Section 69 The Outlook for Transactions

• Library: Business Transitions 2009 Supp

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During these uncertain times, fewer deserving transactions will be able to obtain the bank financing or venture capital investment available a year ago. Transactions that only a year ago could have been structured with a minimal amount of equity and limited guarantees of the promoter will now likely require not only increased equity but also subordinated debt and, in some cases involving
closely held businesses, full personal guarantees of the key owners supported by the pledge of other collateral. At least for a while, business transactions will be more difficult to do, and fewer will get done.

At present, the global financial system still seems unable, even with unprecedented governmental support, to spark the desired economic recovery. Many banks’ balance sheets remain burdened by nonperforming loan portfolios. Regulatory examinations will likely expose additional weaknesses. Moreover, this impairment of their capital and the enhanced regulatory scrutiny that it brings is preventing banks
from being able to raise private capital to improve their capitalization and their ability to actively lend to deserving borrowers. Many banks have endured rapid capital erosion, severe loss of liquidity, and threats of harsh—some would say punitive—regulatory actions. In the last 12 months, more than 50 banks have failed nationally, and
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