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Investment firms look to Washington for clarity

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Among private equity firms, demand for acquisitions “is stronger than it’s ever been,” said Ramsey Goodrich, managing director and partner of a boutique investment banking firm based in Southport.

The problem, he said, is that business owners aren’t jumping at the bit.

“Right now, there is so much demand,” said Goodrich, of Carter Morse & Mathias, which advises both buyers and sellers in acquisitions and other corporate transactions. “What we haven’t seen is on the supply side, people coming out and saying, ‘I want to sell.’”

Goodrich, who also serves as chairman of the Association for Corporate Growth (ACG) Connecticut chapter, was joined by more than 200 financial industry representatives at the chapter’s ninth annual Private Equity Exposition, held Dec. 7 at the Stamford Marriott.

Several people at the event reported high hopes for 2013, but said much is riding on the fiscal cliff negotiations in Washington, D.C.

“Business owners do not like the uncertainty,” said Christian E. Lund, partner of Hamilton Robinson Capital Partners, a Stamford private equity firm investing primarily in industrial manufacturers with between $15 million and $100 million in revenues. “Regarding the tax situation and the fiscal cliff, it’s caused a fair number of them to recoil. … A lot of them are kind of sitting on their hands.”

Elizabeth Burgess is senior partner of Altus Capital Partners, a private equity firm based in Wilton that invests primarily in manufacturers with revenues between $20 million and $100 million.

The deal-making environment, she said, “is a little bit slower than it has been.”

“I do think people are concerned with what decisions are going to be made in Washington,” Burgess said. “My hope is that we get some clarity and decisiveness soon.”

Goodrich said private equity firms are collectively sitting on $430 billion in funds that are waiting to be invested, while companies in the S&P 500 have a whopping $1.3 trillion in cash on hand.

“The problem is these business owners,” he said. “They’re holding out” despite the potential for tax rate increases that would impact small- to medium-size business owners, Goodrich added.

He said that despite what private equity firm representatives “say about how wonderful deal flow is, it’s really not.”

However, Goodrich added, “I think ‘13 will be a good year. Pent-up supply has to come to market soon.”

Michael S. Pfeffer, managing director of Post Capital Partners, a New York City-based private equity firm investing primarily in service-oriented firms with between $10 million and $150 million in revenues, said his firm has “a full pipeline of activity for next year.”

“The area where it (the fiscal cliff) does hit all business owners is in terms of taxes,” he said. “In all cases, business owners have been saying, if they’re going to sell in the near term, why not sell today?”

While cooperation from lawmakers is ideal, Lund said come 2013, the deals will happen regardless.

“This room is pretty crowded and this is certainly just a small sample,” he said. “I think the industry as a whole is doing well. It could be doing better if the government were to embrace some more pro-business policies. But what are you going to do? We’re all going to find opportunities to invest.”

[Editor’s note: The above article was published in the Dec. 17, 2012, print edition of the Fairfield County Business Journal.]

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