What will have a big impact on the middle market over the next year? To find out, we asked a handful of private equity investors, lenders, investment bankers and advisers to make some predictions. Social media is top of mind for Watermill Group's Ben Procter, who says it will play an increasing role in PE. "The industry has been very slow to pick up on social media, but it's a trend that I think is really going to take root."
Another development Procter points to is 3-D printing. We've already started to see the technology fuel M&A with the recent $403 million purchase of MakerBot Industries LLC by rival Stratasys Ltd. Technology innovations, such as 3-D printing, will lead to "a lot more excitement in the manufacturing sector," predicts Procter.
Over the next year, there will continue to be a significant supply of capital from non-regulated lenders, particularly as Basel III requirements and other bank regulations come into effect, predicts Cheryl Carner of Crystal Financial, a middle-market lender. "It will be more challenging for banks to do the transactions that they have historically done, so private equity firms and other middle market companies are going to have to continue to explore alternative lenders, whether that be credit opportunity funds, business development companies (BDCs), or other entities that are non-regulated, as those lenders will have more flexibility to provide the capital solutions they're looking for."
Bill Roman of Harris Williams is keeping a close eye on the Federal Reserve and the "process of deleveraging its balance sheet and pulling back on all the quantitative easing that has taken place." Roman predicts the impact will be negative on lending markets and on corporate growth.
Health care will still be a big focus of middle-market private equity, says Claudine Cohen, who leads Grant Thornton's health care industry group. A year from now, "a lot of the ObamaCare uncertainty may have worked itself out of the system, and people will know more about what's happening, and that will lead to more deal flow in health care."
Procter, Carner, Roman and Cohen spoke on camera with Mergers & Acquisitions at ACG Boston's Growth Conference 2013, hosted by the Boston chapter of the Association for Corporate Growth. The event brought together 600 middle-market dealmakers for the biggest M&A event in New England. Watch the video interviews at http://themiddlemarket.com/video.