According to Jay Jung, founder, and managing partner of the corporate finance advisory firm Embarc Advisors, “2022 has been a turbulent year.” Ukraine was invaded by Russia.
Supply chains continue to be disrupted. Interest rates have increased in tandem with rising inflation and falling stock prices.
Jung is particularly prepared to forecast the key trends in corporate finance for 2022 given his nearly two decades of experience in strategic finance and prior positions as an Engagement Manager at McKinsey & Company and Investment Banking Vice President at Goldman Sachs. He claims the emphasis on good bargains and the rise in demand for top-notch financial services over the previous year. He predicts that similar patterns will persist in 2023.
High-quality deals
Currently, quality is being prioritised, according to Jung. Keep in mind that there is still a tonne of dry powder available for both venture capital and private equity (PE) (VC). This suggests that there is a sizable amount of money available for utilisation.
Dry powder is money that investors have set aside for specific purposes but have not yet used. PE dry powder is now hovering at $1.2 trillion, according to PitchBook. Before the COVID-19 outbreak, according to Jon Sakoda, founder of Decibel Partners, “the amount of VC dry powder was recorded at an all-time high of $290 Billion, about twice the amount observed on average.”
Although the stock market may be down overall, high-quality deals are receiving a lot of attention, according to Jung. Furthermore, they are producing excellent results.
Jung cited two mergers and acquisition (M&A) transactions that Embarc Advisors completed in the second half of the year as examples. The co-founders of each of these businesses “completed a 20-year journey with each of these,” he said. “There is nothing more satisfying than witnessing devoted business owners be paid for their efforts. They both have high market multiples.
As if that weren’t enough, Embarc Advisors continues to complete M&A transactions. The second part of the year saw a decline in fundraising, but an increase in M&A mandates as valuations began to recover, he added. He ends this year with seven M&A and fundraising situations.
That’s not all, though. For our clients, we also finalised two of his buy-side deals, according to Jung. Of course, there have been a lot of projects we’ve worked on that have either failed or haven’t yet materialised.
Increased demand for quality financial services
According to Jung, the challenges of the current business environment “are increasing the need for strong strategic chief financial officer (CFO) services.” Anticipating turbulent times, Embark Advisors invested early in the year in building a team to build on this core strength. Mr. Jung said: “This is a boon for his Embarc. Finance is becoming more and more important and our Strategic CFO Services team is now working with experienced CFOs or filling their absences. , underpinning approximately $200 million in revenue.”
This increased demand has led Embarc Advisors to hire seven new employees, doubling its headcount in one year. “Despite the declining attractiveness of start-ups and the exposure of risks, Private has been able to recruit top talent with experience in equity, hedge funds, investment banking, and strategic finance,” says Jung.
Prioritizing talent and long-term career development, the company hired Kristine Nakamura, director of talent and talent development, who previously worked at her VC-backed startup TuSimple, which went public in 2021. Did. To build relationships with up-and-coming young talent, Embarc launched the first official summer internship program with Stanford University and her Baruch College students.
Smaller companies who struggle to hire or afford to hire a full-fledged strategic finance and corporate development team can benefit from world-class talent thanks to Embarc, according to Jung.
Forecasts for 2023
Jung predicted that investors will continue to carefully evaluate investment opportunities and select only quality deals when asked to look ahead to the coming year.
The heydays are over, and now it’s all about quality, said Jung. “We are noticing a lot more due diligence and attention for the deals that are currently on the market. Easy checks using booked-forward-ARR are no longer available. Success will depend on the ability to demonstrate strong performance through well-organized metrics, whether one is aiming for a VC fundraise or a PE M&A transaction.
Because of this, shrewd businesses will spend money on top-tier financial skills to set themselves up for lucrative exits.
