Contact:
Jim Simpson
Broadgate Capital Advisors LLC
203-329-7491
Mid-Size Companies Express Optimism
About Access to Capital
Banks still dominate, but terms may ease
Better outlook for public offerings
Greater role for private equity
NEW YORK, October 6, 2003: The expectations of many mid-size companies
regarding their near-term access to sources of capital seem to reflect significant
optimism about the market, according to a recent survey of 167 senior financial
executives conducted by Broadgate Capital Advisors (BCA) and The Financial Executives
Consulting Group (FECG).
The respondents represented companies with average sales of $220 million and
that were active participants in the capital markets, raising an average of
$100 million in financing over the past twelve months. About 57% had gone to
the capital markets in the past 12 months and a roughly equal number, about
59%, expected to enter the capital markets again in the next 12 months.
Bank debt, as a whole, continued to dominate as the preferred source of capital
according to the survey. However, many respondents expected some easing of bank
credit: about 31% plan to access unsecured debt in the coming year, which was
up from 23% who had done so in the past twelve months. Also, 84% of respondents
said that an existing relationship was the largest single determinant of their
choice of future capital provider. Next in importance, according to 55% of respondents,
was price along with flexibility of terms and conditions.
Survey respondents also had a brighter outlook for public offerings and expected
a larger role for private equity investment. The number of respondents considering
public equity as a capital source during the coming year was 11%, up significantly
from 5% who used the public equity markets in the past year. Additionally, about
26% of respondents expected to approach private equity firms for capital in
the next twelve months, up from 22% who did so in the past twelve months.
Finally, the survey indicated that 25% of respondents had to renegotiate terms
and conditions with their capital providers in the past 12 months that, in addition
to consuming management time, translated into an expensive undertaking. More
than half of those respondents said that it took them three or more months to
renegotiate the terms of their financings and that capital providers charged
between 25 and 100 basis points.
"The survey confirms that banks continue to dominate mid-size company
financings. However, companies are beginning to expect the return of ‘cash
flow’ lending, and a corresponding reduction in secured financing, in
anticipation of recovery and improvements in their companies’ financial
performance," said Jim Archibald, Managing Director of BCA.
"However, despite the optimism about accessing the capital markets as
expressed by the participants in the survey, anyone who expects an easy negotiating
session is bound to be disappointed," according to Bruce Lynn, Managing
Director FECG. "Approximately 1/3 of the respondents had their initial
terms and conditions turned down by their capital providers, despite 84% of
them using providers that were already familiar with their financial condition."
Jim Simpson, BCA Managing Director, concluded, "respondents’ views
regarding future access to public and private equity reflects a growing optimism
about the IPO market and recognition of private equity firms as a mainstream
rather than ‘alternative’ capital source."
About Broadgate Capital Advisors Broadgate Capital Advisors, LLC, an affiliate of Broadgate Consultants Inc.,
is a corporate finance consulting practice that provides capital strategy, advisory
and execution services to mid-size companies.
About Broadgate Consultants, Inc. Broadgate Consultants, Inc., based in New York City, is an international
corporate and capital markets communications advisory firm. The firm is a partner
firm of Public Relations Organisation International, a global network of independent
public relations firms. More information about Broadgate can be found at www.broadgate.com.
About The Financial Executives Consulting Group The Financial Executives Consulting Group is a Connecticut-based consulting
firm that provides clients with a broad array of financial advice to assist
CFOs, Treasurers and Controllers address and resolve strategic issues such as
financial planning and reporting, bank relationships, forecasting, optimizing
cash flows and financial technology.
