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As we all know, 2022 presented many challenges to each of us, on many fronts.  From the ebbing yet persistent pandemic, to business disruptions, the lack of equity capital, the Ukraine war and its impacts on supply chains and global food sources, the “good and bad” of hybrid work formats, inflation, cash constraints, and rising interest rates – every business has had to navigate quick pivots in their business model in order to persevere.  And we have.

2022 has been a year of driving operational excellence to stretch cash reserves while still building prudently for growth. At FLG, we have been very fortunate to help build innovative solutions which create operational excellence for our clients, be that through creative financings, stronger infrastructure, policies and internal controls and/or better cash management for working capital requirements. As I look at our FLG clients and what they have had to navigate this year, I am impressed with what they have accomplished with our assistance:  creative financing arrangements including debt financing vehicles to stretch the cash runway, restructurings to bring down costs (both fixed and discretionary) to again extend that runway, keeping remote and hybrid work teams motivated – all while continuing to innovate and bringing new technologies to the forefront.

As a firm, we will end the year with higher revenues in 2022 versus 2021, our best year ever, and we have been operating at close to 100% capacity.  While our work in 2021 centered on “all things financings” – private equity financings, IPOs, M&A and strategic work for our clients – 2022 was all about finding ways to extend our clients’ cash runways when the equity markets were closed to them (we handled a tremendous amount of debt financings this year), and assisting them with streamlining operations and businesses, to focus on their “core” priorities and build prudently for the future.   And we continued FLG’s expansion of partners and geographic expansion into Los Angeles and New York.

Looking forward, we are cautiously optimistic about 2023, and what this upcoming year will bring in terms of business activity and the economy:

  • While recession fears are rampant, we could still soft-land. Current thinking from Goldman Sach’s chief economist is that growth in 2023 will slow but remain positive. The labor market could avoid major layoffs and wage growth could simmer down. And certainly, the Fed is working hard to beat inflation down.  Lastly, the job market is showing amazing resiliency, and consumer spending continues to be relatively robust despite inflation. So, while Americans (in particular) are very anxious about it all, perhaps their anxiety needs to be tempered.
  • Capital market outlooks are uncertain. Companies await the new year and what that means for capital market access; if access does not happen and companies must scramble for cash, or have to sell on a de-valued basis, a flurry of M&A could happen.
  • Hybrid work formats continue to evolve as companies improvise, with issues of workplace security, employee accountability, productivity measurement, and tech-enabled virtual collaboration taking on urgency.
  • What happens in China will impact us. While Covid-19 continues to take many lives, deaths have lowered to less than double the number from the flu.  Most countries have de-masked and are relatively “back to normal” – but China’s zero-covid policy is clearly not working, and as a result, the country will need to loosen its policy (which could risk a surge in cases) to see its economic flywheel energized.  Global companies, however, are watching closely here, as this as well as other policies from China have, and may continue to have, major impacts on supply chains in technology, materials, etc.
  • The march towards digital transformation continues with tech spending, particularly in the areas of artificial intelligence, cloud computing, remote access, automation and XaaS (anything as a service).   Cybersecurity continues to be a major issue of concern for all global players (sovereign nations, businesses, etc.), and spending in this area will be robust.
  • Climate change will continue to send investment into niche areas of opportunity. Tesla and its CEO’s issues aside – global sales of electric vehicles have increased by 25% over the past year and this growth rate should continue strongly.
  • E-commerce will continue to be a retail sector driver. While e-commerce growth has slowed, it represents 14% of all consumer spending, an increase of approximately 10% from 2019.
  • The entertainment streaming battles will continue. Even as streaming firms continue to hunt for new subscribers and take on competitors – streaming firms are continuing their robust investment in content – Netflix is at $17B itself!
  • Air travel is turning profitable as international leisure travel has soared. This could even create demand for new airplanes, but expansion will continue to be slowed by the by the slowdown in business travel as companies opt for more remote meetups.

We at FLG are committed to providing our clients with the insights, tools and strategies to successfully manage through the impacts of different business cycles and pivots, and what comes next in 2023.   We believe setting the right vision, prioritizing, partnering with the right networks, carefully managing growth, and always keeping a watchful eye on cash and its uses, will keep us all successful in the coming year.

Happy Holidays from all of us at FLG Partners.

 

Laureen DeBuono

Laureen DeBuono joined FLG Partners in 2011 and served on the firm’s Management Committee 2014 – mid 2017. Laureen became FLG’s Managing Partner effective May 1, 2020. Before becoming Emeritus in 2017 and shifting to coaching and mentoring roles, Laureen was engaged in long-term, complex COO and CFO assignments, with…Read More