The POWER 30: Robert E. Tunheim

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Ballard Spahr LLP

Recession concerns seem to be fading away and prices are up. Credit is more expensive and that has effects on the mergers and acquisitions market, reflected in the sales prices. But on the other hand, there’s a record amount of corporate and private equity cash available, according to Robert Tunheim.

“The Federal Reserve signaled that they are looking at rate reductions so I’m looking at a robust 2024,” Tunheim said.

The 2021 market was a high-water mark. Buyers are being more cautious about due diligence, he said.

At the same time, Tunheim said, investors have committed capital so private equity has a limited amount of time to invest that money. That’s why prices are staying high. The investors also need to be relatively liquid and make their money available.

Private equity, which is important in the M&A market, is looking to raise money, charge a management fee for a fixed period of time and invest it. After that limited time, their management fees are based on the investments made, hence the interest in buying, Tunheim said.

Tunheim sees private equity as a good thing. Following the collapse of Enron Corporation in 2001, there was less interest in the stock market and more regulations, which spurred private equity growth. “It’s been a good investment for partners, they get capital gains treatment for carried interest. It’s also a wonderful source of liquidity and provides a nice exit ramp for entrepreneurs,” he said. It also gives owners a way to grow their company with someone else’s money. “It’s a wonderful source of equity for the market.”

He also noted that representation and warranty insurance is helping the process. That has been available for about 10 years and protects the buyer if the seller’s representation or warranties about the deal turn out to be false. The insurance can affect the sales price, Tunheim added.

It’s clearly a good thing for sellers to have, but the buyers also realize its utility, he said. “It has made a difference.”