Capital Markets and Valuation – What’s Happening-Capital Markets and Valuation

Video Transcription

Video Summary

The webinar "Capital Markets and Valuation, What's Happening?" featured experts Joseph Skorczewski and Dan Kaczmarek discussing the economic and market environment impacting valuations and M&A activity, especially for architecture and engineering firms. They reviewed macroeconomic trends, noting sustained GDP growth despite recession fears and low unemployment creating a labor shortage, leading to "labor hoarding" in the industry. Industry revenue grew steadily, supported by infrastructure legislation, although project rollouts have been gradual. Capital markets data revealed a marked decline in 2022 M&A activity, deal values, and debt financing availability compared to 2021's boom, due to inflation, interest rates rising, and tighter credit conditions. Banks have become more conservative lenders, while non-bank lenders offer higher cost but more flexible capital. Public company valuations in A&E fell about 15% year-over-year amid solid revenue growth and profitability, showing a disconnect between performance and market multiples. Private market transactions showed relative valuation stability but caution prevailed. Valuation methodologies reflect headwinds from rising discount rates and capital costs, suggesting valuation declines of 7-10% for typical firms unless offset by operational success. The speakers emphasized the importance of broad capital market outreach, clear communication with stakeholders about valuation drivers, and a cautiously optimistic outlook for increased M&A activity and easing credit conditions later in 2023.

Keywords

Capital Markets

Valuation

M&A Activity

Architecture and Engineering Firms

Macroeconomic Trends

Labor Shortage

Infrastructure Legislation

Interest Rates

Private Market Transactions