 |
Michael
Poole
PCE Investment Banking |
Florida Dealmaking: Trends
& Deals
Our Economy's 'Creative
Destruction'
January 2003
"What
is essential is invisible to the eye."
From 'The Little Prince' by Saint Exupery
The above quote is an understatement as it relates to the economy.
The cloud of uncertainty continues to hang over us like a heavy
fog. While we receive reports of an improving economy, the recent
negative unemployment report provides us a mixed message. Many believe
that the geopolitical issues are causing Americans to turn cautious.
Economists wonder if the world controversies are masking some "essential"
issues that are weighing the economy down. (They have to "wonder"
about something or they have no job).
What could that fundamental issue be? Perhaps the over-capacity
in our industries? While many companies have pared down their employment
forces, most have not "destroyed" their excess physical
capacity.
So how does this relate to mergers & acquisitions or corporate
finance? We believe that the economy is entering a heightened period
of "creative destruction". Capitalism is built on destroying
unproductive assets, which allows the remaining assets to become
more productive or re-deployed in more efficient means. This destruction
occurs primarily through mergers & acquisitions, or financial
restructuring.
While the public market has experienced the painful process of recognizing
the loss of equity value, the private market has been delaying this
realization. But you cannot run forever. The financial reality eventually
catches you and makes you acknowledge the losses.
This is one of the reasons we believe that M&A activity will
increase over the next year. Our recent survey of private business
owners in Florida confirmed this belief. In addition, many companies
with improving balance sheets (liquidity) are starting to hunt opportunistically
for acquisition targets. Equity funds flush with unspent cash are
looking aggressively for investment opportunities lest they face
the unpalatable alternative of returning the funds to investors
(I think not).
Although the investment banking industry is suffering through on
of its worst periods, we experienced growing momentum in 2002. This
energy has continued into this year. Our current client relationships
are focused primarily on sell-side engagements. However, we are
witnessing increased client engagements related to obtaining growth
capital.
Some of our most recent transactions include:
Unique Electronics: financial advisory services
and securing a senior credit facility
Schwartz Electro Optics: acted as intermediary
in the sale of Applied Optronics division.
Classic Chevy International: acted as intermediary
in the sale to Eckler Industries.
PCE
Investment Bankers is a member of the PCE family of companies that
provide investment banking, valuations, advisory services, research
and Indexes.
|
