Welcome to our July Broker-Dealer Newsletter.
For July, I share some thoughts as to 2023 year-to-date results along with the deal outlook for the remainder of the year. Then, Michelle Mueller will provide compliance updates, and Zaya Bold will do so for collaboration.
To all of our success!
2023 YTD and Outlook for Remainder of the Year
As we move into the second half of 2023 countervailing and difficult to forecast market forces have and continue to impact the middle market deal environment in both positive and negative ways.
On the positive side, we see a cautious optimism across market stakeholders – operating companies seeking capital for growth and recapitalization, private equity firms looking to build portfolio company value “inorganically” acquisition, and corporate buyers seeking special situation opportunities to buy complementary businesses.
Much of this activity and optimism is driven by very strong public equity market performance – with since January 1st the S&P 500 up 14% percent and the NASDAQ a sizzling 31% percent.
And some deal sectors are experiencing almost boom deal times – most notably healthcare and anything related to green and alternative energy.
Then there is the great curiosity and stratospheric valuations for anything touching artificial intelligence (AI).
Total AI related VC funding activity in the first six months of 2023 was more than $25 billion and represented more than 20% of all global VC funding (Crunchbase).
Probably more impactfully, companies across industries are making extremely significant investments of time, money and attention, exploring how to implement AI technologies across their business processes.
These upshoots helped somewhat offset the overall market softening of global venture funding activity in Q2 down 18% from Q1, and down 10% from the 2nd half of 2023 (see Crunchbase above).
The M&A market was similarly down, with the overall volume of deals (18,159) hitting its lowest level since 2020 (Dealogic).
Fortunately, activity on the GTS platform performed better than the market as a whole, with 63 new client mandates onboarded in Q2, resulting in 11 transactions with an aggregate deal volume of approximately $330 million, completed (compared to 10 transactions in Q1 with a deal volume of $110 million).
Finally, a word on this high interest rate environment, which is definitely causing many doable deals to fall by the wayside.
We have seen rates on cash flow based loans quoted as high as 15%. And while the pivot of PE firms to more and more financing their own deals, rates at this level just make too many deals simply undoable.
The sense here is this rate “chilling effect” will somewhat mitigate in the second half of the year, driven less by interest rates coming down than by deal parties just adjusting to and accepting this “new normal.”
So as almost always things could be better things could be worse.
But of course as always also let’s just go do deals!
Finra Regulatory Element Continuing Education. Registered Persons must complete their Regulatory Element CE annually by December 31 of each year moving forward.
More information and instructions can be found here.
Michelle Mueller, Chief Compliance Officer
Platform Resources and Deals
Referrals. Do you know an investment banker looking for the benefits of independence and professionalism provided on the GT Securities platform? We are always interested in speaking to highly ethical and credentialed banking professionals to join our platform. Please reach out to me at [email protected]
Zaya Bold, Director of Banking Partnerships