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2022 Corporate Finance in Review from Embarc Advisors

“2022 has been a tumultuous year,” said Jay Jung, founder and managing partner of corporate finance advisory firm Embarc Advisors. “Russia invaded Ukraine. Disruptions continue to rock supply chains. Stock markets have gone down, inflation has gone up, and interest rates right along with it.”

With nearly two decades of experience in strategic finance and previous careers as an Investment Banking Vice President at Goldman Sachs and Engagement Manager at McKinsey & Company, Jung is uniquely qualified to identify 2022’s top trends in corporate finance. According to him, the past year has seen an emphasis on quality deals and increased demand for high-quality financial services. For 2023, he forecasts these trends to continue.

High-quality deals

“There is an emphasis on quality now,” Jung said. “Keep in mind that dry powder for private equity (PE) and venture capital (VC) is still at elevated levels. That means that there is a lot of capital to be deployed.”

Dry powder is capital that investors have committed to certain objectives, but has yet to be called upon. According to PitchBook, PE dry powder currently hovers around $1.2 trillion. Jon Sakoda, founder of Decibel Partners, writes, “As of the end of June 2022, [the amount of VC dry powder] was recorded at an all-time high of $290 Billion, almost twice the amount seen on average” before the COVID-19 pandemic.

“Overall, the stock market may be down, but with ample capital to be deployed, high-quality deals are getting a lot of attention,” Jung explained. “Moreover, they’re also generating great outcomes.”

As examples, Jung pointed to two merger and acquisition (M&A) deals that Embarc Advisors successfully closed in the latter half of the year. “Each of these rounded out a 20-year journey for the co-founders of the respective businesses,” he said. “There is nothing more rewarding than seeing hard-working entrepreneurs reap the rewards of their labors. Both traded at top market multiples.”

If that wasn’t enough, Embarc Advisors is on the verge of closing even more M&A deals. “While capital raises have slowed down in the latter half of the year, we have seen an uptick in M&A mandates as valuations normalize,” Jung said. “We are finishing up the year with seven live M&A and capital raise situations.”

But that’s not all. “We also completed two buyside acquisitions for our clients,” Jung said. “Of course, we worked on many more that fell through or haven’t come to fruition yet.”

Increased demand for high-level financial services

According to Jung, the challenges of the present business environment have led to “an elevated need for strong strategic Chief Financial Officer (CFO) services.” In anticipation of turbulent times, Embarc Advisors had already invested in building out a team earlier in the year to further develop this core strength. 

“We started building out a Strategic Finance and Financial Planning and Analysis (FP&A) team to allow our clients to access high-quality talent at a less-prohibitive cost structure,” Jung explained. “This has been a boon for Embarc. Finance has become ever more important, and our Strategic CFO Services Team is currently supporting approximately $200 million in revenue, working alongside experienced CFOs or plugging in for their absence.”

This increased demand prompted Embarc Advisors to hire seven new employees, doubling in size in a single year. “Despite the allure of startups fading, or maybe the risk becoming more apparent, we were able to recruit top-tier talent with experiences in private equity, hedge funds, investment banking, and strategic finance,” Jung said.

To prioritize talent and long-term career development, the company brought on a Director of People and Talent Development, Kristine Nakamura, who previously served at TuSimple, a VC-backed startup that IPO’ed in 2021. To establish relationships with promising young talent, Embarc launched its first official summer internship program with students from Stanford and Baruch College.

“This is how Embarc delivers world-class talent to smaller businesses that cannot attract or afford to build out their own full-fledged strategic finance and corporate development team,” Jung explained.

Predictions for 2023

When asked to look ahead to next year, Jung predicted that investors will continue to thoroughly vet investment opportunities and choose only premium deals.

“The heydays are gone, and quality matters,” Jung said. “For the deals currently in the market, we are seeing a lot more diligence and scrutiny. Easy checks based on booked-forward-ARR are gone. Demonstrating solid performance via buttoned-up metrics will be the key to success, whether seeking a VC fundraise or a PE M&A transaction.”

For this reason, savvy startups will invest in top-tier financial expertise to position themselves for successful exits.

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