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More from LAVA: Bernard Carroll, Macquarie Group

2008-07-18

Also from the LAVA meeting, panelist Bernard (“Bernie”) Carroll. The Macquarie Group is based in Australia, but has offices all over the world. They focus on financial services for so-called “mid-cap” companies, in the range of $50 million to $800 million in size, who are looking for external financing or to merge with another company. They also work in other areas of day-to-day finance, like helping corporations hedge risk with commodities trading and that sort of thing.

When asked about the effect that the economic downturn on Macquarie’s equity management business, Mr. Carroll indicated that while Macquarie was still doing equity deals, the ability to execute those deals efficiently was being affected. Small deals, in the $50 million range, were still quite tractable, but large deals (in the $100s of millions) were harder to pull off because of the difficulty of securing financing from traditional sources. Deals that used to have 1 or 2 sources of financing are expanding to 4 or 5 sources, substantially complicating matters and creating more failure modes.

Of the panelists, Mr. Carroll was the most bearish on the current economic state, suggesting that the weak economy has not yet taken its toll on corporate earnings. But he sounded a hopeful note for equity management companies, pointing out that companies attempting to sell themselves for 8 or 9 times EBITDA (“Earnings Before Interest, Taxes, Depreciation & Amortization”) or some other trumped-up valuation will be in for bitter disappointment. Tight credit markets mean that companies will be scaling back their expections for financing, and that means good deals for equity financiers like Mr. Carroll and the Macquarie Group who can get financing in a tough market.

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