Growth Expectations

Economic growth expectations of CFOs have ticked downward according to a Bank of America Merrill Lynch survey. Companies expect to grow more slowly in 2016 over last year, and 15% more CFO’s expect slower growth (from 1% to 5%) in 2016 over 2015. The number of CFO’s expecting faster growth in 2016 is down over last year. While growth confidence is still intact, it has weakened on a year over year basis.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.

Growth Expectations

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