Scott began the discussion with a general outline of exit options for companies and highlighted the likelihood of an M&A exit, given historical data and 2018 data regarding the number of M&A deals compared to the number of initial public offerings for VC-backed companies. Jonathan Kozy, Senior Macro Strategist at Bank of America Private Bank, provided an overview of the macroeconomic factors involved in the M&A market, including the consumer and labor markets, interest rates, and productivity rates. He noted that forecasts now predict that any recession will likely occur later in time and will be milder in effect than originally projected.
Bob Cronin, Managing Director – Technology, Investment Banking Group at Alantra, followed with a discussion of trends in the tech M&A market in 2018. In particular, he noted that deal values nearly reached 2015 level highs with fewer deals in number. He emphasized the increased activity by private equity firms and noted sectors that are likely to remain active, including security software, artificial intelligence and machine learning, and cloud computing. Kirk Sanderson, Managing Partner at M&A Insurance Solutions, then led a discussion on changes in the market with respect to representation and warranty insurance, emphasizing its role as an alternative source of capital. He provided an overview of R&W insurance coverage and noted the differences in deal structure and increased available liquidity when compared to traditional M&A deals.
Scott concluded the panel with an observation of the market shift from sellers paying for the insurance premiums to either buyers paying for the premiums or buyers sharing the costs of the premiums with the sellers.
Stay tuned for our next panel recap: Maximizing Value in M&A.