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Private Alternatives to the Public Markets How to Survive and Grow in a Capital Constrained Environment

Private Alternatives to the Public Markets How to Survive and Grow in a Capital Constrained Environment. A Private Conference on May 16, 2001 Sponsored by: Windsor Group Investment Banking Deloitte & Touche Holland & Knight LLP Holland & Knight Consulting. Backdrop to Current Environment.

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Private Alternatives to the Public Markets How to Survive and Grow in a Capital Constrained Environment

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  1. Private Alternatives to the Public MarketsHow to Survive and Grow in a Capital Constrained Environment A Private Conference on May 16, 2001 Sponsored by: Windsor Group Investment Banking Deloitte & Touche Holland & Knight LLP Holland & Knight Consulting

  2. Backdrop to Current Environment • Slowing economy and Internet “bubble” are reducing the opportunities for IPO’s and secondary stock sales • Number of United States IPO’s are down to 429 in 2000 from 538 in 1999 (down 20%) • Only $8.1 billion of proceeds in fourth quarter 2000 versus $27.4 billion in fourth quarter 1999 • Performance very poor in 2000: • Rule “FD could make things worse, due to increasing uncertainty in minds of analysts and portfolio managers

  3. Backdrop to Current Environment • Leveraged loan market has contracted to levels of the early 1990s • Proceeds of debt syndications of $1,175 MM in 200 versus $1,298 MM in 1999 (down 9.5%) • Bank debt multiples at a 10-year low • Bank examiners caused 60% of syndication buyers to exit the market since mid-2000 • Predicting a recession - and may be getting what they predicted!

  4. Backdrop to Current Environment • High-yield bond market is no longer an option for most issuers • Assets more concentrated than in stock market, leading to larger minimum size thresholds (now $250MM+) • Returns under 5% annually since 1998 • Yields and spreads have increased, but liquidity has not returned • 2000 new issuance down to levels of 1994-95

  5. Backdrop to Current Environment cont’d • Significant amount of LBO capital has been raised but not invested yet Source: Venture Economics/NVCA

  6. Backdrop to Current Environment • LBO funds are investing more equity in deals, despite high acquisition multiples implying a reduction in expected returns

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