We met recently with Jim Love, managing director and head of healthcare investment and corporate banking at BMO Capital Markets, to discuss what he’s seeing in the capital markets. Although he expects the environment to continue to be challenging, he recommends that companies continue to search for financial solutions.
No light at the end of the tunnel. The financing environment is showing some early signs of life and should get better next year, but timing is impossible to predict.
Company “reluctance” in a challenging deal environment. The few deals getting done are M&A transactions and private placements often on terms unfavorable to the selling company. M&A candidates are often in difficult positions; they are either about to bust loan covenants or are contending with a crushed stock price in which selling the company returns something back to owners, though at a price significantly below recent highs. Small companies would like to do licensing deals, but it is a buyers’ market — and buyers are also concerned about the P&L impact of transactions. The absence of an IPO market has resulted in venture capital firms holding onto portfolio companies longer than planned. Their strong companies will be viewed as attractive acquisition candidates and could be sold, and their weak companies will be shut down, leaving the mass in the middle struggling to survive.
Advice: Leave no stone unturned on survival or endgame strategies. Reduce the burn rate to conserve cash because no one knows when liquidity will return to the capital markets. Talk to all potential strategic buyers. Don’t stop business development activities regardless of how gloomy it is out there.
Jim Love’s Bio:
Jim is managing director and head of the BMO Capital Markets Healthcare Group, where he focuses on the firm’s advisory practice. Prior to joining BMO Capital Markets, Jim was a partner at MTS Health Partners in New York, where he was responsible for developing new investment banking relationships and assisted in the management of the firm’s private equity fund. Previously, he served as executive vice President and chief financial officer of Medical Manager Corp. (now WebMD Corp.), where he was responsible for the company’s finance, treasury, tax and corporate development functions. Prior to that, Jim spent 15 years with Merrill Lynch & Co., where he was a managing director responsible for developing investment banking relationships with numerous Fortune 500 companies. While at Merrill, Jim also assisted in the management of the investment banking division and headed its Healthcare Products Group. Jim joined BMO Capital Markets in December 2004.
Jim has an MBA from New York University’s Stern School of Business and an AB from Brown University.