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Sunday, 04 January 2015 16:00

Q&A: Gretchen Perkins, Huron Capital Partners LLC

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Gretchen Perkins, Huron Capital Partners LLC Gretchen Perkins, Huron Capital Partners LLC COURTESY PHOTO

Private equity deal flow was strong in 2014 and Gretchen Perkins believes it will continue that way in 2015 as more business owners look to sell their companies in a good economy. A partner at Detroit-based private equity firm Huron Capital Partners, Perkins expects the economy to continue to improve this year, helping drive opportunity for both buyers and sellers.

Where do you see private equity putting its money in 2015?

The consumer space is still strong … especially food and beverage. Those sectors, food and beverage in particular, generally weathered the recession fairly well, and so private equity likes those spaces. Branded (companies) command more interest than non-branded or private label. Certain pockets of the health care industry, primarily those sectors that are not subject to reimbursement risk, are also of interest. Building products is returning as an industry of favor. There’s a lot of activity of that sector.

How’s deal flow been and what do you expect in 2015?

Deal flow has been strong in 2014 and I expect it to continue to be strong in 2015. Many business owners realize this recovery is getting a bit long in the tooth and are prudently deciding to come to market during these good times, and I think that’s a solid strategy.

Where do you think the economy will go this year and how will that play into your industry?

I believe, barring any significant, mainly international event, the economy will continue to grow and improve. Concurrently with that, I think there will be a lot of liquidity in the market from the lending community. Those two things will combine to result in more privately held companies coming to market for sale to take advantage of a pretty high valuation environment based on economic growth and the high levels of liquidity from the banks.

What’s different in the market today versus a year ago and will that continue this year?

Because the market is very hot right now and valuations are high, and because there’s a lot of debt to finance these (deals), what you’re starting to see as we get to the end of 2014 — and I expect this to continue through 2015 — is companies with a little bit of hair on them that are figuring, ‘Gee, if there’s any time to sell, it’s now. I have a big customer concentration, but the market may bear that in these times.’ Or maybe they have some significant commodity price vulnerabilities and they’re coming to market. In a weak market, those kinds of companies won’t even bother coming to market because they know there won’t be a lot of takers, or the price at which there will be takers will be too low. But in a hot market like this, they’re testing the market. I suspect we’ll see more and more of those businesses that are unappealing in weak times that might be more appealing in hot times.

What’s one action that Congress could take in the next year that could help your industry and spur more private equity investing?

They could make some movement on simplifying the tax code and make some measurable progress on comprehensive tax reform. I’m not real confident that much will occur in the next two years, but if they could work on simplifying areas of the tax code, that would be very helpful. There’s a lot in Dodd-Frank where the rules have not even been written for the regulators to enforce, so there’s a whole lot of uncertainty about what’s to come in a lot of different areas. On the regulatory side, that’s another area where eliminating or reducing uncertainty is helpful to businesses because then businesses can plan and make decisions. But in an environment of uncertainty, things just don’t happen.

Interview conducted and condensed by Mark Sanchez.

Read 3495 times Last modified on Monday, 05 January 2015 09:46

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