On Tuesday evening, the FourBridges team headed over to the Hunter Museum for Chattanooga’s annual Association for Corporate Growth (ACG) conference.
Founded in 1954, ACG is a global organization with 58 chapters and more than 14,000 members, including private equity professionals, investment bankers and intermediaries, attorneys, auditors and accountants, lenders, corporate development officers, company leaders and other middle-market focused professionals. ACG focuses on bringing dealmakers together, providing them with the opportunities, capital and services to achieve business goals.
FBC Managing Director Chris Rowe, president of Tennessee’s ACG chapter, moderated a discussion “up and down the balance sheet” about what’s happening in the world of M&A and loan transactions. We heard some great insights from four panelists:
- Michael Mathis / Executive Vice President and City President, Regions Bank in SE TN
- Allen Jackson / Senior Investment Officer – Portfolio Manager, Unum Group
- Casey Hammontree / Partner, Tenth Street Capital
- Brent Kulman / Director of Business Development, BB&T Capital Partners
So, what did we learn?
Senior debt market:
- Money is cheap, for now. Credit is flowing, which is driving down rates on senior and subordinated loans.
- High-quality deals are basically a slam-dunk – if lenders can find them. Quality is at a premium, so if you’ve got it, don’t drag your feet. You might want to consider hitting the market sooner rather than later.
- “Covenant light” deals are increasing. Due to competition, covenants are becoming less stringent with fewer restrictions.
- As Jackson phrased it, “If you can’t issue high-yield debt right now, then you shouldn’t be in business.”
- Pricing has settled into the 11 to 13% range. And warrants are a thing of the past.
- Pricing pressure from senior lenders is picking up, which is spilling into the mezzanine market.
- It’s a seller’s market. There aren’t a lot of deals on the market right now. Quality companies are getting chased, but really, there’s room for everyone: given the lack of deal flow and the large amounts of investment-ready capital, tougher deals can get done, too.
- Valuations are high. Like, really high. In fact, current pricing exceeds levels in 2012 as well as 2007, when it previously peaked. One panelist participated in a sell-side process that yielded more than 80 indications of interest.
If you have questions about the current lending or M&A markets, give us a call today at 423.266.7490. To learn more about ACG Tennessee, visit acg.org/tennessee.