from the mindset of the 1980s.
• Houston’s commercial real estate market looks fantastic.
– MULTI-FAMILY: 24,000 units under construction at the end of Q2 2014, with additional
18,000 proposed. 15,000 units absorbed in the last 12 months with an average occu-
pancy of 91% in all asset classes.
– OFFICE: 17 million square feet under construction at the end of Q2 2014, 67% of which
is pre-leased. 5.7% rental rate increase in first half of 2014, with vacancy trending
downward to 9.8% at Q2 2014.
– INDUSTRIAL: 4.5 million square feet under construction currently, with 4.6 million square
feet of positive absorption in first 6 months of 2014. Market is well positioned for future
rent growth. Source: Transwestern Houston Metro 2Q 2014 Report
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8. 77
“We know some of our views fall a bit outside of the mainstream. But one of
the great things about being a money manager here in Houston is that we
don’t have to have the same views that everyone in New York or San Fran-
cisco has. We can be a little different, and we think that’s a good thing.”
Rusty Guinn, Salient Partners
THINK YOU’VE GOT THE MARKETS FIGURED OUT?
THINK AGAIN
MISCONCEPTION: I really feel and I really fear that the Fed is going to start tightening. The
Fed is not about to start tightening – the Fed is already tightening. In comparison to other
markets worldwide, U.S. policy is already relatively tight as we come out of this third round
of quantitative easing.
MISCONCEPTION: At this point, interest rates have nowhere to go but up. In 1994, investors
believed that interest rates had hit bottom and had nowhere to go but up. Still more people
held that belief in 1998, and again in 2003, and again in 2009; every smart investor knew
that interest rates couldn’t go anywhere but up. In every case, they were wrong, and many
people missed out on really attractive risk-adjusted returns for U.S. treasury bonds. Having a
long-term view that interest rates will rise is not necessarily wrong – of course, if you extend
the time horizon long enough, it’s a practical certainty. But betting that interest rates can
only go up from here in the short run is anything but a sure bet.
MISCONCEPTION: I obviously don’t want to own bonds right now. Remember that the likelihood
of an expected rise in interest rates is already priced into the bond you’re buying. And since
many of us in Houston already have a lot of implicit or embedded exposure to commodity-
sensitive assets and income through oil and gas, there’s a strong justification for maintaining
a higher bond allocation, in comparison to investing in a lot of different things that look a
lot like the stock market. Consider carefully, if you have a rising interest rate view, whether
the best way to express that is to increase your exposure to inflation-sensitive assets rather
than reducing your exposure to U.S. treasury bonds.
MISCONCEPTION: If U.S. equities are correcting, then emerging markets are going to be
down even more! Central banking policy in the developed world has disentangled the
relationship between emerging and developed markets’ equities. Because that relationship
is less strong than it has been in the past, our view is that positive exposure to emerging
markets over the next three to five years is still there.

9. “There’s something I like to say about markets versus government policy.
With markets, you can never predict them, but somehow or another they
always work out, and it makes perfectly good sense retrospectively.
On the other hand, in government policy, the bureaucrats are always
absolutely sure they know how things are going to work out – and it
never works that way, and there are always unintended consequences.”
Cliff Atherton, GulfStar Group
GOVERNMENT POLICIES THEIR
ECONOMIC OUTCOMES
• The Fed’s quantitative easing policies have quadrupled its asset base from 2008 to 2012,
giving it a balance sheet of $4.4 trillion as of July 2014. This leaves the Fed without many
effective tools available for dealing with any crisis that may arise, putting the U.S. in
uncharted territory.
• To date, the geopolitical shocks have not caused market corrections in risky assets on
as significant a scale as would be expected. In large part that has been due to central
bank policy suppressing volatility, but as the Fed ends the third phase quantitative eas-
ing, investors should be mindful of geopolitical risks.
• A single recent regulation on banks – rules on liquidity – ran 399 pages. That’s just one
of more than 400 new regulation banks are wrestling with, each of which is interpreted
slightly differently by one of the five or six regulatory agencies banks are having to
answer to. The regulatory burden on banks is heavy. For some bank clients, that means
providing more information or paying more for accounts in order to offset the massive
costs of banks’ changes to comply with regulations.
• Where we stand, we are at all-time highs in terms of the percentage of national incomes
that goes to corporations and to capital – and at all-time lows in terms of the percentage
of the national income that goes to labor. That inequality could lead to populist policies:
both taxation and some limitations on the ability of companies to generate the same
levels of profitability.
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10. “If I told you the stock market was on pace to be up 15% on a year-to-date
basis, you would probably expect the cyclicals, the higher betas, the higher
risk stocks to be the best-performing sectors in the U.S. But they’re not.
You rarely see an environment like what we’re seeing right now.”
Rusty Guinn, Salient Partners
PUBLIC EQUITY MARKETS:
A TALE OF TWO INVESTORS
The market is being driven by two diametrically opposed ideas – and they may not be
able to exist simultaneously forever. If one narrative dissolves, the entire market will move
toward the new consensus point quickly. Be cautious; with equities priced as a house
divided, there is potential for volatility.
THE SITUATION:
The macro players are
bidding up equity prices
and keeping corrections low
THE RESULTS:
THE
20% highest risk and
highest beta stocks
on the SP 500 are outperforming
THE SITUATION:
The fundamental investors are
positioning themselves bearishly
THE RESULTS:
THE
20%
lowest risk and
lowest beta stocks
on the SP 500 are outperforming
SP500YTDReturnto07.30.14
BOTTOM BETA QUINTILE
(LOWEST RISK)
4TH QUINTILE3RD QUINTILE2ND QUINTILETOP BETA QUINTILE
(HIGHEST RISK)
12
10
08
06
04
02
00
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11. “One of the things I’ve learned over the years is that the public markets
are very transparent – everybody can turn on the nightly news and
know where the Dow Jones and the SP closed. But on the other hand,
the private markets are very opaque. You don’t see a lot of statistics about
them; most people don’t understand them. But they are of increasing
importance to the economy.”
Cliff Atherton, GulfStar Group
PUBLIC EQUITY MARKETS:
PLENTY TO GO AROUND
• Looking at the deal flow activity in the private market, the number of transactions and
the capital being put to work in the first half of 2014 is greater than we saw even back
in 2007. This could very well be the best year in the MA market that we have had in
some time.
• In terms of valuations in the middle market, multiples are as high as they have been.
In the first half of 2014, the average as 6.4; last year’s average was 6.5 – these multiples
are a full half-turn higher than they were back in 2007 for this marketplace.
• Worldwide, $3.7 trillion dollars have moved into private equity. It’s not a huge number
when compared to public markets worldwide, but considering this young industry started
in the 1990s, that is pretty incredible growth.
• Why is private equity investment growing exponentially? People are looking at their
options: an optimistic 8-10% return in equities or a 2-3% return on bonds. When you
compare it to other choices, putting money into private equity makes a lot of sense.
• At the same time we had record deals activity in 2012 and 2013, private equity was being
reloaded with plenty of capital. There is plenty of dry powder in private equity funds to
continue to fund transactions.
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12. Rusty Guinn
Deputy Chief Investment Officer, Salient Partners
Rusty oversees the teams responsible for Salient’s outsourced
CIO relationships, multi-alternative fund of funds and system-
atic investment strategies. He brings a variety of perspectives,
having previously served as an institutional asset allocator, pri-
vate equity investor in asset management companies and as
a strategic advisor to large investment institutions. Most recently,
Rust worked with the Teacher Retirement System of Texas, a $100
billion+ pension fund, as the head of Strategic Partnerships and
Opportunistic Investments. There he was directly responsible for
more than $11 billion of Trust capital and commitments across a
multi-asset portfolio consisting of equity, fixed income, credit, pri-
vate equity, real estate, and commodity investments. Rusty holds
a Bachelor of Science in Economics from the Wharton School.
Paul B. Murphy, Jr.
CEO and President, Cadence Bancorp, LLC
Paul Murphy leads Cadence Bancorp, which has $7.1 billion
in assets with 80 branches across five states and is privately
held by major pension plans, university endowments and
institutional investors. Previously, Paul spent nearly 20 years
at Amegy Bank of Texas as the CEO and a director. He is a
board member of the Houston Endowment, Inc., the largest
endowment in Texas with more than $1.5 billion in assets.
In addition, he is a board member of the Hines Real Estate
Investment Trust, Inc., Oceaneering International, Inc., the
Fed-eral Reserve Bank of Dallas – Houston Branch, Kinkaid
School, and the Children’s Museum of Houston. He is active
in the World Presidents Organization. Paul holds a Bachelor
of Finance from Mississippi State University and an MBA from
the University of Texas at Austin.
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CONTRIBUTORS
OUR PARTNERS

13. Cliff Atherton, PhD CFA
Managing Director, GulfStar Group
Cliff Atherton is an investment banker with more than
25 years of experience in corporate finance and more than
30 years of experience in teaching finance at the graduate
level. As Managing Director at GulfStar Group, Cliff works with
entrepreneurs and family-owned businesses with enterprise
values between $25 and $250 million. His transaction experi-
ence is split evenly between sales to strategic buyers and
recapitalizations with private equity firms. Cliff has served
full-time and part-time on the faculty of Rice University’s Jesse
H. Jones Graduate School of Business since 1980, where he
currently serves as a Professor in the Practice of Entrepreneur-
ship. He earned a BA from Rice University, MBA and PhD
degrees from The University of Texas, and the Chartered
Financial Analyst (CFA) designation.
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Our Partners, continued

14. Bill Boyar
Founding Shareholder, Business Group
Bill’s practice focuses on representing the various parties
involved in the acquisition, disposition, capitalization and
financing of assets and businesses on a national and inter-
national level. He has served as lead counsel on numerous
complex, multi-party acquisitions and project financings
with significant experience in corporate finance, private
equity and mergers acquisitions. He regularly assists
clients in their strategic planning and capital formation
processes, maintaining a network of private and institutional
clients and contacts worldwide.
Gary Miller
Founding Shareholder, Business Group
Gary’s practice is focused on corporate and commercial
matters with emphasis on mergers and acquisitions. In
addition to MA work, he also has extensive experience
in capital formation, contract negotiations/documentation,
factoring and day-to-day representation of corporations
and other business entities. Gary is often called upon to
represent insurance agencies in their capital transactions
as well as United Kingdom and Norwegian based compa-
nies in their business activities in the United States.
CONTRIBUTORS
PRACTICE LEADERS
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15. Steve Kesten
Shareholder, Business Group
Steve’s practice includes private placements and other
sales and purchases of debt or equity securities; mergers,
asset acquisitions and sales; formation and representation
of private equity funds, venture capital funds and hedge
funds; entity selection and formation (including drafting
complex limited liability company and partnership agree-
ments and corporate charters having multiple classes of
common and preferred stock); and general contract review.
He also has experience representing both lenders and bor-
rowers in asset-based lending transactions involving senior
lenders, mezzanine lenders and factoring companies.
Stephen Johnson
Shareholder, Business Group
Stephen’s transactional practice includes mergers and
acquisitions, asset and stock purchases and sale transactions,
private equity investments, formation of business entities,
restructuring, capital formation, contracts and similar agree-
ments, and general corporate matters. He places the utmost
emphases on providing clients with the highest quality of
service in an efficient and effective manner.
Gus Bourgeois
Shareholder, Business Group
Gus’s practice involves a wide variety of corporate transac-
tions including the acquisition, financing and disposition
of business entities through asset and stock purchase trans-
actions, sales of debt and equity securities, and complex
domestic and international transactions. His clients range
from small, start-up businesses to established enterprises
with international operations.
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Practice Leaders, continued

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