GPs tout US economy amid gloomy campaign rhetoric

Just weeks after the Presidential election, some private equity executives at PartnerConnect Southwest said they think the U.S. economy is doing okay.

The stagnant U.S. economy, which grew 1 percent in the first half of 2016, was a main focus of the recent Presidential election. (Billionaire Donald Trump won the election and has reportedly promised to boost GDP to at least 4 percent annually).

PE executives have complained about the slow-growing U.S. economy. Not everyone seems to share this view.

“It’s a pretty darned good economy,” said Frank Rodriguez, president of JLL Partners, who spoke on the panel, Dealmakers Overview: How GPs are Coping with High Valuations.

“It’s easy to increase profits right now,” added Chris Zugaro, partner and co-founder of Trive Capital.

Upacala Mapatuna, chief investment officer of Victory Park Capital, also believes the economy is “decent.”

The economy “feels tougher” because “we were expecting a more robust expansion following the [2009] downturn,” Mapatuna said during the panel. Instead, the rebound has been a “gradual increase spread out over many years,” she said.

High valuations forced some GPs out of the M&A market in 2015, Buyouts has reported. Stephen Hindmarch, a managing director of Graycliff Partners, said his firm did no deals last year but has completed three this year. “There is a lot of private equity money out there,” said Hindmarch, who also spoke on the panel.

Equity contributions are also up and are in the “45 percent range on average” for LBOs, Mapatuna said. It’s even higher for middle market transactions, with equity contributions sometimes climbing to more than 50 percent, she said. “It is likely that these high levels of equity are being demanded by credit providers as leverage levels climb,” she said.

Action Item: To contact Mapatuna call 646-542-1573

Photo: An employee scans a purchase during Black Friday sales at a Target store in Culver City, California, U.S. November 25, 2016.  REUTERS/David McNew