2024年春季通讯

The big trends weexpect will define 2024: From the CEO Though the Federal Reserve has castdoubts on imminent interest rate cuts,there will be a surge in market activity—with only the best of the best attractingbuyers' attention—when the first rate cutdoes happen. As we move deeper into the second quarter of 2024, we arefeeling—and seeing—a lot of optimism across the boarddespite continued macroeconomic uncertainty. The views we shared with you in our Fall 2023 newsletter onthe resilience of the economy have held true. The economyhas continued to weather storms with rolling recessions onlyaffecting specific industries. We have seen some indication thatthe lower end of the consumer market is running out of steamwith respect to spending as household purse strings aregetting tighter due to slower pace of reigning in inflation. Still,our expectation remains: while the economy is sluggish, it willnot go into a national recession any time soon. The fundamental shift from public marketsto private markets continuing, with morecompanies pursuing liquidity options innon-traditional or non-public markets. Most industries are seeing an uptick in activity as we movefurther into the year, with robust deal activity in several standoutsectors including energy and healthcare. Meanwhile the risingtide of AI continues to put some pep in the step of the techsector, particularly on the venture capital funding side. Activity is ramping up in anticipationof rate cuts. While there is increasinguncertainty about the timing, manycompanies are lining up on theproverbial air strip so they are ready togo to market on day one. Preparing for take-off In recent months, capital markets have picked up even morestrongly than we expected, boosted by the belief that interestrate hikes have stopped, and a cut could be on the horizon latethis year, though well after the markets had initially anticipated.We are seeing strong activity in private credit and on thedebt side—a noticeable improvement over last year whenthe market was closed for certain credits. The confidence ofmarket participants continues to strengthen, including strategicbuyers who are making a comeback. We have had several transaction opportunities that were set to close with privateequity (PE) funds that had been passed on earlier by strategicbuyers, who later returned and put offers on the table higherthan those presented by financial buyers. Overall, there is less nervousness in the market with lessinvestor focus on the 2024 Presidential election than we hadanticipated. The first Federal Reserve rate cut is the main eventeveryone is eyeing. While there had been market consensusthat cuts will start happening in May, June, July, or August,Jerome Powell’s recent remarks implied the first cut couldhappen this autumn – or even later. While there is uncertaintyabout the timing, activity is ramping up in anticipation, with manycompanies lining up on the proverbial air strip so they are readyto go to market on day one. Our pitch count is up, and manycompanies are hiring bankers in anticipation of the windowopening so they can act quickly. The market seems to beembracing the motto that it is best to be prepared. Going public is no longer the stamp ofsuccess for a company as the cachet ofthe private markets increases. Peopleare voting with their feet, pursuing themany other liquidity options that arenow available. teams to satisfy exchange requirements, whether it is theNASDAQ or New York Stock Exchange. The time and financialcosts are so high, it is becoming harder to justify securingliquidity this way when one can secure 95% of the benefitsthrough the non-traditional or non-public markets—withoutall the hassle. Going public is no longer the stamp of successfor a company as the cachet of the private markets increases.People are voting with their feet, pursuing the many otherliquidity options that are now available. After the market was essentially closed for 18 to 22 months,resulting in significant pent-up demand, the stabilization ofinterest rates plus the favorable performance of the stockmarket is generating more appetite for deal execution. Arate cut would only serve as an accelerant, as opposed to anecessary condition. The allure of the private markets This trend from public markets to private markets, and fromregulated entities like banks to non-regulated entities likeprivate credit funds is ramping up. We see this as the biggestmacro trend shaping capital markets in 2024 that is not beingdiscussed more broadly in the press and beyond. At the same time, the fundamental shift from public to privatemarkets continues. In terms of lending, this trend has accelerated as stability ininterest rates has enticed more companies to borrow. Thoughsome of the larger, more stable banks are getting moreaggressive around leveraged finance, the private credit fundsare clearly driving the market. While the regulatory environmentcontinues to be handcuffing banks, the private credi