Q1 Texas Capital Markets Update
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Thoughts on Tatum’s January 29th “Dallas Capital Markets Update”:
Randy Ray / Gardere Wynne: Besides the evolving focus on the MAC (Material Adverse Change) clause as a dealbreaker as dealflow declines, he covered the “newfound legitimacy” of SPACs (Special Purpose Acquisition Companies), with 66 SPAC IPOs in the US last year, five Texas SPACs raising over $1 billion, and over $11 billion in SPAC IPOs in the 2008 pipeline. SPACs are an interesting investment vehicle in that they allow public financing of private equity, based on the backing of a particular management team.
Paul Howell / Grant Thornton on the IPO Market: He forecasts a strong global IPO market for early 2008, with energy and tech the leading sectors, and a continued decline in global IPO market share for NYSE and NASDAQ. Last year, the
Keith Winzenreid / J.P. Morgan (debt markets), and Mark Dufhilho / Houlihan Lokey (M&A) both focused on the contrast of first half of 2007 (low interest rates, historically low default rates, aggressive multiples, high dollar volume of M&A transactions) to second half 2007. The nugget from Mark is an analysis of 2nd half 2007 deal volume by deal size. Deals over $500 million “evaporated”, but middle market deals continued to get done. He supported that thesis with evidence to support private equity ‘dry powder’ for deals, and continued hedge fund growth.
The 2008 net: continued capital availability for middle market deals but at lower multiples, declining global share for US IPO’s, continued growth of hybrid financing styles like SPACs to fill the US IPO gap.
-John Reed