Election Uncertainly: What's the Impact November Presidential Elections May Have on the Middle Market

Election Uncertainly: What’s the Impact November Presidential Elections May Have on the Middle Market

Posted on: July 19th, 2016

2016 is more than halfway done, but we still have some major events to look forward to. In November, the USA will elect a new president.

With only 2 major contenders left in sight, it looks as though either Clinton or Trump will come out victorious, unless a strong challenge emerges from a third party candidate. How does the outcome of this impact the middle market?

Unfortunately, we will not know until the moment is upon us, but we can make some speculations. A new president will come with some new economic policies.

Those policies can include changes tax rates, health insurance policies and trade policies. If the new President focuses on a pro growth agenda and has a favorable small business view, the middle market should expect stronger growth.

If there is renewed focus on export competitiveness, export sensitive middle market companies could be big winners. Over the last 8 years, there has been an onslaught of new regulations which has created confusion and uncertainty in the business world.

Businesses have predictably been cautious as they adapted to the new environment. If our new president focuses on cutting the red tape and putting jobs back in the economy, the middle market sector could benefit greatly.

During their underwriting processes, acquisition financing providers analyze probable performance projections for their proposed borrowers. The underwriter often toggles between a few scenarios to sensitize the growth variables leading to slower revenue and margin growth over time. The lender’s underwriting view is usually an extension of its credit intelligence and historical experience.

Mezzanine debt loans occupy the risky echelon beneath the bank but ahead of the equity in a capital structure. They are naturally subordinated to the bank loan via an intercreditor agreement wherein the senior lender retains the power to block their interest or force them to standstill.

In the middle market, acquisition financing providers are regarded as super intelligent and hardworking. They have distinguished themselves at elite banks or consulting firms and possess the ability to synthesize voluminous levels of info into a coherent, succinct takeaway or observation. This skill is extremely valuable in attributing causation to business drivers in a financial model used to foretell the future.