Private Markets - Some Certainties in a Very Uncertain Time
The evolving impact of the COVID-19 coronavirus on public markets has been precipitous and continues to be a topic of conversation. With the 11-year bull market ending this week, and the market down ~25% year to date (as of 3/13), it’s fair to say the public financial markets have been (to use a super technical term) clobbered.
Change is upon us. In the short-term we’ll face uncertainty on a number of levels. But all things aren’t set to change, some things will actually stay the same:
Companies will continue to incur unique capital needs. With the turbulence of the global markets as the backdrop, the velocity of capital needs that companies will encounter will be fast and furious. Whether it is a capital need to thrive and survive the short-term impact of business interruption, acquiring a struggling competitor, or committing to de-risk a personal financial situation by selling a portion (or all) of a business; these situations will all be amplified.
Private equity isn’t going anywhere. Funds are typically raised on a committed capital basis, and this “dry powder” availability doesn’t have the gyrations that the public markets do because it is committed in advance for the life of the fund, typically 8-12 years and is invested at the discretion of the fund manager. This capital is sitting on the sidelines and is ready to be deployed.
There is capital available for struggling businesses. There is an entire sub-segment of institutional investors seeking companies with strong fundamental characteristics – companies that have traditionally been profitable but have an unexpected business interruption or dynamic, such as the coronavirus, that has caused distress in some form or fashion. While this capital may come at a higher cost, it can mean the difference between remaining a going concern or closing the doors.
These dynamics will lead to deal activity in both the near- and long-term. Although somewhat counter-intuitive to the news cycle in the financial markets over the past few weeks, it will almost certainly lead to many conversations and opportunities in the marketplace. There is an ocean of capital from institutional investors (and their affiliated portfolio companies) waiting for the opportunity to help stabilize a business through uncertain times and the aim of regaining prestige on the other side.
About Infinity Capital Partners
Infinity offers a full-suite of investment banking services for small and middle-market businesses. Headquartered in Oklahoma City, OK, the company has established a reputation working with closely held businesses with the utmost integrity, discretion and professionalism. For more information about Infinity Capital Partners, including a list of current projects, please visit our website at www.infinitycappartners.com.
