J. Scott Victor Describes M&A Market Dynamics in ACG’s Middle Market Growth Magazine
Kathryn Mulligan, author of Under Pressure: Investors May Have to Dig for Distressed Deals, writes: When President Donald Trump picked Wilbur Ross to run the Department of Commerce, he reinforced the new administration’s pro-business reputation. The choice of Ross, a turnaround investor who built his fortune betting on struggling companies, sent a positive signal to both Wall Street and Main Street, which stand to benefit from the financial deregulation and tax reform promised by Trump. But for Ross’ distressed investor counterparts in the middle market, a stronger economy means fewer opportunities. In the absence of broad conditions pushing companies to the brink, these investors are honing in on specific drivers of distress and industries undergoing rapid change. The U.S. economy is showing signs of strength, including employment growth, low interest rates and ample capital. For investors like private equity firm Blue Wolf Capital Partners, that climate doesn’t spur the financial and operational turmoil that can push new industries into financial distress. “You have an environment where companies are more likely to be growing and profitable than shrinking and unprofitable,” says Michael Ranson, a partner at Blue Wolf, which focuses on special situations in North America, including distressed and turnaround investments. That can be a challenge for investors in distressed assets, who target struggling companies or market inefficiencies using strategies that include purchasing the debt of a troubled business, investing in an embattled company in hopes of turning it around or targeting so-called special situations—a catch-all term that describes businesses under pressure for any number of reasons.