It’s fitting the annual Association for Corporate Growth (ACG) West Coast M&A Conference was held on St. Patrick’s Day. We were all feeling a bit lucky with a nice bounce-back in the markets, and a cautious sense of optimism was shared by many of the upwards of 300 attendees, consisting of specialists in private equity, banking, and finance and accounting, as well as entrepreneurs.
A faint wariness has been in the air since November, when the economy had a clear drop in financings and valuations. Conference attendees in general believe the dip was due to overheated valuations that had continued to rise despite concerns over whether imprudent investments were getting made.
With the state of the markets setting the stage for the event, there were many takeaways to be had at this San Francisco conference, which I attended with my counterparts at RoseRyan, Terry Gibson, who oversees the RoseRyan Private Equity service, and director Stan Fels, who was there for the small-business perspective. Here are the topics everyone was talking about:
- In one session, approximately 30% of the attendees predicted that there would be a recession starting some time in the next year and a half. It was tempered with thoughts that it wouldn’t be nearly as bad as the 2007/2008 recession.
- There was a strong shared sentiment at the conference that the business cycle has gone to the wayside as Fed policy is now the biggest indicator of whether the economy will expand or contract.
- A common topic of discussion was the democratization of fundraising. This is taking form through the increased use of technology to bring buyers and sellers together in an efficient way. Tremendous growth in the enabling technologies has made this all possible (consider these now-common names we didn’t know a decade ago: Kickstarter, Indiegogo, Lending Club, GoFundMe, Lending Club, Prosper and Funding Circle).
- The personal touch is not leaving. Investors still want to understand the business owners who are seeking money. The old rule of being close to your money still resides. This was emphasized from the private equity folks in the room to the entrepreneurs as well.
- Bankers are starting to get risk averse—no surprise there.
- There is lots of money in the PE marketplace. Due to the dearth of opportunities and low interest rates, opportunities are still out there. Valuations are coming down dramatically. Fidelity, in particular, has been aggressive in downgrading its investments.
- Fintech is exploding, enabled by the rise in big data and analytics. Machine learning and artificial intelligence have helped companies in this field better gauge risk and tap into markets where bankers are afraid to risk capital. Attendees and speakers expressed great optimism about this sector and marveled that it’s a phenomenon that’s been going on for at least five years now.
Deal-making has its up and down times, but there are opportunities in the M&A space at the moment. Capital is definitely available. It is a safe bet that there will be more prudent investing, more cautionary growth plans and more options on how to raise money in the coming year.
And there will certainly be new ideas brought to the table by entrepreneurs looking to transform our lives. The last session I attended was an entrepreneurial meetup in the style of the TV show Shark Tank. I watched as Amy Errett, CEO of startup Madison Reed, flawlessly executed her pitch for a prepackaged hair coloring kit billed as “makeup for hair.” Using a combination of technology and healthier formulas, the startup is attempting to be a disruptor in the hair-coloring space.
As the father of three daughters, I took notice when Amy mentioned the hair coloring market is a $50 billion industry. I introduced myself to Amy after her presentation and took the free $75 gift certificate and headed out the door, feeling cautiously optimistic about the prospects ahead.
Chris Vane is a director at RoseRyan, where he leads the development of the finance and accounting firm’s cleantech and high tech practices. He can be reached at [email protected] or call him at 510.456.3056 x169.
