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Could the Fed they blame for the lack of M and -- activity on next guest says -- is causing some list or perhaps have unrealistic expectations when it comes to price.
A potential buys it just walking away from its joining us now Scott sperling co president of private equity firm Thomas H.
Lee Partners Scott thank you for being here welcome I guess is some logic to that -- -- that QE has really kind of what it's been great for some.
For the -- market is really kind of messed it up hasn't it well.
But I would say is that well here's what we know.
-- know that the interest rates served stole it pretty close all time lows yet and yet the Yemeni market isn't as robust as people would have thought based on the normal relationship between.
Interest rates and low -- but many activities.
Now must much much of that has to do with the fact that there are still significant.
In the broader global economy him to come back to potentially impact what happens with the business over the course the next two or three years in and that adds to the risking us.
Of any business that you acquire.
And so one of the things that we've seen is that the low interest rate environment.
Much as it did in 20062007.
-- has caused sellers to want higher prices because the math.
Can be made to work if somebody pays a higher price.
If your private equity player you can still theoretically get a 20% return on your money not given the low interest rates but one of the things that we all learned back in the 20062007.
Is you shouldn't buy a business for more than what it's intrinsic value is regardless of -- -- And that means that there's a bigger gap between buyers and sellers know where the Fed plays a role.
And I would have to say that I wasn't an early.
-- phone and Bob.
Of Q -- but I think Q we have had -- a very good job of helping new economy that faces all of these headwinds including some fiscal headwinds here -- -- And -- that has caused the stock market and the credit markets to be very strong and robust and that has flowed through back into main street in many ways.
So why do think that -- more certainty we have that we're gonna DNA.
Interest rate environment is helpful to the markets that causes consumers to be more confident.
A more confident consumers a bit better consumer they're gonna buy more and the more that they buy.
Means that hire the capacity utilization will be for companies that sell them goods and services we know we -- -- they're gonna hire people.
And all of that is lovely but we do know the companies have struggled to get their revenues growing and one of the ways you can do that is by making acquisitions.
So acquisitions are helpful when they're -- -- accretive basis which means you have to pay a price that makes them accretive and you can grow throughout position and we.
Is -- as a matter of tactical Stratton strategy if you will.
By companies that are good acquisition platform so we agree that you can grow -- position and enhance.
Enhance your returns by doing that right however I think the world is still now looking at organic growth -- organic growth is driven.
Buy -- a stronger consumer.
And again that comes back to how much uncertainty do those consumers have about where they're going to be in the next six.
Months to eighteen months -- and that's related to.
How they perceive the markets if they see a strong stock market.
They feel better and there are.
There are more likely to go out watching what sparks the emanate.
Activity we know companies have they cough is a full of cash we're seeing so many stock buybacks where they gonna -- this money to work.
The more that we can beasts have a better have more visibility about where the world's going to be in the next two years -- Then the risk goes down and -- the willingness to spend money if you're strategic or private equity player to -- company.
And when you combine that with the fact that financing is still very attractive we -- we may be have higher interest rates that we had.
Six weeks ago still -- it until pretty darn good and as I say I've been doing this for over thirty years.
If you told me that the high yield market would be where it is an absolute sense then I would say that's probably the best market overseeing that.
Brought -- at a time Scott sperling thank you so much you're very welcome appreciate it -- I --
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