Preventative health care and capital market trends beyond COVID-19

As private and family business leaders contemplate how to resume or expand operations, they are all keeping a close eye on megatrends in preventative health care and capital markets.

No matter what industry you’re in, preventative health care and wellness should be a priority. They affect your employees, families and bottom line.

The capital markets were also under a microscope well before COVID-19. During the past decade, global debt mounted and has expanded significantly in the past few months. What will this mean if you’re seeking capital for your company’s next steps and beyond?

The megatrends aren’t curiosities. They’re important business issues that could impact your opportunities for growth. If you’ve been following along, you know that for the past few weeks, I’ve been sharing insights from findings that my colleague James Bly, along with the EY Family Enterprise team, have put into perspective for private and family business owners.

The initial piece was an overview of the 10 major trends you should have on your radar. In the second, we discussed the rise of smaller cities and bio and food safety. Now let’s consider two more issues: preventative health care and wellness and capital market conditions.

Preventative health care and wellness

Biometric data. Genome editing. DNA sequencing. New vaccines and antibody treatments. These have become commonplace. We continue to see stories about how antibody testing will play a role in reopening the economy. And biometric data is just as sensitive as a person’s credit score, making it an important business concern.

While homebound, many have relied on telemedicine for their health care and wellness needs. Employees may now expect these remote alternatives as part of their health plans.

How will each of these issues factor into your responsibility as an employer who is charged with protecting information and providing benefits?

Concern over capital market and demand conditions and distortions

CEOs and CFOs of family-owned businesses are watching capital market conditions closely as the Federal Reserve has intervened to help bolster the economy and stabilize capital markets. Interest rates and asset values have shot up and down, but debt levels are high and credit standards are being tightened.

In the first half of 2019, global debt soared to a record $250 trillion, according to the Institute of International Finance.[1] That amounted to 320% of gross domestic product, or $32,500 worth of debt for each of the 7.7 billion people on the planet.

During the last half of 2019 in the US, there was an increase in late consumer auto loan and credit card payments. Coupled with the reported soaring unemployment rates and the growing number of households that live paycheck to paycheck, these conditions may weaken consumer demand over the next couple of years.

Before the pandemic, the nonbank or unregulated credit markets were driving much of the leveraged credit and covenant-light financing terms. They enabled higher-multiple leveraged buyouts and dividend recaps. The secondary trading markets for such credits were very thin, although in January alone, more than $2 billion of new funding was secured by such credit funds.

The confluence of these and other factors may have a negative long-term impact on capital market options for upper-middle-market businesses seeking growth capital or funding for shareholder liquidity. These are complex finance and economic principles that, if not understood, could lead to wrong assumptions.

How current and future government stimulus programs will affect capital market conditions remains to be seen. The rules are still being defined. But that doesn’t mean you shouldn’t start crafting a strategy now. It’s important to be disciplined and find top talent or strategic partners who can relate these trends to your business and support your growth goals, or shareholder liquidity needs.

In my next post, we will look at the increased emphasis on environmental, social and governance criteria and how it, too, may become a requirement for future capital access. And I’ll also tell you about the “transition wave” ahead for family businesses.

Until then, keep the feedback coming. Send me a note about how you’re navigating these and other trends on the horizon.

The views expressed in this post are mine and are not necessarily those of Ernst & Young LLP or other members of the global EY organization.

[1]“High debt may exacerbate climate risk,” Global Debt Monitor, 14 November 2019, ?The Institute of International Finance, Inc.