Actionable Ideas

The automotive aftermarket is a rare sector that can thrive in any economic environment. It’s also notably more fragmented than other sectors and ripe for investments that enhance efficiency and scale.

The new universal proxy card (“UPC”) rules took effect last year, making the 2023 proxy season the first in which both company and dissident nominees were listed on the same ballot, allowing shareholders to choose among the different candidates in a contested election.

Fewer activist hedge funds have recently used ESG themes as a wedge to extract concessions from target companies given the challenge of aligning a fund’s investment horizon with what could be a much longer timeline for ESG focused themes.

There is a burgeoning trend of multinational corporations (“MNC”) actively restructuring their China businesses through any number of divestitures and / or carve-outs to realign their balance sheets and maximize shareholder value.

Issuers should take advantage of strong technicals and robust investor demand to pursue a variety of opportunistic transactions including refinancings, repricings, and dividend deals.

Companies that require new capital to refinance upcoming debt maturities, fund ongoing business, and/or fund incremental growth should consider raising “hybrid” capital in the form of structured/preferred equity as an alternative to raising secured debt.

Companies in need of new capital that are evaluating a Double Dip transaction should consider whether structuring the Double Dip as a “Pari Plus” financing is a viable alternative.

Three major issues that should be on the mind of decision makers’ as they prepare for next year are: Regulatory scrutiny, counterparty risks and new launch landscapes.

It is common for highly levered sponsor-backed companies with liquidity needs and/or upcoming maturities to engage in liability management exercises, which often includes creating a new priming tranche of secured debt (an “Uptier”) or transferring assets out of the secured collateral package (a “Drop Down”).

With a mix of economic and market headwinds prevailing against M&A activity in 2022 and 2023, financial sponsors’ exits have been expectedly muted. As such, many sponsors have resorted to fundamental buy and build strategies to create value over a longer time period.

The convertible debt new issue market in 2023 has been frequented by companies seeking a lower cash interest alternative to what is being offered in the high yield and investment grade debt markets. 

Corporations and PE firms are increasingly partnering up on acquisitions. What makes these transactions attractive?