Insights

While it is sometimes true in the financial world that “Past performance is not necessarily indicative of future results,” looking at history can show us that the private capital markets do follow trends in the public markets. For example, after the stock market crash in October 1987, the market for high-yield bonds, which were used to finance many leveraged buyout (LBO) transactions at the time, effectively dried up. As a result, the LBO market experienced a short-term, but drastic, slowdown. Two decades later, the private debt and equity markets followed the public financial markets’ surge to all-time highs, with aggressive leverage multiples, reflected in everything from mega-deal acquisitions to consumer mortgages. In the recent melt-down, with the stock market plummeting and the simultaneous freezing of the credit markets, both valuations and leverage multiples contracted severely. 

As the dust settles and a cautious sense of calm is restored, we at Schneider Downs Corporate Finance see reason for optimism. Following the public markets’ rebound over the last six months, we have witnessed both strategic and private equity buyers more proactively seeking acquisitions as well as mid-market business owners once again looking to sell their companies.

Schneider Downs Corporate Finance, LP is a registered broker/dealer.

Member FINRA/SIPC.

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