MidCap Advisors is pleased to announce the opening of new offices in Las Vegas, Nevada and Austin, Texas.

Jim Pringle will be the Director of MidCap's new Austin office and will focus on serving clients throughout Texas and the Southwest.

Steve Champlin will be the Managing Director of MidCap's new Las Vegas office and will lead the firm's Gaming and Entertainment Industry Specialty Practice Group.

The Obama Administration’s sweeping tax reforms will have a significant impact on entrepreneurs thinking about selling their businesses over the next few years. The following is a brief summary of the Obama Administration’s tax proposals and the impact they may have on our clients:

1. Capital Gains Taxes Will Increase. The Obama Administration proposes increasing capital gains rates from a historic low of 15% up to 20% on long-term capital gains and qualified dividends. This rate would apply to married taxpayers filing jointly with income over $250,000 and for single taxpayers with income over $200,000.
   

The survey results are in. Despite the slowing economy, liquidity issues and tight lending conditions, deals are likely to pick up for the second half of 2009 according to a recent survey of dealmakers completed by the Association for Corporate Growth and Thomson Reuters.

While the credit crunch is seen as the biggest potential impediment to corporate growth, deals are likely to pick up - in fact, over half of the survey respondents expect the number of M&A transactions to increase through the end of 2009. Also, over 70% of survey respondents expect the debt markets to improve six months from now – opening up greater deal opportunities in the coming months.

The current recession is causing many business owners to begin thinking about their ownership transition strategy. While most business owners realize that now may not be a great time to sell, most want to understand their options so that they can take advantage of a market rebound in 2010.

All business owners intuitively know that they need to have an ownership transition strategy, but few know how to design and then implement a good one. A good ownership transition strategy needs to empower business owners so that they can answer "yes" to each of the following eight questions:

In previous posts we've discussed three areas where business owners can focus their energies to emerge from the current recession with a business that is prepared for sale.  As you may recall, those areas are:

Pine Brook Road Partners announced that it raised more than $1.4 billion for its first private equity fund.  Pine Brook plans to invest $100MM to $200MM of equity in companies that operate energy or financial service businesses.

However, unlike most leveraged buyout firms, Pine Brook takes an innovative approach to dealmaking, providing companies with a "line of equity" commitment instead of using a large amounts of debt to acquire companies as is typical in a leveraged buyout.

Q: Why do entrepreneurs often sell 100% of their healthy business to achieve some personal liquidity?

A: Because they mistakenly believe they have no alternative.

In recent announcements, both Thoma Bravo and New Capital Partners announced they completed fundraising for their newest funds and both were oversubscribed. 

MidCap Advisors has been retained by The Keyword Group, a prominent Italian company, to identify and negotiate one or more strategic acquisitions for them in the United States over the next twelve months.  The Keyword Group is representative of many strategic buyers, both domestic and international, who view the current market disruption as an opportunity to build market share through acquisition and generate superior returns. 

According to a February 2009 survey of 150 CEOs done by CIT and Forbes Insights, a surprisingly high percentage of middle-market business owners say their businesses haven't had problems getting loans during the credit crunch.

Availability of credit wasn't near the top of a list of things that CEOs expect to negatively impact their companies over the next 12 months. Instead, healthcare costs, regulation and customer demand were their top concerns.

Although the pace of mergers & acquisitions activity has slowed, and the highly leveraged deals of the past few years have disappeared, large companies continue to seek growth through strategic acquisition, private equity investors still have capital to deploy, and private owners are looking for timely exit strategies.

While MidCap Advisors has have never been a fan of trying to time the market, we do advise private sellers to prepare their businesses now for a transaction when markets turn around.

Current market conditions are very similar to those after September 11, 2001.  Business owners and business buyers were shell shocked and uncertain about what to do.  Smart business owners used 2002 and 2003 to tightened their operations, clean up their financials, and prepare their companies for sale when the market improved.

Some good news to end the week - it looks like GE is lending again after their fourth quarter 2008 "pause".  Below are some highlights of a conversation with a member of GE's senior management late last week.

In our investment banking practice, most clients come to us wanting to know what their company might be worth if it were sold it to a third party buyer, a member of management or to the employees. As a result, clients want a clear idea of the value of their company and how it impacts their future financial security.