After a distinguished career in food processing and safety, Marcio da Cruz has just joined Pacific Northwest Advisors.  A dual U.S. – Brazilian citizen, Mr. da Cruz presently offers business development for food industries. Mr. da Cruz has extensive expertise and experience in process engineering, research and development, marketing and sales, and holds several U.S. patents. In addition, he has strong relationships with colleagues in various segments of the U.S. and Brazilian food industry. He is fluent in Spanish and Portuguese. Read his full bio here: http://pnwa.com/marcio-dacruz/


Stephen E Murphy, PNWA’s Senior Advisor, Latin America and Caribbean, reports that Peru, a country of 32 million has been consistently growing under several democratically elected governments with proper transition. Its newly elected President Pedro Pablo Kuczynski (PK), is expected to cut back government regulations and to encourage more foreign investment. GDP growth is estimated over 4% in 2017, depending on the price of copper. GDP per capita is $6,000 CloudFare’s new data center (above) in Lima is an example of a new multinational firm setting up in Peru’s capital. The company advises that “Its new data center reduces the latency to access customer websites, adding redundancy and capacity, in order to absorb possible cyber-attacks.”

Colombia hopes to receive a ‘peace dividend’ from its recent deal with the FARC guerrillas and Chile hopes for improved copper prices. GDP growth may reach 2% in both countries with unpopular presidents. Venezuela, on the verge of civil war, should be avoided, with business conducted in Miami.

Southern Cone economies stumble, save Paraguay: This has been a tumultuous year for Brazil, when its Congress impeached its president, and Argentina spiraled into steep recession upon President Macri’s election. GDP growth in both countries is estimated to break even, with unemployment high while austerity measures continue. Only little Paraguay of 6M people is expected to growth over 3% in 2017, thanks to agricultural expansion.

Mexico’s growth slows and Cuba’s tourism booms: No other country will be as uneasy over its future as Mexico, following Donald Trump’s victory in the U.S. election, the latter threatening to redo NAFTA. Mexico’s growth in 2017 is expected to slow to 2%, but Costa Rica’s should stay steady at 4%, thanks to eco-tourism. Panama is the other Central American market growing over 4% from increased canal tonnage and expatriate investment. In Cuba, tourism is growing apace from norteamericanos, as AirBnB reports 40% increases over previous year. PNWA’s associate in Havana notes more visits by US tourism and IT firms, still seeking a ‘profitable M.O.’ GDP growth is expected at 3% in 2017, fueled by the private sector (semurphy@pnwa.com).


By Jeff Hoyt, PNWA Managing Director — Corporate Finance

At last in December the Fed finally decided that the economy was strong enough to head towards normalizing interest rates.  A single quarter point rise in itself was not terribly meaningful; however, the market is more than doing the job for the Fed.  The 10 year Note started around 2.25% in January, with the economic uncertainty and Brexit rates fell to a low of 1.40% in July and since that time has steadily risen to close the year a touch under 2.5%.  Were it not for perhaps the most unexpected federal election result in decades this increase would be viewed as unprecedented.  In other credit markets we have seen spreads generally widen the farther you go down the credit quality spectrum.

All of this cheap money has been driving corporate m&a activity to new highs.  Deal volume in the US will come in around $1.7 trillion driven largely by big corporate mega deals.  Ample cheap debt funding has been available for even the more speculative transactions.  Activity in the middle market likely slowed down from 2015.  Expectations for 2017 are good for large-cap consolidation transactions (on the expectation that a Trump FTC will be less restrictive).  Activity in the middle market, which tends to be more credit sensitive, will likely continue at a similar pace.  Driving middle market activity is the fact that PE Buyout firm fund raising remained strong in 2016.  For rates to seriously slow activity, we would need to see more than 150 basis points in rate hikes by the Fed.

Speaking of rising rates, a longer-term impact will be felt in terms of company and asset valuations.  In the private market, values tend to be reflected as the present value of discounted future cash flows.  Thus big ticket assets like commercial real estate and timberland may find values under pressure as the year goes on, assuming the Fed follows through on its rate normalizing plan.  In the public markets the drivers include growth rates (earnings and revenues) and WAC (weighted average cost of capital).  Rising rates are not a direct negative for stock values, but as an asset class, rising long term rates do tend to cause a shift from equities to fixed income in asset parity valuation models (Jeff.Hoyt@pnwa.com)


President Obama’s historic visit to Cuba in March has put the Cuban market on the radars of a number of Pacific Northwest area businesses, e.g., Alaska Air’s bid to fly there.  PNWA’s Steve Murphy is our resident Cuba expert, having visit Cuba last summer and already executed a market research project there for an American firm.  See Steve’s recent article in the Seattle Trade Development Alliance’s March newsletter, https://www.seattletradealliance.com/blog/tda-blog/post/pacific-northwest-connections-to-cuba.

Steve and his Havana and Miami-based colleagues offer market research services  today from a team of experienced professionals.  PNWA’s Team Cuba” is ready to help companies identify business prospects and provide background information on potential business partners:

  • Chief Researcher Reynier Ortiz, based in Havana, has already completed an in depth market research this summer for a U.S. tannery, seeking alternative sourcing from Cuban goat and sheep herds.
  • Researcher Frank Martinez, currently based in the Miami area, has market research experience in Cuba and works with the Cuban-American community in Florida.
  • PNWA Senior Advisor for Latin America & Caribbean Stephen Murphy, based in Seattle, recently met University of Havana’s Business School Dean, the Catholic Cultural Center’s Rector, hoteliers, restaurateurs and travel agents while in Havana earlier this year.

Contact Stephen E. Murphy, Pacific NW Advisors at semurphy@pnwa.com.

2015 Corporate Finance – Our Perspective

PNWA Managing Director Jeff Hoyt (jeff.hoyt@pnwa.com) reports that M&A activity in 2015 set a new record, surpassing 2007.  Mid-December global announced deal volume was $4.35 trillion globally.  Factors driving this high level of deal volume include increasing global competition, slow organic growth in the domestic economy, high public market stock valuations of acquirers, and ample access to both debt and equity capital markets.

Middle market activity has been robust as well albeit with differing drivers, including generational transition , often leading to sales of private middle market companies.  Also,increasingly onerous reporting and financial requirements of becoming a public company dissuade many from considering going public, particularly “old economy” companies and industries.

One example is Dannaher’s announced spinoff of Fluke, Tektronix, Kollmorgen and several others into a new company, Fortive Corporation, based in Everett.  The spinoff will immediately create a new public company, which will likely target small add-on acquisitions to complement existing businesses. The business case for the spinout is to separate Fortive’s slower growing but still profitable businesses from the remaining faster growing medical and technology  businesses, which tend to have higher market multiples in public equity markets (Danaher acquired Fluke in 1998).

A private market sector example is Haggen Foods.  After their private equity infusion (resulting in majority control), Comvest Partners undertook a transformative acquisition,  growing the size of the company almost eightfold and expanding the footprint into California, Arizona and Nevada as well as growing the Oregon store base.  Unfortunately the expected synergies did not materialize and this fall the added debt load pushed the combined company into bankruptcy less than a year after acquisition .