BoyarMiller Capital Markets Forum Reveals Strong Business Confidence; Available Investment Capital Provides Options for Growth
Steve Kesten of BoyarMiller, Matt Anstead of EV Private Equity, Bill Pyle of Texas Capital Bank, Ali Nasser of AltruVista, and Chris Hanslik of BoyarMiller.
HOUSTON (Oct. 16, 2017) – Business confidence is strong with positive deal flow and available investment capital, said finance experts at “The Current State of Capital Markets” breakfast forum hosted by BoyarMiller, a Houston-based business and litigation law firm.
“There was a collective sigh of relief from our attendees as the presenters delivered their insights on the availability of capital and positive perspectives on the current business environment,” said Chris Hanslik, BoyarMiller chairman. “Obviously there are always challenges, but I know our attendees heard some optimism at this annual discussion.”
The breakfast forum panelists included Matt Anstead, Partner of EV Private Equity; Ali Nasser, Principal and Founder of AltruVista; and Bill Pyle, Managing Director of Syndicated Finance, Texas Capital Bank.
Improved Oil and Gas Sector
Matt Anstead of EV Private Equity said he is focused on the oil and gas sector and sees consistent deal flow and many new transactions since the challenges of 2015-2016.
“This is a changing market and we can be more confident about the future because the industry has become sustainable at $50-per-barrel. For planning purposes, we assume prices will remain flat between $45 and $55 per barrel through 2018. Maybe that’s conservative, but that’s okay.” said Anstead. “Companies that have survived the last couple of years are leaner, more focused and can now realize opportunities for growth.”
Anstead said the bright spots of the global oil and gas industry include the U.S. shale plays and called it an “incredible reversal” of the downturn in 2015-2016.
“However, that is much less the case outside of North America. International offshore sector has not experienced the same recovery, but it may offer buying opportunities if you believe in the long-term importance of offshore supply.”
According to Anstead, private equity companies are providing capital in place of bank funding as banks remain circumspect about oilfield services following the downturn. As a private equity firm, his company’s strategy is to generate returns through growth by using technology to drive down operating cost and increase productivity for operators in the oil and gas sector.
“There are tremendous opportunities out there,” said Anstead. “Great companies that took care of their businesses and their balance sheets during the downturn are now growing strongly again.”
High Valuations Deliver Options
Ali Nasser of AltruVista agrees that business confidence has increased substantially this year.
“Incentives are possibly coming with reinvestment and there is the potential reduction in corporate tax rates. We are in a period characterized by historically low unemployment, reasonable GDP growth and the markets are doing well,” said Nasser. “All those factors are having a positive impact on business valuations.”
The increased confidence and higher valuations are the triggers for a dilemma among entrepreneurs and business owners—should they evaluate the potential for re-investment growth or consider this an opportunity to execute an exit strategy?
“There are generally three things business owners need to consider when evaluating their options,” said Nasser. “Those are opportunity cost, risk, and where they are in their business and life cycle. Depending on goals for their company and opportunity cost for alternative investments, an entrepreneur needs to prioritize their overall strategy. Are you ready to move on and monetize? Do you have a passion business that you want to continually grow? Do you want to pass on the business, perhaps to a family member? What is your end goal?”
Nasser advises business owners to consider their options regardless of anticipations from the Federal Reserve on interest rate hikes.
“While the Fed indicated that there may be an interest rate increase in December, and perhaps three times next year, the market has already priced in the probability of those hikes,” said Nasser. “We can’t predict where interest rates or inflation will be a year from now, but inflation has been very mild and it is usually the driver for increased costs. Do what is best for your business now and focus on what you can control.”
Bill Pyle of Texas Capital Bank said it is a robust environment to do business right now, which is good for borrowers. He advises business owners to obtain financing that is reasonably priced and flexible, so if there is a downturn, there are options to work through the problems.
While banks that service the energy industry are shying away from lending, Pyle said that middle market business-to-business companies that need growth capital are desired by most banks.
“Banks are very profitable right now, partly because there is liquidity in the market,” said Pyle. “Every bank competes for the same type of loans because the regulators don’t want banks to loan to those industries considered high-risk, like construction, energy and real estate.”
According to Pyle, industrial companies providing services to the downstream sector are doing very well and not considered high risk by regulators.
“Basically, if a company is tied to the drill bit and had no revenue last year, we can’t structure a loan that will meet regulatory approval,” said Pyle. “The fallout from the financial meltdown meant that changes were needed. But regulators will not keep banks from being successful. Banks want to consider all types of opportunities, however for some, it may be an uphill battle.”
Pyle was optimistic stating it is a fantastic time for businesses to see revenue up year-over-year.
“The lending industry is making more loans and it is a good time for businesses that have a recurring revenue model with an inflation adjustment built in. Regulators still watch the market because somewhere out there is another correction. But for now, it’s a great capital environment.”
The BoyarMiller eBook highlighting key insights of the “The Current State of Capital Markets” breakfast forum is available for download on the BoyarMiller website.
BoyarMiller is a Houston-based law firm comprised of two practice groups: business and litigation. The business group serves multinational companies, middle-market businesses and entrepreneurs in need of collaborative and strategic representation. The litigation group represents organizations of all sizes, from entrepreneurs to Fortune 500 companies, seeking to resolve complex business issues and employment disputes.