The credit crunch and all its related problems have surprisingly affected only the top tier of companies, companies that are huge in relative size and are highly leveraged up. This firm just recently closed two deals, and have been able to secure reasonable financing for these mergers/acquisitions. Ofcourse, these companies are smaller in size, with their estimated value ranging from $30 mm to $200 mm.
So what I took from this conversation with him was that there is a sizable amount of capital in the market. Private equity firms are flush with new capital, cuz investors have removed chunks of capital from the stock market, and are investing it with these private equity firms, which are not publicly traded, hence not affected by SEC disclosure regulations; maintain a healthy investment portfolio with companies that they directly control, and have enough clout in the banking industry to command good financing rates.
Its amazing. My boss tells me his business is doing better than ever, while the market tells me that business couldn't be worse.
Contrary to my prior held belief that as big firms have lower risk and greater access to financing, they are a better investment choice, I now am leaning towards the belief that smaller, better managed firms with private equity investors at their helm are a better investment choice.
At least in this market, atleast for the next 2 years..
5 comments:
I think its interesting that Burningsnowz points this out. However i was reading the Economic times and there it states the Chief Executive of BMW as stating that the German carmaker would only emerger stronger from the current crisi in the world. he is quoted as saying that "...BMW will know how to reinvent itself and come out stronger from this crisis in the sector..." All this in spite of admitting that 2009 will be an extremely difficult yearfor the world wide auto industry. However i am not sure that BMW is really a "middle market". however i think its interesting that there are firms that are coming out stronger from the current crisis. this would never have occured to me!
heres the link if anyone wants to read teh article where i read about BMW:
http://economictimes.indiatimes.com/International_Business/BMW_to_emerge_stronger_from_crisis/articleshow/3613070.cms
The link doesn't seem to work for me. Can anyone see the article?
Your article is very interesting. Once again, I think it somehow proved the idea of "Two big too fail". Big banks, as a lot of people believed and as Burningsnowz pointed out, were supposed to have "better investment choice". However, reality contrasts. They seem to know that they are too big too fail, that the government will help them out at some points, and thus, they seem to care less about risk. The mid-size firms, on the other hand, have no one to back them up. Of course, they do not want to die, so they have to be independent on its own and be cautious w/ each investment it decides upon. This might be why some firms as your boss' are still doing well :). Gluck to him
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