Kathy Elsesser

About Kathy Elsesser

Kathy Elsesser is Managing Director and co-head of the Global Consumer Retail Group in the Investment Banking Division at Goldman Sachs.

Succeeding in a Rapidly Evolving M&A Landscape

These are exciting times in the financing and mergers markets, with several key themes influencing the consumer retail space, and exciting opportunities for high growth and emerging companies.

Financing Markets

During the financial crisis, we saw GDP growth plummet 0.3 and 3.5% in 2008 and 2009, respectively. Then 2010 saw a rebound of 3.0%, and 2011 exhibited progressive improvement. This year and next are expected to deliver stable growth, due in part to a belief that the unemployment rate will continue to decrease albeit at a relatively slow rate.

This increasing growth and stability has pushed equity market performance up almost 10% so far this year.

Against this positive macro market backdrop, consumers continue to spend, while saving less. In addition, investors have become less risk-averse.
These combined factors have resulted in retail stocks outperforming the market by 8% last year and 9% YTD. High growth retailers like Francesca’s Collections and Michael Kors have had even more spectacular performance.

The merger market peaked in 2007 at $4 trillion and dropped by more than half by the end of 2009. In 2011, merger volumes were up 6% to $2.5 trillion, but transaction volumes as a percentage of the overall market remain low at 5% (vs. a long term historical average of 6.5%.) We expect merger volumes to increase as the broader market continues to rise. Also, acquisitions of private companies have rebounded significantly and were up approximately 10% last year. We expect this trend to continue driven by exceedingly low interest rates.

Despite better-than-expected economic data and positive news from Europe, interest rates remain near all-time lows.

And private equity firms have more than $300 billion of uninvested equity capital.

With the economy growing (albeit slowly), jobs increasing, the equity market rallying and the merger market poised to continue to grow thanks to low interest rates and a significant amount of money available from private equity funds, this is a good backdrop for growing companies. [Read more...]