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Speaker 1: Broadcasting Live to New York, Bloomberg eleventh to Washington, d C,

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Speaker 1: Bloomberg one to Boston, Bloomberg Groober to San Francisco, Bloomberg nine,

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Speaker 1: SI to the Country Series Exam General one ninety and

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Speaker 1: around the glow the Bloomberg Radio Plus Athen Boomberg dot com.

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Speaker 1: This is Bloomberg Surveillance. Good Morning, I'm Karen Moscow along

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Speaker 1: with Tom Keene and Michael McKee and the opening Dale

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Speaker 1: brought to you by Marks Panneth l LP, ranked among

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Speaker 1: the top three forensic accounting firms in New York by

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Speaker 1: the New York Loge Journal for the sixth year in

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Speaker 1: a row. Visit Marks Penneth dot com, and stocks are

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Speaker 1: higher at the open the S and P five hundred

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Speaker 1: up three tenths per cent or six points to twenty

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Speaker 1: fifty three, down Jones Industrial average of three tenths per

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Speaker 1: cent or fifty five points to seventeen thousand, six hundred

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Speaker 1: thirty six, and the Nastacks of half per cent or

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Speaker 1: twenty four points to forty eight seventy five. Ten year

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Speaker 1: Treasury down eight thirty seconds. The yield one point seven

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Speaker 1: four percent yield on the two year point seven one

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Speaker 1: percent now I'm x screwed. Oil is up one point

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Speaker 1: one percent, or forty three cents to forty dollar sixteen

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Speaker 1: cents of barrel COMEXS. Gold is up seven tenths per

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Speaker 1: cent or eight dollars twenty cents a twelve two ounce.

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Speaker 1: The euro a dollar fourteen oh seven, the yen one

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Speaker 1: oh eight point three four. Tom and Mike, thanks so

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Speaker 1: much greatly appreciate that up seventy right now VIX not

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Speaker 1: trading at fifteen point three six is what we saw

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Speaker 1: all on risk on in the last two hours of

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Speaker 1: good data checks, including Karen Moscow's efforts. UM, we love

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Speaker 1: talking with Ryan Nelson out of Darden, out of the

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Speaker 1: UNC Chapel Hill. We won't talk basketball with Mr Nelson

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Speaker 1: Ryan Nelson, UM is a hd W h W and company.

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Speaker 1: Rather Harris Williams and UH does a lot on what's

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Speaker 1: going on in the pulse of the middle market. Ryan.

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Speaker 1: Money is free? Does that that's still down to the

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Speaker 1: middle market or is the money free province only that

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Speaker 1: of mega corporate rations that can borrow it? Well, Tom,

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Speaker 1: good morning, I would say I don't know that anything

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Speaker 1: is free. These days were in life, UM. But to

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Speaker 1: answer your question, directly. UM. Certainly rates for big corporates,

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Speaker 1: for big private equity, for mintal market, for smaller private

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Speaker 1: equity firms. He O, is it historical lows? UM? I

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Speaker 1: think what we have seen here over the last several months, however,

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Speaker 1: from what I would say is a bit of a

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Speaker 1: peak last summer, is that rates have crept up a

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Speaker 1: bit on the senior debt side, and certainly on the

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Speaker 1: subordinated debt or mezzanine side, where it uh you know,

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Speaker 1: capital was certainly more uh you know, tougher to come by. UM.

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Speaker 1: I think, I think what we're seeing is that those

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Speaker 1: who need to borrow as opposed to use cash off

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Speaker 1: their balance right, the pure strategic um you know, are

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Speaker 1: finding that second lean or that subordinated debt tougher to

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Speaker 1: come by. Boxley Materials, very text corporation inventis solution. As folks,

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Speaker 1: this is not Yahoo, this is not Facebook. It's not

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Speaker 1: the Brazilians and Warren Buffett buying half of UM Canada.

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Speaker 1: Within this what's the spirit right now? In the middle

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Speaker 1: market area? Are sellers and buyers even remotely close invaluations? Yeah,

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Speaker 1: I think there are transactions to be done. You called

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Speaker 1: out some there number of those head strategic exits. Some

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Speaker 1: of those are also private equity nature. I think what

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Speaker 1: we're seeing is a bit of a bifurcation across the market,

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Speaker 1: the M and A market, the middle market M and

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Speaker 1: A activity generally um there while there is good balance,

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Speaker 1: we are seeing I would think, relatively more activity and

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Speaker 1: sectors like healthcare, consumer, even technology to an extent where

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Speaker 1: those businesses on balance are performing better than some of

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Speaker 1: their brethren and say energy and power or industrials where

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Speaker 1: performance is a bit more muted. But you know, we

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Speaker 1: are seeing transaction across all of those, across all sizes,

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Speaker 1: and we're certainly seeing activity from with private equity investors

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Speaker 1: and strategic buyers. Um. We are finding intersections between buyers

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Speaker 1: and sellers as well. Although I would tell you, and

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Speaker 1: talking to many of our clients on the private equity side,

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Speaker 1: they view this year two thousand sixteen and hopefully a

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Speaker 1: year where they are able to invest more dours than

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Speaker 1: they are potentially returned hours in the form of exits. Uh.

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Speaker 1: Just given the relative uncertainty and a broader market, say

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Speaker 1: compared to two thousand fifteen or two thousand and fourteen, Well,

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Speaker 1: I'm wondering if there's a difference in the middle market

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Speaker 1: between the big guys in the sense that we're told

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Speaker 1: the big guys are more responsive to their stock price

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Speaker 1: than their top line at the moment, and they don't

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Speaker 1: need cash. They don't need to borrow because they've gotta

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Speaker 1: like cash on the balance sheet. It's just sitting there,

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Speaker 1: so it doesn't really matter what rates are. And you know,

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Speaker 1: when you're talking about the large caps, the FED is

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Speaker 1: kind of pushing on a string and trying to get

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Speaker 1: them to do anything. Is it different for your space, Yeah, well,

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Speaker 1: I guess just the you know, maybe a couple of

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Speaker 1: things you guys mentioned. Uh, certainly on the strategic side,

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Speaker 1: you're right when you're pulling cash off the balance sheet,

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Speaker 1: I mean, there's little incremental cost. Those guys are chasing

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Speaker 1: growth where some of their organic growth may be slower.

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Speaker 1: They're acquiring that and we've seen strategic buyers as active

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Speaker 1: as they have ever been over the last six or

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Speaker 1: twelve months. I would say. On the on the private

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Speaker 1: equity side, Um, those guys, you know, have an enormous

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Speaker 1: amount of capital that needs to be invested and that

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Speaker 1: goes into the quote middle market. We spend time selling

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Speaker 1: businesses call it between enterprise values or purchase prices of

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Speaker 1: a hundred million dollars to over a billion dollars, so

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Speaker 1: pretty broad swath and certainly over a billion dollars or

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Speaker 1: sizeable transactions. But those guys have you know, five hundred

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Speaker 1: plus million dollars of dry powder that they need to

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Speaker 1: put to work. And if you think about the ability

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Speaker 1: to leverage that on a conservative basis three to one,

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Speaker 1: that's you know, trading and a half dours of buying powers.

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Speaker 1: So clearly, what we're seeing is these guys wanting, uh

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Speaker 1: to find transactions and frankly they're not being enough supply

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Speaker 1: of those transactions and for quality companies or quality assets

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Speaker 1: in the market. Uh, there is certainly a lot of

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Speaker 1: competition between not only the private equity guys, but also

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Speaker 1: the strategic virus. I look at this, and again, I

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Speaker 1: guess it comes back to the industrial nature of America.

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Speaker 1: We have a modest manufacturing recession right now. What's the

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Speaker 1: pulsive industry that you see not only around the Richmond area,

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Speaker 1: but you know as you move west across that huge

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Speaker 1: belt of manufacturing mite that we have. Sure if you

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Speaker 1: talk about industrials generally, which is where I spend a big,

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Speaker 1: big chuck at my time. Because I mentioned earlier, I

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Speaker 1: think as you look at growth rates for that sector

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Speaker 1: is certainly not as um steep or as fast as

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Speaker 1: maybe health care, consumer or technology. I don't know that

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Speaker 1: they really ever are. As we look at the transactions

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Speaker 1: we're currently involved with, we do look at each of

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Speaker 1: those individually, monitor their performance versus budget, how they're doing

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Speaker 1: for the year, how they did it over the last

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Speaker 1: twelve months. And I'll tell you, for the most part,

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Speaker 1: businesses are actually performing on budget. This budgets maybe a

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Speaker 1: little bit more muted than they were, say a year

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Speaker 1: or two ago. And certainly the industrial businesses that have

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Speaker 1: any level of exposure to the energy and power market

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Speaker 1: or the oil field, which has certainly been a tougher

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Speaker 1: market of the last twelve to twenty four months, we

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Speaker 1: see those businesses maybe performing a little less strong than

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Speaker 1: some of the other guys who have a better insulation. UM.

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Speaker 1: I would tell you another sort of pocket within industrials

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Speaker 1: where I spent a lot of my time is building products,

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Speaker 1: which continues to be you know, one of the stronger

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Speaker 1: areas continued activity, strong performance from private and public companies

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Speaker 1: they're on balance on a fair amount of M and

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Speaker 1: A activity as well. We are, however, seven or so

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Speaker 1: years into that recovery from the depth of the recession.

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Speaker 1: So as you begin to get further and further into that,

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Speaker 1: despite what the statistics say relast to the housing stars

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Speaker 1: or household formation, I think we will see a little

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Speaker 1: bit of flow in or moderation in that market as well.

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Speaker 1: Can I quickly ask you before you have to go

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Speaker 1: here about building materials in your area, because a lot

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Speaker 1: of questions about what they're telling us about housing. Sure,

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Speaker 1: as I said, that's certainly a sector where we have

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Speaker 1: been very active. You noted the Boxley Materials business which

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Speaker 1: is actually down the road from us here in Richmond

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Speaker 1: and Roanoke. Great family health business has been around for

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Speaker 1: fifty sixty years, acquired by the public strategic some of

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Speaker 1: the materials. You know, demand for those types of assets

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Speaker 1: that go into either building materials are ultimately housing construction

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Speaker 1: again continue to be very attractive because the demographics point

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Speaker 1: to continue to house for household formation. In fact, we're

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Speaker 1: behind in that regard. In the case of Boxley, you know,

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Speaker 1: they are going into highways for example, and infrastructure as well.

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Speaker 1: With the recent um good news around the highway bill

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Speaker 1: that spending will continue at the state and federal level. Uh.

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Speaker 1: And so there's a lot of you know, and there

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Speaker 1: are a lot of well heald strategics who are interesting

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Speaker 1: earning that. Ryan, thank you so much. Ryan Nelson is

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Speaker 1: with Harris Williams as we look at it's something we

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Speaker 1: don't look at enough, which is more middle market middle

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Speaker 1: market emine right now the down points of vis fifteen

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Speaker 1: points three to the yield one point seven five. This

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Speaker 1: hour of Chavellance brought to by Palisade Doughty Visit Palisade

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Speaker 1: Doughty dot com. Here's Michael r with news headlines. Mike Tom,

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Speaker 1: thank you very much. More than seventy years after a

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Speaker 1: US atomic bomb destroyed Hiroshima, U S Secretary of State

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Speaker 1: John Kerry became the most senior US official to visit

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Speaker 1: the Japanese city since World War Two. Kerry today place

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Speaker 1: to read that the monument of the city's Peace Memorial Park.

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Speaker 1: Kerry is in a Roshima for a meeting with a

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Speaker 1: group of G seven foreign ministers. Kerry says the visit

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Speaker 1: has reminded him of the need for diplomacy to prevent war.

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Speaker 1: I come away here from here absolutely re energized and

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Speaker 1: recommitted and dedicated to help find that better way. Some

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Speaker 1: prominent legal if it gets their weighing in on the

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Speaker 1: debate over President obama Supreme Court nominee, fifteen former American

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Speaker 1: Bar Association presidents sent a letter to Senate leaders urging

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Speaker 1: Republicans to consider Chief Judge Merrick Garland. They say Garland

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Speaker 1: is one of the most outstanding judges in the country.

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Speaker 1: Ce i A director John Brennan says his agency will

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Speaker 1: not engage in water boarding, even if the next president

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Speaker 1: of the US orders the agency to do so. Brennan

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Speaker 1: tells NBC and that the CIA won't engage in any

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Speaker 1: so called enhanced interrogation techniques. Meanwhile, Republican front runner Donald

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Speaker 1: Trump calls that ridiculous. Global news twenty four hours a day,

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Speaker 1: powered by our twenty four hundred journalists more than one

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Speaker 1: fifty news bureaus from around the world. Now, Michael Bar,

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Speaker 1: Mike Tom, Michael Bart, thanks so much, appreciate that. Again,

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Speaker 1: develop one points coming up. A very busy week in

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Speaker 1: the business of sports and the sport of sports. Evan

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Speaker 1: and Wi Williams with a Sploomberg Surveillance. Bloomberg Surveillance brought

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Speaker 1: to by Landrover Adventure Yours for the taking. Visit Landrover,

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Speaker 1: tri state dot com for special lease and Financing Office,

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Speaker 1: landroper above and BIA