The NorthView Compass
November 2021 Edition
“It’s not how you start, but how you finish!”
…and its going to be a hell of a finish to a wild 2021. We’re over 3/4th of the way and, no surprise, 2021 continues to break deal activity records, for right reason too.
We sometimes feel like a broken record with all the inflationary talk (told you so) and overall M&A activity…don’t get us started on yet another stimulus bill.
2021 is a year for the record books in all things finance – stock market, crypto, M&A, capital markets, commodities – and if you haven’t already acted on or even thought about one of two things this year, your business will likely be left behind:
1: Access Debt – whether refinancing, growing, or acquiring, debt is the most liquid and cheapest it has been…for now. Lenders from Bank ABL to non-bank unitranche and everything in between are aggressively putting capital to work.
2: Sell all or part of your business – see our M&A section from the last 5 Northview Compasses. We’ve been focused on M&A activity because, well, you should be too. If selling your business is something you plan to do in the next 5 years, you may want to consider moving up that timeframe…you know, the whole “make hay, while the sun shines” thing. And you don’t have to sell all of it to take advantage of these ridiculous valuations…
Lastly, we wanted to give a shout out to our newest partner in Dallas, Mark Hoy. We’re excited about him joining our team. He brings a very interesting and complementary skill set to our engagements. Read more about Mark here.
Debt Markets Are Booming
To go along with the boom in M&A we’ve seen throughout 2021, capital markets remain strong as well. Companies are using more debt to fund their acquisitions and are taking the opportunity to refinance to their advantage in this environment. Additionally, with companies implementing new growth plans, many are utilizing the debt markets to access more working capital at low rates before rates potentially begin increasing.
Moving On From LIBOR
The move away from LIBOR has been discussed for years, but recently JP Morgan became the first major bank to turn that talk into action. They’ve sold the first corporate term loan not tied to LIBOR, paving the way for more loans to be brought to market without it in the near future as well. This new structure utilizes the SOFR benchmark instead. Now that the first domino has fallen, how are you handling the transition with your lender(s)?
For the backstory on LIBOR and why it’s being abandoned, check this episode of Planet Money from NPR. It details how the rate was originally conceived and ultimately exposed as a tool for widespread collusion among banks in 2008.
A dedicated resource for M&A news, announcements, and insights
In what shouldn’t be a surprise by now, M&A markets set another record in Q3 surpassing 2019’s record annual deal value for PE dealmaking. Read that again…M&A Activity in 2021 through Q3 has already surpassed all of 2019, which was the best year in history before now. PE firms remain bullish and show no signs of slowing down. Fundraising in Q4 is looking to remain just as strong as dealmaking and is expected to end the year on its highest note. Expect PE firms to remain in the driver’s seat pushing M&A markets into 2022.
A dedicated resource of curated content for CFOs
Echoing the message of our featured article, many companies are acting now while times are good. Lenders are eager to deploy their dry powder. As inflation continues to rise however, lenders may adjust their approach. In addition to securing easy credit before it dries up, companies are also identifying strategic opportunities to capitalize upon as well.
Another record broken, this one may not be what you think…a record low of commercial bankruptcy filings. Even in the COVID aftermath, lenders haven’t tightened the screws to their “problem child” borrowers…yet.
Other Recommended Reads
More than 6,000 everyday products are made from petroleum including some you may not have thought about. You’ve probably already noticed it most at the pump though. Oil and gas prices are running up faster than, dare we say, Bitcoin.
Oil Builds on Highest Close in Seven Years as U.S. Dollar Falls – Bloomberg
The White House authorized the release of 50MM barrels of oil from US Reserve in a move that it coordinated with countries like Britain, China and India to help lower gas prices. That may draw the ire of OPEC.
We discussed the ease of raising transactional capital, specifically debt, in this month’s newsletter. Buyouts are leading the charge here and it gets even more interesting.
Corporate Buyout Loans Near Highs of 2007 – WSJ
Inflation is a common a topic as the word “unprecedented” was last year. This inflation run up hasn’t been seen since the 1980s.
Up the Price Pipeline, Inflation Rages at 20% – Wolf Street
But why so much inflation? Perhaps understanding the reasoning will help you prepare.
EXPLAINER: Why US Inflatin is so high, and when it may ease – AP
Last inflation article, at least for this newsletter. It’s such a mainstream topic these days, that most outlets don’t offer solutions.
Opportunities to Free Cash from your Balance Sheet – McKinsey
Many companies aren’t able to hire full-time, and frankly a consultant may be more appropriate. What to expect when looking to add an advisor to the payroll.
The Year Consultant Salaries Emerged from Quarantine – Jennings Executive Search
Even better than ’95?!
If some of us show up to meetings rocking pearls for a while, you’ll know why. Go Braves!
About NorthView Advisors
NorthView Advisors is a full-service, lower-middle market focused, investment bank that prides itself in establishing and maintaining meaningful, personal relationships with its clients and investors.
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