Evolve Capital is excited to release our “Capital Markets Landscape: Industry Deep Dive,” a 50-page almanac diving into trends cutting across the capital intensive & advisory, service providers and software / data solution providers in the space. The pandemic was key in bringing large numbers of retail investors into the space, with many learning how to trade stocks through tools that are easily accessible at home. In addition, the pandemic highlighted the need for continued digital transformation, as firms continued to raise capital and acquire firms that can supercharge their growth in this digital age. We constantly receive inquiries from our clients and key accounts on how they would fit into the capital markets landscape or where the capital is flowing. Hence, our “Capital Markets Landscape: Industry Deep Dive.”
The Evolve team recently returned from InsurTech Connect (ITC), the world’s largest insurtech conference in Las Vegas last week. After a two-year break hiatus because of COVID, we noted the increased attention to digitization of traditional players, and it was a common theme across many conversations. The research note was penned before we departed to ITC, but our conversations with conference attendees further supports our thesis. Enjoy our note on M&A and partnerships driving digitization.
Today’s competitive deal sourcing market requires an efficient and effective approach to manage inquiries from investors and bankers. Evolve’s approach, sharpened over a decade of refinement, has served us and our partners well, leading to successful deals and partnerships. We highlight key points from our approach that will be useful as you leverage inbound leads to your advantage, which will help you to generate new business, gain insight into competitors and help prepare for your company’s sale or recapitalization.
Evolve Capital is excited to release our “Insurance Landscape Industry Deep Dive,” a 73-page almanac diving into trends cutting across the insurance distribution, carrier, service, and software firms in the space. Over the last several years, the sector has undergone evolution as incumbents race to digitalize, new entrants finally rapidly scale, and capital availability has ignited innovation. We constantly receive inquiries from our clients and key accounts on how they would fit into the insurance landscape or where the capital is flowing. Hence, our “Insurance Landscape Industry Deep Dive.”
When a company is negotiating a sale or capital raise, one of the important questions that surface is whether it makes sense to put an employee equity plan in place (“The Equity Question”). This is especially pertinent for entrepreneurs that desire to attract and retain talent to grow their business. For those considering an M&A or financing deal, an equity plan is an effective signal to buyers and investors that they are focused on long-term business growth and will help to optimize the company’s valuation.
While the market presents an opportune time for M&A transactions and growth equity deals, companies will need to consider whether their financials are in a good position to make the most of the opportunity. Companies with strong or stable revenues are in a favorable position to execute a deal, especially if annual revenue is up from 2019. However, companies will also need to consider several factors, especially potential industry-specific headwinds in the coming year. In this research note, we suggest perspectives for companies to think about when considering deals.
As we close out 2020, it became apparent that companies expanding remote-work arrangements performed strongly in the stock markets, such as communication platforms Zoom and Twilio. These cloud-based SaaS platforms generate recurring revenue, which adds business resiliency amid the global pandemic. SaaS solutions can also be offered as part of a cloud ecosystem, making it more efficient for companies to manage data, perform analytics, and drive automation for business processes.
As companies enter the growth stage of the startup cycle, founders must start to consider a new aspect of business: M&A deals. These deals could take the form of a strategic company acquisition to expand product offerings or gain market share (buy-side), or getting acquired by a larger company (sell-side). Although there are differences between financing and M&A processes, founders may want to consider building up fundraising experiences to better prepare for future acquisitions, be it from a VC or PE fund. This will help founders understand how to engage and negotiate with buyers to generate long-term benefits for the company, while tapping into the expertise, networks, and capital of existing financial backers to maximize deal outcome.
With over $50 billion raised by SPACs so far this year, companies that plan to go public have a new option they can take. A significant share of the proceeds will likely go towards tech/FinTech companies. Despite growing concerns that SPACs may be a fad, this phenomenon can be favorable to all the relevant stakeholders including SPAC founders, target company and retail investors. In the short-term, more SPACs will emerge to take advantage of the trend, with some turning out to be bad apples. However, over the long-term we can expect SPACs to undergo natural selection, as visionary SPAC founders with less egregious allocations are preferred and thus can raise larger SPAC deals eventually.
As tech stocks continue to outperform and maintain high P/E ratios, there has been growing concerns about whether this is sustainable. With the upcoming election, the markets may become more volatile leading up to the event. We should also note that there are several supporting mechanisms that will likely prove favorable for the markets, such as record levels of private equity dry powder that may bid up the valuations of fundamentally strong companies. While the tech market shows positive signs of holding up, tech-enabled consumer-facing businesses may not benefit as much as mission-critical enterprise SaaS firms. The former tends to have heavy operational and marketing costs, while the latter is able to generate higher, recurring revenues, leading to a bifurcation in the tech markets.