ROLE/FIRM: Managing Director at UHY Advisors NY, Inc.
Every month, we will feature an active member of the ACG New York community in a brief interview. Reflecting industry insight and personal perspective, this feature will introduce industry leaders and offer advice on the tools you need to succeed in the ever-changing middle market.
1. Quick Basics- Role/Firm/Focus
I have been an ACG New York member since 2009, a member of the Programming Committee since 2015 and have served as a Board member and as Sponsorship Committee Chair since 2017. For over 25 years, I have advised private equity funds, high-profile C-suite executives and boards at public and private companies on SEC matters, accounting, audit and tax services. I recently joined as a partner at UHY LLP, a national certified public accounting firm that focuses on middle-market companies. Joining UHY has given me access not only to national resources, but a global network of member firms in nearly 100 countries. This is a huge benefit to my clientele that came with me who are both international and national, which are primarily in the private equity, technology, financial services, manufacturing and distribution, and professional services industries.
Formerly, I was the founding member and co-leader of the private equity practice of a nationally recognized, top-ranked accounting, tax and consulting firm. Additionally, I have held the role of CFO at various privately held companies, which has been extremely valuable in providing insight into my clients’ needs. I truly enjoy working on all facets of the M&A cycle, as evidenced by the 300 + transactions I’ve completed. Having built, bought and sold practices myself, my experience as a CEO has also given me an inside edge as an advisor. I am also proud to have been a member of the CEO organization Vistage.
2. What do you think are the biggest obstacles in the middle market today?
I don’t know if I would use the word ‘obstacles’ but I would call them ‘challenges.’ Based on my experience with the lower middle market, this year, we will continue seeing seller valuation expectations being too high for buyers to purchase and achieve an ROI into the future that will satisfy their investors. Going forward into this year, inflation and interest rates were anticipated to rise, the effect of the passage of the recent tax reform act will most likely accelerate the rise of both of these key economic measures. This will cause less debt leverage on the purchase of companies and will require more equity invested by buyers at closing, which will then lead to buyers being more stringent on how they evaluate targets. The ROI buyers’ LP’s expect on the equity they deploy on purchases of portfolio companies is way higher than the interest they pay on debt. Additionally, corporate strategic purchasers now have more cash available to deploy since corporate tax rates have dropped and there are incentives under the new tax bill to purchase capital-intensive businesses. All of these factors will lead to continued extreme competition in the US for quality companies to purchase in the middle-market.
Owners/sellers need to be more strategic than ever, as there are ample opportunities available with the amount of dry powder in the private equity firms, family offices, corporate strategic buyers and foreign companies who will now want to enter the US with the favorable tax rates. Owners should consider if they want to sell and cash out, take chips off the table and get the right partner because they see opportunities in their industry. Now is the time to get multiple strategic plans together. Owners should also contemplate restructuring their companies to take advantage of the new tax law. The bottom line is that owners need to have the right team of advisors to guide them, as this will be a robust year and more than ever there is a need for solid strategies during an opportunistic time. The window to take advantage could level off and potentially close when interest rates and inflation increase to a certain level.
3. How has ACG helped you in your career?
Having access to a pool of the members’ high quality thought leadership and the opportunity to build strategic relationships with deal professionals have been the biggest benefits for me. I met one of my largest private equity clients through a discussion with a family office at an AGC event. They were in the early stage of seeking private investments, which I supported in the financial and tax due diligence. I’ve had many opportunities and engagements that came about for buy side and sell side support through the relationships I’ve built with ACG members, which I am very grateful for.
4. Can you tell us about your greatest success story/proudest achievement in association with ACG?
My proudest achievement was assisting in judging the ACG Cup and then coaching the MBA students on how they could have improved their presentation/business approach. Mentoring these students gave me the ability to teach a practical approach of presenting to business decision-makers by demonstrating how decisions are made. I also consider my participation as a committee member on the programming committee and chairing last year’s luncheon on Industry Trends, which drew an above-average attendance, another big success.
5. What changes do you foresee happening in the middle market in the next 3-5 years?
Most likely we will be coming out of an economic dip, not necessarily a recession, but the excess dry powder available today will decrease and more will be deployed due to the rise in interest rates. Sellers’ valuation expectations will still be an issue but will be more aligned with the market.