Election Uncertainly: What’s the Impact November Presidential Elections May Have on the Middle Market

Posted on: July 19th, 2016

2016 is more than halfway done, but we still have some major events to look forward to. In November, the USA will elect a new president.

With only 2 major contenders left in sight, it looks as though either Clinton or Trump will come out victorious, unless a strong challenge emerges from a third party candidate. How does the outcome of this impact the middle market?

Unfortunately, we will not know until the moment is upon us, but we can make some speculations. A new president will come with some new economic policies.

Those policies can include changes tax rates, health insurance policies and trade policies. If the new President focuses on a pro growth agenda and has a favorable small business view, the middle market should expect stronger growth.

If there is renewed focus on export competitiveness, export sensitive middle market companies could be big winners. Over the last 8 years, there has been an onslaught of new regulations which has created confusion and uncertainty in the business world.

Businesses have predictably been cautious as they adapted to the new environment. If our new president focuses on cutting the red tape and putting jobs back in the economy, the middle market sector could benefit greatly.

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.