COVID-19 has generated considerable economic uncertainty, which is not good news for companies seeking to raise capital, says Paul Carlisle, executive vice president at Wintrust Bank.
“If business owners don’t like uncertainty, banks hate it,” Carlisle says. “That element will cause some degree of tightening.”
Those businesses that can weather the storm through the pandemic are likely to find good opportunities for growth on the other side of the crisis.
“Businesses that come out of this strong will have opportunities to perhaps buy other businesses that are not as strong coming through this or exploit other market opportunities, and perhaps buy very strong companies that are just tight on liquidity,” Carlisle says.
Carlisle spoke with the Smart Business Dealmakers Podcast about how investors view the current deal market and what business owners can do to prepare for the second half of the year. Here are excerpts from that conversation.
Listen to the full interview
What do investors see when they look at the deal market right now?
Uncertainty makes everybody more cautious. However, there are great companies out there. They were great before the crisis. They’ll be great on the other side. If you have the liquidity, there are going to be opportunities to make solid long-term investments. The other thing is just not to panic. The worst thing you can do right now as an investor is pull the plug on an investment if you don’t have to from a liquidity standpoint. That is literally locking in your loss, locking in selling low. So it’s a combination of, if you can, look for opportunities, and for everyone, not panicking.
What do you see for market activity for the second half of 2020 and beyond?
We’ve seen a lot of projects get deferred. A lot of significant capital expenditure projects are being pushed out and may well be pushed into 2021. So I don’t think those are necessarily over or will be fully canceled. But I think to the extent that something was discretionary and nice to have, or perhaps a new business initiative, folks may rebuild their balance sheets a bit and wait on those projects until 2021.
I fear that it’s going to affect more small businesses than the middle market businesses that I work with day to day, though it will affect Winrust as a whole. I do think some businesses that were struggling beforehand will just not reopen. I saw in one of the local newspapers a restaurateur quoted as saying he thought up to 25 percent of restaurants in Chicago may not reopen. That seems high, but it’s probably not out of the question. So I do think the landscape will be a lot different in that regard on the small business side.