Dr. Ken Cyree is the Dean of the School of Business and the Director of the Mississippi School of Banking at the University of Mississippi. He is also the Frank R. Day/Mississippi Bankers Association Chair of Banking, and a Professor of Finance at the University. He holds a Ph.D. in finance from the University of Tennessee at Knoxville. His research interests include banking and financial markets, and his papers have been published in the Journal of Business, Financial Management and Journal of Banking and Finance, among other academic journals.
The culture of debt financing in the Southeast has typically been risk-averse and remains that way today.
Because traditional banks remain risk-averse in debt financing, there are more investment opportunities in the Southeast for private equity firms, venture capital firms and angel investors.
To best fuel middle market growth and activity in the Southeast, create partnerships between venture capitalism, private equity, traditional banking and hedge funds to support companies from inception to the middle market stage and beyond.
The intellectual capital found in the South’s college towns and cities have the resources to spur entrepreneurial growth.
Doug Johns is a senior advisor to FourBridges Capital Advisors with many years of executive experience in the technology and telecommunication sectors. He also currently serves as the Chairman of the Board of Directors for NIVIS, LLC, the world’s leading developer and integrator of wireless network technologies.
Overall, the technology market in the Southeast is very robust, particularly in Atlanta.
From a tech standpoint, the Southeast is underserved in terms of access to capital, investment bankers and advisors.
The tech industry in the Southeast needs increased visibility to become comparable to other major tech hubs.
Developing incubators and accelerator programs are critical to the growth of tech startups.
Glenn Oken is a managing director at Mangrove Equity Partners in Tampa, FL, where he focuses on originating deal opportunities and qualifying acquisition candidates. Glenn has been a private equity investor focusing on the lower middle market for 27 years and has completed 129 transactions across 57 different niche industries.
For lower middle market companies in Florida, there are no longer geographic barriers. Money is willing to travel.
However, capital for startup companies may more commonly find seed funding through local angel groups and investors. Once they prove their business model they tend to attract interest from local investors, or from the start-up focused areas of the country.
Face-to-face meetings are essential in M&A deals. While numbers are important, relationships are key. In-person meetings give both sides an opportunity to assess the character of a potential partner.
As equity partners seek out lower middle-market companies, they look for those whose products or services are essential, non-cyclical and non-commoditized. Often, this ends up being companies with some measure of engineering content, customization, or technical capability who offer mission-critical products or services.
Thanks to the strength of the manufacturing and industrial services sector, the South may be one of the best regions for investors focused on those industry categories.
The M&A market has not yet seen a sudden mass exit by Baby Boomers. Multiple factors, not just age, are involved in an exit decision. Thus, deal volume seems to have followed a natural cycle over the years, rather than a sudden deluge of exiting Baby Boomers.
Bobby Pearce is an attorney with Smith Moore Leatherwood and the co-managing partner of the firm’s Charleston office. His practice includes mergers and acquisitions, corporate law, private securities offerings and shareholder disputes.
Pearce has an entrepreneurial background, having started or invested in multiple companies, and since 1984, he’s spent a great deal of time working on economic development initiatives for the state of South Carolina and the Charleston area.
There is a broad chasm in South Carolina between investors with money and companies seeking to raise funds. With a shortage of mid-market companies that have the longer-term, proven track record that most investors are seeking, capital often is being left sitting on the sidelines.
Established companies, especially with EBITDA of $2 million and above, now have many more options for capital.
Charleston is on a fast growth track with its commercial and industrial base of companies; the number of home-grown and recruited successful, mid-market companies is expected to grow exponentially over the coming years.
The snowballing growth of mid-market companies in this region will lead to many more successful exits and then much more capital being reinvested into new companies in the Lowcountry of South Carolina, creating a self-fulfilling cycle of formation, growth and corporate and investor success.
Tech-savvy and creative millennials are migrating to Charleston at a rapidly accelerating rate because of its livability, coastal amenities, historic charm and now high-impact work opportunities. The region is one of the top 17 fastest-growing metro areas in the U.S. and is experiencing some growing pains, having to explore infrastructure options to better accommodate the increasing influx of people and businesses.
Boeing’s new multi-billion dollar aircraft manufacturing and assembly plant here has spurred an explosive growth of investment in the Charleston region’s aerospace and aviation cluster. Daimler just announced its plans to grow the region’s automotive cluster by building a Sprinter plant, which will complement the already-existing defense, tourism and health care industry clusters.
South Carolina’s highly-integrated, 16-campus technical education college system has greatly helped to attract Boeing and other companies to the state and the region. This system offers unparalleled industry-specific training and education and thus provides a steady stream of well-trained, qualified employees, which most other states cannot provide.
Matt Heiter is a shareholder at Baker Donelson in Memphis, Tenn. He focuses his practice on public and private securities offerings, mergers and acquisitions, corporate governance and business planning.
Companies in Memphis garner capital from a strong local market of investors, as well as eager firms from outside the state.
Tennessee government has effectively marketed the state’s attractive business environment, encouraging a steady stream of out-of-state money.
The pent-up supply of cash from the recession and a general confidence in the economy has created a robust capital market.
In addition to strong financials, companies should focus on their management team when seeking investors.
Tennessee’s emphasis on start-ups has increased access to capital for companies of all sizes.
Bob Crutchfield is a general partner with Harbert Venture Partners, an institutional capital firm located in Birmingham, AL and Richmond, VA. Harbert Venture Partners invests in emerging technology and healthcare companies in the Southeast, mid-Atlantic and Texas. Bob has launched five successful new business ventures and has led four M&A transactions during his career.
Serious tech economies require a cohesive economic development model, combining private and public capital to provide predictable funding to fuel the early growth needs of startups.
A coordinated partnership between public and private organizations is necessary to commercialize the innovative technology being produced in Southern universities.
Government dollars, in the form of non-return on invested capital or technology-based economic development site prep, are most needed for seed funding of high growth companies.
State money relies on private intelligence. Therefore, if private entities allocate portions of their budgets towards seed-stage companies, it’s likely that state funding will follow.
Tech development is not a short-term process. Government funding vehicles are needed to maintain a level of continuity, and private funders can help facilitate funding predictability by smoothing out the disruptions that can result from political changes.
Investment should be paired with the organizational structure and management expertise that private industries provide for early stage companies to accelerate their commercialization time horizons.
Based in Tennessee, Stewart is an expert and consultant on government and economic incentives. Having worked as an engineer, Wall Street tax attorney, fund manager and business owner, Stewart has a unique perspective on how small and mid-market businesses can maximize the use of incentives to help reach their goals. Currently, Stewart is working with FourBridges Capital Advisors to advise businesses on how to best integrate traditional forms of financing with all forms of incentives.
Incentives (offered by federal, state, city and county governments, and some utilities) are readily available and can be highly effective. However, in many cases, they are underutilized.
With respect to any business within its taxing jurisdiction, the government effectively acts as a passive partner with a financial interest in the net profits of the business. Through this partnership, the government offers incentives as a way to foster the growth and prosperity of the business, reducing costs or providing it access to cheaper capital, property, infrastructure and job support.
In the Southeast, just at state and local levels, billions of dollars of incentives are offered each year to businesses of all sizes across most industries. Incentives can play a vital role in a business’s capital structure and should be considered as an alternative or complement to other types of capital.
Lee Lloyd is a senior strategic advisor for M&A and financing transactions through his independent advisory firm, J. Lee Lloyd, LLC. He has over 30 years of professional experience in investment banking, business law and accounting. Mr. Lloyd was previously an investment banker with Goldman Sachs and an M&A/corporate attorney recognized in “The Best Lawyers in America.” He has advised clients on deals ranging from $5 million to $6 billion, including cross-border transactions in over 26 countries.
In an effort to deploy capital, private equity firms and mezzanine funds are aggressively seeking out high-quality companies. As a result, companies of that caliber have numerous options for obtaining capital.
Since the recession, investors and lenders have become more risk-averse, so lower quality companies have fewer options for obtaining capital.
North Carolina companies currently are benefiting from readily available capital across all size and stage of maturity classifications.
The increasing ease and accessibility of cross-border transactions is a major trend. These deals are now more viable because of technology, relationships and experience.
Early-stage entrepreneurs should pursue external outreach activities to build their networks.
Out-of-state investors often seek a local co-investor when pursuing early-stage deals.
In the current M&A middle market, many entrepreneur-owned businesses are looking to grow through add-on acquisitions rather than harvest through exit transactions.
Mr. Marsden is an attorney at Lanier Ford in Huntsville, AL. His practice is concentrated in the areas of corporate law, securities, and technology. He advises clients entering into private equity transactions and assists them in negotiations with venture capitalists.
Middle-market Alabama companies in the $10 million to $50 million range can have a difficult time finding capital.
Bank inactivity has forced underserved middle-market companies to look for opportunities in private debt.
Organizations like the Huntsville Angel Network provide structure and efficiency to the investment process so that those looking to invest make well-informed strategic decisions with their money.
For companies above $50 million on the acquisition side, most capital comes from out-of-state.
State and local governments should create incentives for retaining top talent.
A diverse management team and a strong board of directors make a company more attractive to investors.
Mr. Jones is co-founder of Bull City Venture Partners in Durham, NC, and partner of Southern Capitol Ventures in Raleigh, NC. He previously co-founded and served as the Chief Technology Officer of Orthocopia.com.
In today’s market, growth is one of the greatest definers of value. Consequently, private equity groups are competing to invest in tech companies because they are fast growing, require relatively little upfront capital and offer the potential for a quicker return.
Traditional tech centers like San Francisco, New York and Boston are investing outside their region because markets are overcrowded and value can be found in innovative companies in areas like the South.
The startup market is gaining strength because successful entrepreneurs who have sold their businesses are choosing to reinvest in their local communities by funding early stage companies.
Industries that have a binary outcome – meaning they are either approved or not, like biotech – are becoming less attractive to investors. Meanwhile, hardware companies like 3D printing are gaining traction.
Companies should seek to build relationships with funders long before they think they need the money. By engaging funders in the business early on, companies position themselves to call on them when the time is right.