US asset-based lenders face challenges in 2012 according to a new report by Deirdre Martini, a business development officer at Wells Fargo Capital Finance, and David W. Morse, a member of the law firm of Otterbourg, Steindler, Houston & Rosen, P.C., and head of the firm’s finance practice.
Their research suggests that there are few options for ABL lenders to increase supply to deal with the trends affecting pricing and structure.
One trend that seems to have evolved during 2011 and may continue through 2012 is acquisition financing for strategic buyers, rather than just financial buyers. With corporations sitting on cash, some companies undervalued, and top-line growth limited, there seems to be an uptick in possibilities for acquisitions for which asset-based lending can provide the liquidity cushion that a company may be looking for after the acquisition.
Another possibility, according to Martini and Morse, is for asset-based lenders to look to finance the overseas operations of domestic companies or even to set up shop outside the United States. Such efforts face real challenges in terms of adapting the US-style asset-based product to the legal regimes and cultures of other countries. But if they are willing to engage these issues, asset-based lenders have an undeniable impetus to look beyond the United States for opportunity, given the obvious significance of globalization.
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