financing for emerging growth companies
Post on 21-Oct-2014
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Research John Paglia, director of the Pepperdine Private Capital Markets Project at the Graziadio School of Business and Management, describes accessing capital for privately-held companies based on the latest results from his ongoing cost of private capital investigation.TRANSCRIPT
Financing for Emerging Growth Companies
Insights from the Pepperdine Private Capital Markets Project Surveys
John K. Paglia, Ph.D., CFA, CPAAssociate Professor of Finance
Senior Researcher, Pepperdine Private Capital Markets Project
Thank You!
Fall 2009 Spring 2010 Fall 2010 Spring 2011 Forecast
Confi-dence
0.013 -0.177 0.181 0.36 0.44
Growth Ops
0.441 0.406 0.524 0.61 0.73-30%
-10%
10%
30%
50%
70%
Business Owner Confidence and Growth (Net Increases)
% D
iffer
entia
l
$1M EBITDA
$5M EBITDA
$10M EBITDA
$15M EBITDA
$25M EBITDA
$50M EBITDA
Deal Mul-tiples
4.4 5.2 5.3 5.9 6.4 7.5
Se-nior Leverage
1.25 1.4 2.5 2.5 3 3
Total Leverage
3 3 3.5 3.7 4.2 5
0.5
2.5
4.5
6.5
Valuation and Leverage MultiplesM
ultip
le o
f EBI
TDA
Fall 2009 Spring 2010 Fall 2010 Spring 2011 Forecast
Employ-ees
-0.149 -0.057 0.093 0.26 0.49
CAPEX NaN -0.089 0.032 0.14 0.42
-10%
10%
30%
50%
Employees and CAPEX (Net Increases)
% D
iffer
entia
l
• Expected increase in organic revenues over the next year is approximately 20%
• Nearly 95% of business owners report having the enthusiasm to execute growth strategies
• Yet just 53% report having the necessary financial resources to successfully execute growth strategies
Businesses Need Capital to Grow
What are Top Issues Facing Privately-Held Businesses Today?
38%
12%37%
1%
2%
4% 2% 3%
Access to capital
Government regulations and taxes
Economic uncertainty (Domestic)
Inflation
Ability to find qualified employees
International economic un-certainty
Competitiveness with foreign trade partners
Other
What types of capital are available and
how does one access them?
• Bank Debt• Asset Based Loans• Factoring Lines• Equipment Leasing• Mezzanine Funds• Private Investors
Borrowing Options
• Angel Investors• Venture Capital• Private Equity• Private Investors
Equity Options
Fall 2009 Spring 2010 Fall 2010 Spring 2011 Forecast
Capital Ac-cess
-0.259 -0.226 -0.027 0.04 0.32
-30%
-10%
10%
30%
Business Owner Access to Capital (Net Increases)
% D
iffer
entia
l
Despite continued economic uncertainty,– Increasing capital availability– Increasing leverage multiples– Increasing deal multiples– Increasing confidence in growth
prospects
The Road Ahead
John K. Paglia, Ph.D., CFA, CPAAssociate Professor of Finance
Senior Researcher, Pepperdine Private Capital Markets Project
bschool.pepperdine.edu/[email protected]
Thank You!