Jaime Guzmán-Fournier is founder, president & CEO of JGF Financial, Inc., a lower-middle-market private equity investments and advisory firm in La Jolla, Calif. He also is a member of ACG’s Los Angeles Chapter and the ACG Global Middle Market Voice Committee. He is a former head of the U.S. Small Business Administration’s Office of Investment in Washington, D.C., known for its Small Business Investment Company program.
Q. ACG LAUNCHED ITS FIRST POLICY AGENDA THIS SPRING. WHAT POLICY ISSUES DO YOU BELIEVE ARE MOST CONCERNING TO THE MIDDLE MARKET?
The most critical issues we face include: maintaining pass-through structure taxation, continuing to treat carried interest as capital gains rate (this issue is particularly important for smaller funds that focus in the lower-middle and middle markets), and leaving the capital gains rates at average historical levels. However, the most concerning to me is the federal budgetary pressures forcing a tax reform debate that could easily become unbalanced during these partisan times. For those in private equity, it is important to participate in the dialogue with policy makers and their staffs in Washington by sharing the value of private capital and investment and its role in the sustained growth of the U.S. middle market and our overall economy. The good news is ACG’s Middle Market Voice Committee and Growth Policy Agenda are doing an excellent job of bringing the private capital investment story and the issues that concern the middle market to Capitol Hill.
Q. WHAT CONCERNS DO YOU HAVE ABOUT DEAL FLOW AND ACCESS TO FINANCING?
Deal flow was slow during the first quarter of 2013 but has started to pick up in Q2 2013. A surge of deals in the fourth quarter of 2012 for tax reasons depleted the pipeline, but I believe we are poised to see stronger deal flow during the second half of 2013 and into 2014. There is still high competition for deals in the middle market from both financial sponsors and strategics. Rallying equity markets combined with readily available financing (as in 2007) is fueling deal activity, which is driving up multiples and valuations. More deals are going through auction than ever before. But our focus is on the lower-middle market and we like to rely on proprietary deal flow relationships that result in attractive deals at better valuations.