Hillary Clinton or Donald Trump? What the elections mean for the middle market?

Posted on: October 2nd, 2016

The US middle market occupies a substantial market share. Defined as companies with annual revenues between $10 million and $1 billion, the middle market accounts for roughly one-third of total employment and GDP in the US, generating $10 trillion in annual revenue.

In fact, if judged as a stand-alone economy, the U.S. middle market would be the fifth largest economy in the world, standing between Germany and Japan.So, what will the 2016 presidential race, which has already thrown up plenty of surprises, bring in store for middle market.

On one hand, if Trump becomes the President, his lack of background in public office can cause doubt his policy consistency. He seems very focused on bringing jobs home to the US and fostering pro-employment policies.

He wants to increase the growth rate. On the other hand, Democrat candidate Hillary Clinton is more interested in raising taxes and creating her version of social fairness.

She will like continue many of the existing policies. The main impact on the middle market lies in the candidates stand on critical issues such as Global Trade Agreements, Regulation, and Corporate Income Taxes.

Both Clinton and Trump at present seem to agree on eliminating the Carried Interest Tax rate and are in favor of cutting certain corporate itemized deductions. Clinton has spoken out against Tax Inversions.

Trump is focused on decreasing the corporate income tax rate to 15 percent, so that the incentive to move to foreign tax domiciles would be reduced. A lower corporate tax rate would also jumpstart economic growth.

Trump wants to activate US based manufacturing and to rebuild manufacturing which could be very positive for middle market manufacturers.

Their stances on Trade Agreements are markedly different, with Clinton backing a more moderate view and Trump advocating a more aggressive stance, including renegotiating or withdrawal if the U.S. doesn’t get its way.

As it relates to business growth, Trump is focused on reducing barriers and regulatory hurdles for business. Clinton seems to believe that government is needed in order to ensure equitable distribution of the business profits.

In conclusion, it is wise to remember that no matter who wins the White House, some things may not change, but may continue to remain the same. Gridlocked legislative branches as experienced in the last couple of sessions of Congress can pose a challenge.

Thus, the best way to prepare for possible market volatility in 2016 is to take a long-term perspective by staying focused on your personal goals and keeping an eye on broader economic trends reshaping U.S. and global markets.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.