Investment experts ‘cautiously optimistic’ about 2019

Ten years into the latest economic upturn has investors wondering, “When does this end?” But many, including the panelists from ACG Kansas City’s February breakfast meeting, remain cautiously optimistic that 2019 will be another in a line of good years, although no one will be shocked by a downturn.

Bill Conway, 2019 president of ACG Kansas City and managing director at CC Capital Advisors, moderated a panel that included Greg Gleason, managing director at Wynnchurch Capital; Ward Nixon, managing director of CrossFirst Bank; and Bret Oettmeier, president and CEO of Cobalt Ventures.

“Uncertainty is the reality that we live in,” Nixon said. “I’m not sure if we are in the top of the seventh or the bottom of the ninth, but it feels like we’re coming to the end of a cycle.”

Gleason said that while most signs point to another good year, variables such as interest rates or a trade war could change that. Most economic highs don’t last this long, so some change is inevitable, he said.

And the changes aren’t just in the economy. Today’s options when it comes to financing are ever-changing and ever-expanding. Money doesn’t just come from traditional sources, and that is both welcome and disconcerting, these experts said.

Gleason pointed out that private firms like his have several advantages: they are able to move quickly, they know their markets and are able to offer valuations quickly, and they are able to offer plans for management teams that make sense for businesses.

Nixon agreed, citing the inherent advantages to working with a smaller bank such as CrossFirst.

“In this space, execution matters,” he said. “We can do a closing in as little as 60 days. In a big bank, there are just so many layers of reviews and meetings, etc. When I was at Chase it would take three weeks to get 10 people on a conference call. Here, we say, ‘The call’s tomorrow at 10. Either be there or don’t.’”

But non-traditional money sources are enticing, particularly for a business owner who may not be traditional.

“Not everyone has EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization),” Oettmeier said. “Not everyone is making money, but they still need access to money. Remember, Amazon didn’t make money for a long time.”

So in the face of an uncertain world, what should business owners be doing to set themselves up for success in finding money or selling?

“Seventy percent of M&A deals fail for a couple of reasons: we can’t find cultural alignment and valuations,” Oettmeier said.

Thankfully, the panelists said, Kansas City is in a good place to weather any downturn that may happen.

“We are blessed with some really good, privately owned and family businesses,” Conway said.

The Midwest also remains somewhat of a secret to outside investors. Gleason came here from Chicago and said that Wynnchurch sees a kindred spirit between the two cities.

“We are both from the Midwest; we have the same values,” Gleason said. “It’s about integrity and hard work.”

People make the difference, Nixon said.

“People are incredibly friendly here,” Nixon said. “That enables people to get stuff done. It’s also a very stable environment.

“Here, relationships are what matters.”