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Capital Markets Survey: Growth Capital EditionDocument Transcript
CAPITAL MARKETS SURVEY
Growth Capital Edition
LCG Capital Advisors, LLC
Issued: March 2014
Survey Overview & Participants 03
Key Insights 04
Survey Results - Deal Trends 05
Survey Results - Management Issues 06
Survey Results - Economic Outlook 07
Potential Responses & Action Items 08
About LCG Advisors 09
02Proprietary Capital Markets Data | March 2014
LCG Advisors Capital Markets Research
In order to gather exclusive data not found in
conventional media outlets, LCG Advisors surveyed
market participants from industry-leading firms
that specialize in mezzanine lending, SBIC funds,
specialty lenders, and private equity firms focused
on minority and growth capital investments. With
feedback from 27 firms, their responses represent
the trends of the leading and most active growth
capital providers from all parts of the country and
covering all market sectors. The survey results
represent the entire sector spectrum and are not
skewed toward any particular industry. Collectively,
these firms have a strong footprint in all major U.S.
markets and have in excess of $50B of invested
capital across 40 different asset portfolios.
Survey questions were structured in a way to
gain the deepest insight into deal trends, external
factors, and business attributes that may impede
deal execution and outlooks on the future
macroeconomic environment. The following details
the data collected and LCG Advisor’s findings.
Growth Capital Providers
In an effort to provide its clients with the most relevant, up-to-date transaction advisory services, LCG
Advisors devotes significant resources to conduct capital markets research on an ongoing basis.
Throughout the year, LCG researches specific segments of the capital markets to obtain feedback on
activity levels and outlooks. This edition of the LCG Capital Markets Research focuses on the growth
Survey Overview & Participants
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As opposed to market factors that are mostly beyond control
of the individual, management issues can be almost entirely
prevented and controlled through preparation and preparedness.
Supply of deployable capital has dramatically increased from 2013.
The appetite for deals remains strong among mezzanine lenders and hedge funds when
compared to 2013.
Executed deal multiples and leverage ratios are trending upward due to a flat-line supply of
investment opportunities coupled with high level demand from financing firms.
Results indicated for each firm that there is a strong likelihood issues with a client’s
management team will inhibit at least one deal from being executed this year.
Management teams can significantly increase their ability to access capital by
improving their working knowledge of strategic planning, accounting and finance,
and sales and marketing.
Key insights can be extracted
when analyzing the survey data:
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Robust economic growth in 2013 has led to increased capital availability and a spike in mergers and
acquisitions. LCG sought to identify key drivers behind deal activity in addition to trends in financing rates
and execution multiples. The following questions indicated the most noteworthy results:
Availability of Capital
To Deploy Relative
Slightly Less About the Same
Significantly MoreSlightly More
Q: How would you characterize your firm’s availability of
capital to deploy (dry powder) relative to last year?
Survey Results - Deal Trends
Q: To what extent has your deal criteria broadened over
the past year in an effort to deploy more capital?
Extent Deal Criteria
Broadened Over The
Not At All
Q: How would you rate your firm’s appetite for deals
(1 being lowest, 10 being highest appetite)?
Appetite For and Availability
of Quality Deals
Today A Year Ago
Appetite Quality Deals
Q: Over the last year, what trends have you seen
in executed deal multiples?
0% 0% 0%
Trends in Deal Multiples
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Q: How would you characterize the performance
of the management teams of the companies
you have been seeing in the market today?
Acceptable/Satisfactory Yes No
Q: What are the key areas where these management teams need
to improve? (select up to 30)
Key Areas Where Management
Teams Need to Improve
Factors driving deal activity help indicate desirable characteristics for investors, however, often overlooked
are the factors that are discouraging investment. Survey results indicated a series of undesirable traits with
a consistent focus on management quality and execution.
Survey Results - Management Issues
Performance Rating for Management
Teams in Market Today
Have You Walked Away From A Deal Citing
Largest Concern As Management
Q: In the last year, has your firm declined a
deal opportunity citing the largest concern as
management (experience, focus, vision, etc.)?
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Survey Results - Economic Outlook
Macroeconomic trends combined with specific industry trends have a significant impact on deal activity.
As deal makers react to those economic factors, certain sectors and factors can become more affected
than others. Survey questions were designed to discover the strongest economic influences and outlooks
driving and discouraging deal activity.
Q: What is your outlook on the US economy over the
next 1-2 years?
Q: Which do you believe are the biggest threats in this
country to the growth of middle-market businesses?
(Make up to 2 selections)
Largest Areas of
Outlook on U.S. Economy,
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Companies that can be successful and drive growth despite
challenges from poor economic conditions and increased
government regulation will be most attractive to investors.
Before considering whether a transaction is the
best option, careful consideration must be given to
evaluate the current state of operations:
A successful transaction begins with diligent planning and preparation.
Considerable efforts must be focused on the time period leading up to a transaction in order
to best position a management team and/or owners for success.
Timing and expertise make the difference. Knowing the market and key players saves time
and increases returns.
If expectations are not in line with reality, significant time and investment losses can occur.
Proper planning and preparation can allow a management team to navigate the challenges of
a transaction process while staying the course of business operations without missing a beat.
Potential Responses & Action Items
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LCG Advisors is a leading, nationally-recognized transaction advisory services firm specializing
in corporate finance, mergers & acquisitions, loan and investment due diligence, risk mitigation, and private
capital solutions for entrepreneurs and executives.
Our professionals serve as trusted advisors to the world’s largest financial institutions and today’s growing
businesses. With over 40 professionals across the country with unique and diverse backgrounds, LCG
Advisors serves a wide variety of client needs through the full business life cycle.
Business Advisory Services Due Diligence
In 2013, LCG Advisors completed over 800 credit advisory engagements and provided transaction
advisory services to dozens of industry leaders. Our depth of experience and knowledge of the
transaction process allows our clients to achieve their goals.
For more information on LCG Advisors, please visit www.lcgadvisors.com
Growth Capital & Equity Placements
Mergers & Acquisitions
Private Capital Solutions & Wealth Management
Quality of Earnings Examinations
Collateral Field Examinations
Acquisition Due Diligence
About LCG Advisors
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Tampa, FL 33602