Midmarket Investment Conservatism

The National Center for Middle Market Research polled 1,000 companies over the past two years. They questioned what that company would do if they had $1.00 extra to either invest or retain. The portion of companies willing to invest their extra capital has decreased since the end of 2014. Only 61% of companies are willing to invest capital and resources in Q4’15 as opposed to the 68% that was willing to do so in Q4’14. Those willing to invest has decreased from 67% in Q1’15 to 61% in Q4’15.

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.

Midmarket Investment Conservatism

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