Opus Connect's Newsletter

Deal Announcement

We're thrilled to share news of a significant transaction orchestrated by our member, Terry Mocherniak, from Apex Capital Advisors Inc.?

Node-App, a leading digital platform that automates content production and distribution via a network of verified creators, has been acquired by a major player in the marketing technology sector. This acquisition aims to expand their service offerings.

It's important to mention that over the last decade, social media has become an integral part of marketing strategies for major corporations, particularly through influencer marketing. As this market continues to grow, we anticipate a surge in startups seeking funding from private equity firms and venture capitalists to maximize this booming sector.

Exciting Partnership Announcement: Opus Connect And BestFit PEO Solutions

We are delighted to announce our new strategic partnership with BestFit PEO Solutions, a leader in PEO brokerage services. This collaboration is set to greatly enhance the resources available to our members, providing expert advice and preferential pricing on human capital solutions. Through this partnership, Opus Connect members gain unparalleled access to a wealth of PEO knowledge and tools, empowering them to navigate complex human capital challenges with ease. Learn more about how this partnership can benefit you by sending us an email at [email protected].

Economic and M&A Insights

Stock Market Advances After Soft PPI Release

After a 12-month continuous rise, with the Producer Price Index (PPI) increasing by 2.3%, the PPI for May 2024 saw a decrease of 0.2%. This shift suggests a potential reduction in inflation, potentially leading to a more favorable economic outlook ahead of the upcoming November elections.

Comment: Monitoring economic indicators related to inflation is crucial for predicting trends in the M&A sector. With the recent decrease in the PPI and advances in the stock market, inflation could drop in the upcoming months. This suggests a potential rebound in the M&A sector, which has been slowing since 2023 due to global uncertainties deterring international investors.

Private Credit Leaders Are Shifting their Strategy

Private credit giants like Blackstone and Apollo Global Management are adopting innovative strategies to maintain their strong returns in recent years. These strategies primarily involve reducing their financing costs, diversifying their investor base, and focusing on smaller, higher-risk businesses to enhance returns.

Comment: The Private Credit sector has experienced strong performance in recent years, bolstered by favorable rates and returns among leading financial institutions. However, with rising competition, major players like Blackstone and Apollo are compelled to adjust their strategies. This shift suggests the market may be reaching its peak and normalizing returns. While this could lead to more favorable financing costs for business owners seeking such funding, it may pose challenges for medium and smaller players in the Private Credit sector.

Mexican Economy Plunges After Elections

On June 2nd, Mexico held presidential and congressional elections, resulting in a decisive victory for Morena party candidate Claudia Sheinbaum, who secured the presidency with a 30% lead over opposition candidate Xóchitl Gálvez. This outcome, coupled with Morena's majority in Congress and the current policies of president López Obrador, prompted concerns among international investors about the future economic policies. As a result, there has been a significant shift of capital out of Mexico to other markets.?

This investor reaction has led to a 7% decline in the Mexican Stock Exchange and a 10% depreciation of the Mexican peso.

Comment: The recent elections and the anticipated congressional majority for the Morena party have raised significant concerns among key political and economic analysts. There is apprehension regarding proposed bills perceived as detrimental to transparency, which are unsettling for international investors. The importance of these developments is underscored by their potential impact on both Mexican and American businesses that have benefited from nearshoring advantages due to their geographical proximity. This situation could influence the operational dynamics and economic benefits previously enjoyed by corporations engaged in cross-border collaborations.

Opinion Article

The Evolving Deal-Making Landscape: Insights From Investment Bankers For The 2024 M&A Market

By Bill Bowler, Sales & Business Development Associate at Opus Connect

Discover Insights from Investment Bankers for the 2024 M&A market. Learn how interest rates and geopolitical uncertainties are shaping the evolving deal-making landscape.

The M&A market has recently faced a challenging environment characterized by interest rate fluctuations and geopolitical uncertainties. Global M&A activity saw two consecutive annual declines in 2023 and 2022 following the boom year of 2021, where a large amount of dry powder combined with very low interest rates led to a record-setting year. Despite the recent slowdown in M&A deal activity, investment bankers remain cautiously optimistic about the evolving deal-making landscape and an increase in new opportunities.

Influence of Interest Rates and Geopolitical Uncertainties:

A slowdown in M&A deal activity can influence market psychology, further dampening enthusiasm across all sectors in general. According to Matt Gilbert of Gilbert & Pardue Transaction Advisors, “2024 appears to be a bounce back year for deal volume but it is also one where the players are cautious due to the interest rate impact, impending elections, and now Capital Gains tax uncertainty (again).” Chris Karl of Jegi Clarity added “The slowdown in M&A across most sectors can be tied back to the increase in rates and geo-political conflicts exacerbated things from there.? In recent months the ambiguity around the potential of a prolonged higher rate environment has created additional consternation in certain pockets of the market and in a select few it has created some urgency to act.”

Resilience in Uncertainty: Industry-Specific Impacts:

Not all industries are equally impacted by recent challenges. Brian Valik of League Advisors, LLC stated: “While interest rates have significantly affected sectors such as real estate, our operations are largely unaffected since we primarily focus on home services, business services, and construction services. In these sectors, the impact has been minimal.” Melvyn Threatt-Peters, Director at DAK Group, commented “Right now, it seems that less regulated, recurring revenue, service-based businesses are in vogue regardless of sector. We see this trend continuing alongside interest in more regulated sectors such as healthcare services where more specialized sponsors and strategics can generate alpha. We also see interest in industrials, infrastructure, and technology, as the US and private sector retool to become more self-sufficient.

Strategic Positioning of Companies for Success:

Across all sectors, certain companies appear to be better positioned than others for success. Nicholas Kirk of The Hickory Group, LLC said that “We see strong potential in corporate carve-outs as larger enterprises rethink their return on capital from various business units. Second, we remain bullish on the opportunity to serve family-owned enterprises as younger generations, finally in the c-suite, may see more value in an exit -- solidifying their family's imprint on an industry via an exit -- than having to fight through supply chain issues, an increasingly complex regulatory environment as well as a global playing field.” Gilbert also acknowledged “CEOs across US industries recognize that M&A remains a vital strategic lever to expansion and that baby boomer businesses can be bought fairly to drive growth hungry investor demands. It has been reported that companies making multiple small to midsized acquisitions annually over ten years have delivered better shareholder returns than those relying solely on organic growth.”

While many challenges persist in the evolving deal-making landscape, strategic opportunities exist for investment bankers who can navigate these complexities and identify resilient sectors and targeted acquisition strategies. The cautious optimism among industry experts suggests that 2024 is seeing a rebound in deal volume, albeit with a heightened sense of awareness and strategic foresight.