The demand for lending in the middle market is robust, according to Jeff Kilrea, Co-Head and Managing Director of CIT Sponsor Finance at CIT Group, Inc., a leading provider of financing and advisory services to small businesses and middle market companies. These views and others are presented in the “2014 Middle Market Private Equity Outlook," the latest in a series of in-depth executive video Q&As featured in the award-winning CIT Executive Insights video series.
Energy and IT Are Growth Industries
The energy sector, specifically the oil field services businesses and the information technology businesses, were the industries that spurred overall trading activity and interest from private equity sponsors last year. “Energy and information technology will again be the growth industries that private equity sponsors will continue to focus on going forward,” says Kilrea.
Private Equity ROI
With M&A activity flat to down, private equity firms are holding their businesses longer and making their returns by two ways, according to Kilrea. “They’ve been making strategic tuck-in acquisitions and they’ve been focusing on internal organic growth opportunities that might not have existed in the past. It might be a new product or a product extension to what they currently do. It might include additional hires to spur sales, going international or it could be a host of different things.”
Evolving Landscape
Middle market lending practices have evolved over the past three years. “We’re seeing the return of traditional lenders, such as banks and finance companies, as well as new entrants to the market, like private equity-backed finance companies,” said Kilrea. “With greater capital entering the marketplace, we’re seeing more variation in structures and financing terms.”
Credit Conditions Hold Steady
According to Kilrea, credit conditions should not change dramatically over the next year. “The Federal Reserve’s monetary policy continues to support a low interest rate environment, which makes it an attractive time for a consumer or small business to borrow money,” he said.
CIT Corporate Finance provides lending, leasing and other financial and advisory services to the middle market with a focus on specific industries, including: Aerospace & Defense, Business Services, Communications, Energy, Entertainment, Gaming, Healthcare, Industrials, Information Services & Technology, Restaurants, Retail and Sports & Media.