Doubts About Job Market Turning Around Soon Easy To Understand

 

By Angela Gabriel

In a recent BioSpace LinkedIn poll, nearly half of respondents predicted the job market won’t turn around until 2027 or later. It’s easy to see why people are skeptical, especially when you consider recent hiring activity and layoffs.

EDITORIAL
Biopharma professionals don’t have much hope for the biopharma job market turning around this year, based on a recent BioSpace LinkedIn poll. A whopping 74% of respondents predicted it won’t improve until 2026 or later, and 44% don’t expect a turnaround until at least 2027. It’s easy to understand the skepticism given that the positive signs people were looking for to spur hiring, including increased funding, haven’t materialized as layoffs continue.

Biopharma professional Pierre Michel Baez Ortiz is among those feeling pessimistic about the job market turning around anytime soon. In a poll comment, he noted that Maryland hasn’t recovered from the crash after the pandemic-era money infusion ran out.

“Over three years and the region is unstable as hell,” he wrote. “There’s zero job security and some people in my network have been unemployed for more than a year, a few for several years. And now we have more big companies leaving Montgomery County.”

If the industry recovers, he added, it wouldn’t be for maybe two more years.

Biopharma professional Ricardo Azedo took a more positive tone in the poll comments, writing, “I want to be hopeful, so I’d cast my vote to ‘as soon as possible.’”

That said, just 27% of voters predicted the job market will turn around by the end of this year.

Reasons for Skepticism Easy To Find

It’s not hard to spot what might be fueling people’s skepticism. In addition to factors such as venture capital funding dropping 20% year over year in the first quarter, massive Department of Health and Human Services layoffs and looming pharma tariffs, consider:

  • Late last month, the U.S. Bureau of Labor Statistics reported that the number of job openings was little changed in March and dropped by 901,000 over the year.
  • In April, job postings live on the BioSpace website were up just 1% month over month and down 8% year over year.
  • Although the number of biopharma professionals laid off in April dropped 22% year over year, according to BioSpace tallies, the 1,357 people affected was the second-highest monthly total of 2025. (Note: Figures exclude contract development and manufacturing organizations, contract research organizations, tools and services businesses and medical device firms.)

In what’s sure to be unwelcome news, May’s layoffs have already surpassed April’s with Teva Pharmaceuticals cutting 2,893 employees worldwide. Add Bristol Myers Squibb’s layoffs of 516 people in Lawrenceville, New Jersey, and you’re at about 3,400 people out of work between just two companies. That’s especially significant given that just over 4,000 biopharma employees were laid off over the entire first quarter.

Those layoff numbers likely wouldn’t surprise Ira Leiderman, healthcare managing director at investment banking firm Cassel Salpeter & Co. During an interview for a recent BioSpace article, he noted that companies are “leaning down.”

“People need to husband their cash, manage their expenditures, and unfortunately, it’s costing people their jobs and their livelihoods,” he said.

Leiderman doesn’t see hiring rising in the near term and theorized that mid-level and senior-level people could leave the country and head to Europe, leading to some brain drain. He also noted that biopharma professionals might change industries.

For those who need jobs now, and especially for those who’ve needed them for several months or longer, leaving the U.S. or biopharma itself to gain employment is understandable. As Leiderman said, “People have to pay their bills, right? They’ve got to make a mortgage payment. They’ve got to put food on the table for their kids. You’ve got to live the dream, but you’ve got to also be realistic at some point.”

Click here to read the PDF.

Click here to read the full article.

Job Market Woes: More Funding, Stability Needed for Turnaround

 

By Angela Gabriel

The biopharma job market likely won’t turn around until 2026, according to two industry experts. Both cited a need for more investment and noted the impact of uncertainty on the industry.

The biopharma job market is unlikely to turn around this year, according to two industry experts who cited a need for more investment and regulatory predictability as key factors to a hiring increase.

“I expect 2026 will be the real inflection point,” said Audrey Greenberg, CEO and founder of AG Capital Advisors, a strategic advisory firm. “The election year, uncertainty last year and the capital markets conditions—coupled with sort of inflation concerns and global trade and geopolitical risks—are all sort of making folks stop and stare, like rubberneckers during a car crash.”

Greenberg noted that emerging biotech and early-stage research and development hiring are still slow and will probably lag until the markets fully recover and rebound.

Based on BioSpace data for April, overall biopharma hiring activity is down year over year. There were 8% fewer job postings live on the website last month than the year prior.

Ira Leiderman, healthcare managing director at investment banking firm Cassel Salpeter & Co., which primarily handles mergers and acquisitions, said there’s a low chance hiring will turn around in 2025. Echoing Greenberg, he noted that just as the job market looked like it would get better, it was hit with uncertainty on the macro level with the economy and political situation and the micro level for biotech. Certainty must come back for the situation to improve, he said.

Leiderman noted that it’s possible the biopharma job market will turn around after the midterm elections in 2026. If the House and Senate flip, he explained, President Donald Trump may not be able to run the country by fiat and executive orders.

“Right now, Congress is not doing their job, in my opinion, and they’re getting steamrolled,” Leiderman said.

Investment Key Factor in Turnaround

For the biopharma job market to turn around, there needs to be more capital deployment, according to Greenberg.

“Funding is still very selective,” she said. “A lot of capital is sitting on the sidelines. We need recovery in the IPO markets, and then that will allow for the redeployment of capital into early-stage companies and late-stage ventures. So, the cycle of capital needs to increase in momentum, starting with the IPO market opening up.”

A recent BioSpace article noted that more capital left biotech than entered the sector in 42 of 52 weeks of 2024.

Greenberg noted there are some bright spots for investment, citing Philadelphia and New Jersey as examples. According to CBRE data, between 2019 and 2024:

Leiderman’s thoughts on investment aligned with Greenberg’s, as he noted that the flow of funds into biotech has decreased and venture capital activity has dried up.

“There are funds with a lot of money that are holding back, and they’re keeping dry powder for their portfolio companies,” Leiderman said. “We’re not seeing a lot of transactions getting closed.”

Biopharma VC funding dropped 20% year over year in the first quarter, from $8.1 billion to $6.5 billion.

As to what could spark a change in investment, Leiderman said, “I think when we see people feeling good about the stock market without the crazy volatility that we’ve been seeing over the past month, people may start saying, ‘Well, maybe now it’s time to start looking at transactions and still putting some money to work.’”

Regulatory Predictability, M&A Activity Also Critical

Regulatory predictability is another factor in the job market turning around, according to Greenberg. She cited recent changes at the FDA as part of what’s holding the market back. Those changes include 3,500 FDA staffers being let go in April, leading to drug review delays.

Leiderman also pointed toward a lack of predictability where the FDA is concerned, noting “you have successful Phase III trials, registration studies, and you file your BLA or your NDA, and then who knows how long it’s going to take to get out of the agency.”

In addition, he said cuts to research funding at universities could become a hiring issue, as the biopharma industry sources scientists from those academic institutions, from grads and postdocs to junior and senior faculty.

“If that gets cut back, we’re killing the farm club, right?” Leiderman said. “We’re going to have empty benches.”

The final factor Greenberg cited for the biopharma job market turning around is more mergers and acquisitions.

“We’ve seen a lot of partnerships, but Big Pharma—and they’re the ones with all the dollars—is still a bit cautious,” she said. “But I think it’ll really only be a matter of time before pipeline gaps force aggressive buying and partnering.”

Although M&A value in biopharma rose 101% in the first quarter of the year compared to the final three months of 2024, policy challenges prompted pharmas to turn to less risky licensing transactions.

Finding the Right Rhythm for Growth, Hiring

How companies pace growth moving forward is also important to the biopharma job market, according to Greenberg. She noted that businesses should avoid not only underhiring but also overhiring, which can lead to layoffs.

“Not too hot, not too cold,” Greenberg said. “You need to hire against real inflection points and avoid ‘short-termism,’ is a phrase I like to use.”

She noted that when it comes to hiring, timing can be particularly difficult for those running a manufacturing operation, such as a contract development and manufacturing organization. When CDMOs are trying to sell contracts to clients, she explained, they need to prove that they already have the capability, which means hiring a bit ahead of need.

“You need some people, say, six months door to floor, meaning from when you hire someone to when they’re actually operational and fully functional on the manufacturing floor,” Greenberg said.

Leiderman’s recommendation for how companies can pace growth was that they should focus on programs with the highest likelihood of success. He noted that data talks.

“If you have good data, it’s going to attract people who are going to want to fund that,” he said.

Putting It Into Perspective: It’s Not 2022, but That’s a Positive

As biopharma professionals keep an eye on the job market, funding and federal actions that impact the industry, Greenberg offered a positive take on the situation.

“This isn’t 2022, and that’s a good thing,” she said. “We’re in a more rational market. Emerging biotech is leaner, making good decisions. Big Pharma is incredibly disciplined, and cell and gene therapy, AI and manufacturing are scaling with purpose. So, I wouldn’t call it bad. I call it healthier and smarter hiring for the next wave of innovation.”

Click here to read the PDF.

Click here to read the full article.

Biotech’s ‘Nauseating Roller Coaster’ Repels Investors

 

By Ana Mulero

Biotech was starting to show signs of recovery after years of investor pullback—until new tariffs and economic uncertainty sent fresh shockwaves through an already fragile market.

More capital left biotech than entered the sector in 42 of 52 weeks of 2024. It was the second consecutive year of a prolonged downturn in biotech investment following the COVID-19 pandemic boom. And now, macro headwinds are adding even more to the gale pressuring the industry.

Bruce Booth, partner at early-stage biotech venture capital firm Atlas Venture, told BioSpace that “the biotech capital markets have been super challenging in the past couple of months; tariffs and macro issues, FDA turmoil, NIH issues and so much more.”

“There’s been no place for investors and companies to hide,” Booth added. “The daily volatility is a nauseating roller coaster.” Still, he emphasized that these gyrations haven’t shaken his belief in biotech’s long-term promise.

Frustrated investors have been pulling back from biotech, accelerating the flow of funds out of therapeutics development and signaling a sharp decline in confidence in the sector’s near-term potential. In 2024, capitulation in biotech got “so bad it might just be good,” Christopher Raymond, managing director and senior research analyst at Piper Sandler, told BioSpace.

Capitulation marks a moment of extreme investor pessimism when money exits the sector rapidly and sustainably. Christopher Garabedian, CEO of life sciences accelerator Xontogeny and Perceptive Advisors portfolio manager, explained that capitulation occurs when investors say, “We’re done,” and collectively sell off their holdings, unable to justify being in biotech anymore.

On a more positive note, Piper analysts said that such massive outflows often indicate that the worst of a downturn may be over, with the market potentially approaching or already hitting bottom—a sign that a recovery is finally on its way. This time, however, nascent signs of recovery in 2025 have been overshadowed by political turbulence and trade tensions.

“As the first quarter ends, the mood among biotech investors is poor, with frustration, despair and resignation widely felt,” TD Cowen’s analysts wrote in a recent note.

The Roots of Capitulation

Biotech, more than other sectors, relies on investor confidence to sustain the lengthy and costly therapy development process.

The roots of 2024’s biotech struggles stretch back to late 2021, when the market began cooling after the COVID–19 pandemic-driven boom. 2022 and 2023 were marked by a sharp decline in IPOs, shrinking private financing and waves of industry layoffs.

“In the pandemic years, we saw a surge in IPOs due to lower interest rates and an influx of nontraditional capital,” EY’s Arda Ural, who specializes in strategic planning and asset valuation in biotech, told BioSpace. “However, most of those assets have not lived up to their initial pricing and are trading underwater for their investments.”

Ira Leiderman, healthcare managing director at investment banking firm Cassel Salpeter & Co., echoed this sentiment. “Biotechs take a long time to die,” he told BioSpace. “But over the past few years, we’ve seen companies exhaust their runway. Some have restructured and many have gone bankrupt.”

Piper reported that in 2022, the biotech market held up better than in the two years that followed. While inflows slowed after December 2021, money was still entering the sector early in the year, and there were no major signs of panic.

The proportion of rising stocks versus falling ones, known as the breadth ratio, is another proxy for market sentiment, with lower values suggesting a broad-based retreat. According to Piper, the breadth ratio stood at 0.63 in late January 2022. By contrast, 2023 marked a deeper downturn, with the breadth ratio dipping to 0.29 in November.

Capitulation, too, followed this trend. Investor sentiment weakened as 36 of the first 45 weeks in 2023 saw outflows. Piper called 2023 “abysmal,” with net outflows of $16 billion, compared to $12.7 billion in 2024.
In 2024, the pressure continued, with biotech fund outflows occurring in 42 of 52 weeks, according to Piper Sandler data. Lipper/AMG Data Services put out similar findings, revealing that 80–85% of 2024 biotech investment funds experienced outflows.

“We’ve had essentially two straight years—2023 and 2024—of nothing but negative fund flows,” Raymond said. The breadth ratio also dipped in 2024, down to 0.21—the “lowest level since 2009 and below the magic number of 0.3,” which has historically been the point of a market rebound, he said.

This trend does not necessarily indicate a complete rejection of biotech, Garabedian stressed. Investors may be exiting simply to balance their portfolios, offsetting gains elsewhere, he told BioSpace.

Indeed, history suggests that when the breadth ratio falls below 0.3 like in December 2024, the S&P biotech index, or XBI, typically gains around 16% over the next six months. Booth said that as 2025 unfolds, the historical pattern Piper highlighted provides a glimmer of optimism for the industry.

“Biotech will remain in recovery mode [in 2025], but that doesn’t mean pessimism prevails,” Evaluate’s 2025 preview states.

But with the administration threatening a variety of tariffs and wiping out much of the government’s workforce, including many top regulators, the path of that recovery has become ever more uncertain.

“Given the current environment, we don’t anticipate the IPO market to offer a window in the next 3–6 months,” Ural said.

Rising Tides in a Very Rough Ocean

Still, Booth remains hopeful about biotech’s outlook. He said that while current volatility is “nauseating,” early-stage investors can take the long view.

“Fortunately, as early-stage venture investors, we can take a very long-term view of the space,” Booth told BioSpace, “and our perspective on the sector’s 5–10 year horizon remains very positive.”

He emphasized, however, that macroeconomic stability will be crucial for sustaining momentum. Upheaval at the FDA and other agencies under Robert F. Kennedy, Jr.’s oversight as secretary of the Department of Health and Human Services continues to ripple across the industry, as do the continued tariff threats from President Donald Trump.

Prior to these developments, biotech had set itself up for a recovery. Private investment had strengthened, particularly in early-stage companies. “Both seed-stage and Series A have seen strong investment,” Kale Frank, managing director of Silicon Valley Bank’s (SVB) life science and healthcare division, told BioSpace. 2024 also was the second-largest year for public equity issuance ever, Frank added.

With valuations adjusted downward, biotech companies adopted leaner operating strategies and were prioritizing their most promising assets. Garabedian said this is a “silver lining” highlighted by the Piper data. “All these things are in play now, so the runways these companies have when they do raise money will get farther.”

Still, in this environment, only the strong survive, said Margery Fischbein, healthcare managing director at CS. The gap between the “haves and have-nots” in biotech is widening, she warned. Thus, even when the sector does buoy, “I don’t think we’ll see a rising tide lifting all boats.”

Click here to read the PDF.

Click here to read the full article.

How Low Will It Go? March M&A Stays Quiet in the Middle Market

By Demitri Diakantonis
April 7, 2025

Blame the tariffs, blame reluctant buyers and sellers — blame whatever you want — but the fact of the matter is dealflow is continues to putter along. In fact, March’s totals were at the lowest level since May 2013. Here’s our monthly deal analysis.

According to LSEG, there were 52 mid-market deals valued at about $13.7 billion last month compared to 74 deals valued close to $22 billion for the same period in 2024. The data is based on North American completed deals worth between $100 billion and $1 billion.

Year-to-date totals are 5 percent off of 2024’s transaction total of 206 deals, though value totals are 5 percent higher at $61.7 million due to higher prices per deal done this year.

Expectations were high coming into the year that there would be an uptick in dealflow after many quarters in the doldrums. Those expectations have yet to be met.

“New deals are taking longer to bring to market,” says Cassel Salpeter Co-Founder James Cassel. “The economic uncertainty and hesitancy among market participants contributed to fewer opportunities materializing than we had initially projected.”

One bright spot has been the real estate sector, driven mostly by the demand for data centers. The industry saw 30 deals valued at close to $6.8 billion compared to 12 deals valued at around $4 billion in the 2024 first quarter. A recent deal from March came from 1547 and Harrison Street, which acquired DRFortress, Hawaii’s largest carrier-neutral data center, from GI Partners.

Technology also saw an uptick in dealmaking, thanks to AI-driven deals, with 55 deals valued at about $15.7 billion compared to 49 deals valued at around $11.2 billion in the 2024 first quarter.

The healthcare industry, historically a staple of mid-market M&A, continues to decline with just 22 deals compared to 39 at this time last year with deal value dropping from $8.9 billion to $5.3 billion. The industrials, retail and consumer staples sectors also saw sharp declines.

In the league tables, Piper Sandler (NYSE: PIPR) jumped to first place by advising on the most deals (10). Evercore (NYSE: EVR) and Morgan Stanley (NYSE: MS) round out the top three. They advised on nine and seven deals, respectively.

“We anticipate a choppy market until there’s greater clarity and stability,” Cassel says. “Buyers and sellers remain hesitant and worry about the effect of tariff inflation and consumer sentiment with concerns of a recession seeming closer than they have over the past 12 months.”

Reach Cassel at jcassel@cs-ib.com.

Click here to read the full article.

Table of Experts — Passing the torch: Mastering business succession planning

April 2, 2025

Generational wealth is a time-honored reality for family-owned businesses and family offices tasked with protecting assets for current members and descendants. Yet, handing off the reins from a family’s elders to their offspring can be uncertain.

How can families grow their business enterprise or wealth to ensure holdings are protected, whether for eventual sale of the company or distribution to family members down the road?

In this roundtable discussion – hosted by First American Bank and held at the South Florida Business Journal office – entrepreneurs, bankers and advisors explored the importance of succession planning to prepare and protect the family business for future needs. The ideas discussed included employee stock option plans (ESOPs), acquisition by a private equity firm or investor, and strategies to keep the business within the family. Solutions vary depending on whether the family is seeking to pass the management torch, an exit, a payout, or family-office security. Yet, the decisions made today can have a lasting impact on valuations in the future.

Moderated by Brian Hagan, the Florida Market President of First American Bank, panelists agreed financial education is central to effective planning and future success. Teaching today’s members, with a goal of broad understanding of the strategies for wealth preservation, can help prepare family elders and their progeny. It also can align individual expectations for the future of the family organization.

Choosing a successor

One such family business is Padrón Cigars. Founded in 1964 by then-recent Cuban immigrant José Orlando Padrón, the company today is led by his son and company president Jorge Padrón. The son is one of five siblings involved in the business, with over a dozen progeny in the family.

As his father aged, he turned leadership to Jorge Padrón – but not before the son worked in the company, learned the business, and came to know his father’s intent and wishes, Jorge Padrón told fellow panelists. Like many who take over family businesses, nothing was handed to him. “I had to earn that responsibility,” Padrón recalled.

Padrón watched his father lead, learning along the way how to navigate his own leadership, especially when making big decisions for the business or family.

“It was tough, more so for me than my siblings. He never told me how to act or what to do. I watched. That gave me the opportunity to see how he did things, and appreciate what he did,” said Padrón. He admitted it sometimes gets challenging leading a family business with a large family separated by skills, generations and individual expectations.

“I never took for granted the power or authority he gave me to run the company,” Padrón said. “Sometimes, in family businesses, we have to make big decisions on how to run things, and that’s where it can get hairy. You have to check your ego at the door and do a little more work than others. But it’s all for the greater good of the family and business…The legacy has to be preserved. Our name is on that cigar.”

Tony Argiz, South Florida managing partner with accounting firm BDO USA, acknowledged that the Padrón family example speaks to how transitions can work well. Whether through the father’s support or the son’s humility, the transition was likely made easier by the brand his father built.

Educating the next gen

How can a family business or investment office best manage itself when it has parents, offspring, and even grandkids involved in its operations, financial needs, or succession?

“Planning must consider tax implications from any sale or divestment, as well as how management will carry forward,” said William Stewart, managing director with PCE Investment Bankers. Management makes the decisions, and liquidity ensures the finances are in place to follow through, especially when taxes are due on sale proceeds, distributions, or death.

Mauricio Rivero, national tax partner at Nelson Mullins, noted that companies take different approaches toward family members. Some, like Jorge Padrón, become active leaders.

“This person may be the oldest, the strongest character, have natural leadership skills, or they have an education in management. The oldest may not even want a role; he or she might prefer little to no daily involvement but still receive remuneration or distributions,” Rivero said.

Deciding who is included or excluded, and in what capacity, or whether a sale or reinvestment is in the family’s or company’s best interest, is up to the elders and the family. Rivero’s firm often will consult with clients to ensure the structure is in place, whether for a family office or trust company to manage proceeds should the business be sold.

Roles and structures vary. Some family members are leaders, while others may be shareholders without a managerial role. For family members who are inexperienced or ill-suited for leadership, holding a shareholder role allows them to stay involved without management duties, Stewart explained. An ideal leader may possess the traits of an entrepreneur – thoughtful, yet opportunistic, spontaneous or reactionary. They become an extension of the culture.

“You give them a position that keeps the family together, without the tension,” Stewart said. “There are all sorts of dynamics, and these change. Someone has to be in charge. If not, you’re inviting failure.”

The success of such designations, compensation decisions or the choice to bring in outside management “depends on the family dynamic,” said James Cassel, chairman of Cassel Salpeter & Co. Are there people “on payroll” who don’t work, and are there discrepancies in the amounts each person may earn? Are the patriarchs and next generations aligned in their vision for various situations?

If needed, a consultant can be brought in, not to serve as a manager, but as a facilitator to help educate the family members about different situations or to lead discussions – or address concerns.
“The consultant can be the bandleader that puts them in the right place,” Cassel said.

“The consultant can review such topics as compensation, salary, bonuses or distributions,” added Thomas Wells IV, CEO of First American Bank. While a shareholder or family leadership can have those conversations, a third party brings a neutral perspective to the discussion.

Keep an eye on the prize

Most successful companies have an eye on their shared future. Sometimes, leadership at growing businesses seeks to reward employees with an ownership stake. An employee stock ownership plan, (ESOP) lets employees acquire and own part of the company they work for. The plan can motivate workers-turned-owners, while also boosting productivity and improving retention.

Maybe they’re growing the business with hopes of an exit, or they have no intention of selling, but a private equity firm or investor comes along with an enticing offer.

In either case, it’s important for the family to position the business in the best possible light, by studying valuations to understand how much the business might be worth in current market conditions.

Wells suggested families explore their true motivation for valuation. Is it for a sale, estate purposes, or insurance valuation to protect against inheritance or “death” tax hits?

“The truest valuation is the market,” Wells said.

Valuation can be a challenge for family businesses. Owners might seek the input of a wealth manager, who may not understand the nuances of valuing a particular industry.

“A friend at the country club may boast they sold for some multiple of revenues or EBITA, when it might have been a fraction of that,” Cassel joked. Numbers vary by industry or performance, and the family may have various assets that would be part of the sale.

Fernando Mello, a certified business broker with Transworld Business Advisors, said it’s best to have “a constant eye on the books” and not wait until an offer comes along.

“The sooner the owner looks at their business, the better,” Mello said. “Most don’t do that until it’s very close to an exit.”

“How are the records?” Argiz asked, rhetorically. Solid financial records can help determine the strength of cash flow or profitability. “Are there add-backs or adjustments, even other financial situations that could increase tax liability,” added Mello.

How is the quality of earnings? This can reveal how well a company’s reported earnings predict future cash flows and is especially important for potential investors seeking an acquisition or merger.

Other paperwork could include formal leadership roles and succession plans, shareholder agreements, even leases or client or vendor contracts. Are key employees under contract?

Again, an outsider – an accountant, attorney or business advisor – can help run these numbers or documents, and “allow the owner to focus on the business,” Argiz said.

“Entrepreneurs might not be looking day to day to sell their business. It’s not positive when the business owner takes their eye off the ball,” Argiz said. “They’re executing their vision.

Speed round: How can family offices and small businesses plan today for a stronger tomorrow?

William Stewart, Managing Director, PCE Investment Bankers: “From the education side, it’s understanding the options you have in business. Not everyone is a fit for private equity [acquisition]; not everyone wants to sell to a strategic buyer. ESOPs can work great for some companies. You have to understand the options and how they’ll work for you. And you can’t start early enough teaching the next generation to help them understand their role and how they can participate in building family wealth and the operating company.”
Mauricio Rivero, National Tax Partner, Nelson Mullins: “Education and understanding options are key to any family operation. They need to understand the history of where their wealth comes from, and some of them don’t. They need to know what the options are going forward, from a business level, and where they are and where they see themselves and the family in the future. If somebody comes knocking on the door looking to buy, is this something they want to do, or will it disintegrate family unity?”
Jorge Padrón, President, Padrón Cigars: “A lot of this applies to everyday operations. We as a company, and I, within it, must work toward a more efficient company, with better communication between our family and employees, and understanding of our roles. Who knows what will happen in the future? But if the people involved in the business are well- educated and understand the dynamics, it creates a much stronger company.”
Fernando Mello, Certified Business Broker, Transworld Business Advisors: “The key person from the business – the entrepreneur – is not necessarily the one to drive this. They need to be smart enough to surround themselves with the right people and advisors. When something like this is considered, we require an investment of time and money.”
James Cassel, Chairman, Cassel Salpeter & Co.: “There are those family businesses where the people at the top look at their family members and really believe they’re not the right people to run the business going forward. This fork in the road leads to the question, ‘Do we bring in professional management, or do we sell the business, leading to wealth created in a different fashion?’ That kind of planning needs to be considered, and you have to be very honest about it.”
Tony Argiz, South Florida Managing Partner, BDO USA: “Education within the family is critical. They need to understand where their money came from and how those pennies were earned and saved. ‘Where did that money come from?’ That’s hard work. You have to pass it from generation to generation, and the only way to do that is by being smart and aware of everything you’re doing.”
Thomas Wells IV, CEO, First American Bank: “There’s not a stone tablet that says, ‘You should be rich.’ That’s a really important concept for the next generation. It means, you’re going to have to learn, participate and figure out how to manage your money. Because your wealth, which you have been blessed to receive, is transitory and ephemeral. It will disappear if you don’t take care of it. That takes work. ‘How did you invest it? How did you make it happen?’ That’s the education. If you sit down with a bunch of 20- and 30-year-olds, the second and third generations, they don’t know what a trust vehicle is, what a beneficiary is, what a shareholder is. It’s basic stuff that needs to be thought through. The family can’t buy that. It must be ingrained as part of the culture.”
Brian Hagan, Florida Market President, First American Bank: “We help educate our customers on this. For many families, whether it’s early in the process or they’ve been educating the next generation from the beginning, it’s an ongoing effort and comes in many forms. First and foremost, it starts with good advisors.”

Click here to read the PDF.

Click here to read the full article.

How Macroeconomic Trends Are Impacting Dealmaking, Investor Appetite, and Corporate Valuations

By Jill Malandrino
April 2, 2025

Jim Cassel, Co-Founder & Chairman, Cassel Salpeter & Co., joins Jill Malandrino on Nasdaq TradeTalks to discuss how macroeconomic trends are impacting dealmaking, investor appetite, and corporate valuations.

TradeTalks broadcasts live from MarketSite in Times Square, the historic Philadelphia Trading Floor and Global Industry Conferences and Events. Featuring conversations with top industry thought leaders on trends, news and education.

Click here to read the PDF.

Click here to read the full article.

Joey Smith, Director of Aviation Services @ Cassel Salpeter

By Lee Hayhurst, ABNcast
April 2, 2025

Joey Smith, director of aviation services at investment banking firm Cassel Salpeter spoke to ABN editorial director Lee Hayhurst in this latest edition of ABNcast about a report the firm has published looking at the impact that Artificial Intelligence is having on the sector. He also expresses his concerns about the looming threat of US tariffs by the Trump administration on prospects for the industry.

Businesses Bemoan Tariff Hikes

South Florida companies fret over Trump’s potential tariffs on key trading partners

By Brian Bandell
January 9, 2025

Tariff woes have been a fact of life for U.S. companies since Donald Trump’s first presidential term. But the threat of substantial hits to businesses’ supply chains has intensified as the president-elect is poised to take office.

During his recent campaign, Trump advocated for a 60% tariff on China and a 20% across-the-board tariff on all imported goods. And after his election win in November, he called for introducing a 25% tariff on all products from Mexico and Canada.

If Trump ramps up tariffs on just those three countries, it would impact a massive amount of trade. That’s because Mexico, China and Canada were the top three importers of goods to the U.S. through the first 10 months of 2024, accounting for 42% of all imports by value, Miami-based WorldCity reported.

Tariffs are absorbed by companies that import the goods. So, this would raise costs and reduce profits for a host of businesses that rely on products and raw materials from overseas. To make up for those losses, businesses typically pass those costs onto consumers through price increases, which can reduce demand for their products.

Kevin Maloney, president and CEO of Miami-based developer Property Markets Group, said many building materials used in its high-rise projects are imported, such as glass and concrete from Mexico, wood from Canada, and rebar from China. Paying higher tariffs would drive up building costs and erode profit margins. In response, PMG could raise condominium prices, or decide a future project isn’t worth pursuing.

“There is no question that if tariffs are imposed in the full force at the amounts being advertised that we will have inflation and our costs will go up,” Maloney said. “They will go up in just about every manufacturing business.”

Yet, there are ways for businesses to avoid higher tariffs.

That’s why PMG, developer of Miami’s tallest tower, the Waldorf Astoria Residences, is ordering far ahead in bulk from subcontractors to lock in favorable pricing. Maloney said it bought 48 elevators at a bulk discount for 10 of its projects nationwide. He also seeks long-term agreements with suppliers to lock in materials prices for two to four years.

Yet, not every construction expert is convinced tariffs will be a big deal.

Peter Dyga, president and CEO of Associated Builders and Contractors in South Florida, said tariffs didn’t cause a problem for construction during Trump’s first term and, in fact, inflation was relatively low during those four years. He suspects Trump will use tariffs as a negotiating tool to win concessions from other countries to accept U.S. goods, without actually imposing tariffs on U.S. imports, he added.

“The supply chain will be improved when European, South Asian and Central American markets open up to more of our products,” Dyga said.

China trade already shrinking in the U.S.

Tariffs on China would accelerate a trend that started with Trump’s first term and continued during the Covid-19 pandemic: less reliance on imports from China.

Since Trump’s first term, China is no longer the U.S.’s largest trading partner, said Ken Roberts, president of WorldCity, which tracks trade data. He added that, despite assertions that increasing tariffs would reduce the nation’s trade deficit, it hasn’t happened. Instead, countries such as Mexico, Canada, Vietnam and Taiwan saw their imports to the U.S. boom.

Still, China dominates certain product categories such as toys, computers and phones, so tariff hikes would hit U.S. buyers hard, Roberts said.

“If Trump puts a 60% tariff on China, I would be astonished,” he said. “The repercussions would be hard to imagine. Prices would have to adjust immediately.”

So much of what we eat and use in the U.S. is made overseas, and it’s not always feasible to manufacture all of it domestically at competitive prices, said attorney Peter Quinter, chair of the U.S. customs and trade law group at Gunster in Miami. More tariffs on China would likely cause manufacturing to move to other low-cost countries, not the U.S., he said.

“You’re not going to make clothing and footwear in the U.S.,” he said. “And the same with auto parts. We assemble cars in the U.S. We don’t really make them.”

In some cases, a product could start the manufacturing process in China, be shipped to a country like Mexico for final assembly, and then be imported to the U.S. without paying the higher tariffs placed on Chinese products, Quinter said.

Many companies have been looking outside of China, which has made Vietnam a huge player in manufacturing – often in factories owned by Chinese investors, said Joseph Firrincieli, sales manager at New York-based freight and logistics firm OEC Group. Yet, Vietnam doesn’t have the vast infrastructure and population that China has, so it can’t replace China’s output for U.S. buyers.

“If these tariffs go through, every sourcing manager out there will be traveling like crazy to find other countries to make their commodity on par with China,” he said.

Seeking alternatives to Chinese imports

Coral Springs-based Aere Marine Group, which makes inflatable fenders for boats, has reduced its reliance on Chinese goods by a third in response to tariffs and supply chain challenges during the pandemic, COO Vicki Abernathy said. It sources more fabric from Europe now, and strives to obtain materials such as yarn from the U.S. as much as possible.

If Trump raises tariffs on China further, the company will do what it can to avoid them and manufacture outside of China, she said, but it’s hard to avoid in all cases. Aere Marine Group can raise prices for its big fenders for large yachts and make them in the U.S. because those customers are less price-sensitive. But it’s harder to hike prices on small fenders for boats 30 feet or under, which it has manufactured at a plant in China for 20 years, she said.

“It’s just not cost-effective to build them here,” Abernathy said. “I don’t know what we would do.”

More companies will consider sourcing their goods in the U.S. due to increased tariffs, said Matt Lekstutis, an Orlando-based supply chain leader for trade consulting firm Efficio. Increasing automation in domestic manufacturing and major federal investments, such as the CHIPS and Science Act for semiconductor facilities, should make it easier for more advanced products to be made in the U.S., he said.

“We’ve got a great environment for that investment in manufacturing in the U.S., and these kinds of disruptions, like tariffs, will only spur it further,” Lekstutis said.

However, he said manufacturing lower-cost goods is less likely in the U.S., as opposed to Southeast Asia or Latin America.

Increasing trade with Latin America could be a boon for South Florida ports that are close to the region.

Miami-based Lennar Corp. (NYSE: LEN), one of the nation’s largest homebuilders, started reducing its reliance on China during Trump’s first term. During his fourth quarter conference call with analysts, Lennar co-CEO and President Jon Jaffe said it made a major shift from Chinese and other Asian manufacturing importers starting eight years ago to now source the majority of its supply chain from U.S. manufacturers. It also sources more timber from the U.S., but there would still be a financial impact from the tariffs.

“There remain some parts made in China, primarily electronic components used in the manufacturing of products that are assembled here,” Jaffe said. “These components become subject to tariffs. We estimate the potential cost impact to be in the range of $5,000 to $7,000 per home.”

Importers could seek an exclusion to avoid tariffs on certain products that aren’t available elsewhere, but there’s a limited window to do so, said Lori Mullins, director of operations in Houston, Atlanta and Virginia for custom broker Rogers & Brown. They have 90 days from the announcement of tariffs to seek an exclusion, and it only lasts a year or two before they have to apply again, she said.

Mullins said it would be a more complicated and lengthy process for Trump to impose tariffs on nations that have existing free trade agreements with the U.S., such as Canada and Mexico. Trump signed agreements with both countries in 2020.

It would be faster to increase tariffs on China because the U.S. already issued findings on China’s alleged unfair trading practices, she added. Many of her clients still rely on China for goods from air-conditioning units to windows to furniture, and they would be hard-pressed to find them at low cost elsewhere. Plus, it’s difficult to identify another supplier overnight.

“Americans want to buy cheap and not give up the quality,” Mullins said. “But tariffs will impact how cheaply products get to the market.”

Uncertainty looms for manufacturing businesses

The biggest challenge surrounding tariffs is it’s uncertain how this will play out, so companies won’t have enough time to react, said attorney James Cassel, chairman and co-founder of Miami-based investment banking firm Cassel Salpeter & Co. It’s hard to acquire a company that relies on products from Mexico or Canada when a tariff could suddenly increase costs for that business and drive its value down, he added.

“When looking at any business importing its products or manufacturing, you have to examine its whole supply chain and determine how long it could take to reasonably move it [to avoid tariffs],” Cassel said.

That uncertainty will lead to more demand for warehouse space in the short term, he said. Many companies are rushing to import goods from countries that might be subject to elevated tariffs and stockpiling them in the U.S.

Smaller businesses are likely to be hit hardest by tariffs because few of them have the capital to preorder and warehouse a vast amount of goods, said Margaret A. Kidd, program director and associate professor for supply chain and logistics at the University of Houston.

Additionally, higher tariffs on China are likely to result in inflated costs for consumer goods. That would disproportionally impact lower-income households, so companies that rely on those customers may deal with lower sales, she added.

“You don’t want to be caught flat-footed,” Kidd said. “So, if you weren’t already looking at supply chain diversification after Covid, then shame on you.”

Click here to read the PDF.

Click here to read the full article.

2025 M&A Outlook: Fundraising, Lending and Distressed Deals

By Demitri Diakantonis
January 2, 2025

The M&A landscape continues to evolve, shaped by shifting economic conditions, a new political regime and dynamic corporate strategies. As we move into the new year, Mergers & Acquisitions presents a week-long special series: The 2025 M&A Outlook. In it, we gather insights from dealmakers across all corners of the M&A world to explore key trends, emerging opportunities and potential challenges that will define the dealmaking environment in the coming year.

Today we hear from our experts on several topics of interest to Private Equity including projections on fundraising, lending and the distressed markets.

What is your outlook for fundraising in 2025?

James Cassel, Co-Founder, Cassel Salpeter: There is a lot of optimism now that the coming year will be good. But there is still a lot of money to deploy and LPs still have not been returned the distributions they expected. Brand name funds never seem to have any kind of challenges in raising the next fund. Smaller funds that haven’t had liquidity yet will have some challenges. People are very optimistic that deals will get done and that will free up cash for investors. If cash gets freed up, funds will get raised.

David Duke, Partner, Kian Capital Partners: The market may remain tough as LPs have experienced limited distributions from older GP investments (e.g., DPI for 2018 vintage is well below .75x) which has constrained allocations to new funds. We are hearing that the lower end of the middle market has remained attractive to LPs given the historical alpha returns from that asset class.

Vivek Subramanyam, CEO of Technology Holdings: Private equity funds are quite optimistic about the prospects for 2025. There’s robust demand for businesses looking to strengthen market positions with easing capital costs. Strategic drivers are in place and also the promise of a more accommodating regulatory environment after the elections. They’re sitting on record levels of undeployed capital from recent fundraises while grappling with underperforming portfolios, given the last couple of years haven’t been easy for companies globally, right? And they’ve been waiting for favorable exit valuations. So, all of these are factors that we believe will lead to increased deal activity and also a much better environment for fundraising. The mood has turned dramatically from a year back.

Scott Voss, Managing Director, HarbourVest: Despite the public markets delivering record returns since their late 2022 trough, private market KPIs including exits, investment activity, and fundraising have continued to decline through 2024. We believe 2025 will be a reversal across all measures. More certainty regarding the path ahead for interest rates, inflation, and politics will drive exit activity and new deal volume. We expect fundraising, which has historically lagged a broader market rebound, will increase and accelerate into the second half of 2025 as GPs burn through the dry powder they accumulated in 2021 and 2022.

What is your outlook on the lending market?

James Bardenwerper, Director, Configure Partners: Credit funds have ample dry powder and are eager to lend for all transaction types: acquisition, refinancing and dividend recapitalizations. Furthermore, banks are wading back into the cash flow market and pursuing new opportunities. Current supply / demand imbalance (limited deals with ample capital) is driving high competition.

Wayne Kawarabayashi, Head of M&A, Union Square Advisors: Declining interest rates will be a tailwind for financing as access to capital will be more prevalent and cheaper for corporates and private equity firms for buyside M&A deals and for companies looking to raise capital for internal growth, acquisitions, or refinance maturing or expensive debt.

What’s your outlook on the distressed market in 2025?

James Bardenwerper, Director, Configure Partners: Increase as lenders finally exit dated investments, but partially offset by more favorable interest rate environment easing cash burdens, which allows more “kicking the can.” As lenders have an opportunity to deploy more capital, they can strategically exit positions that are stressed / distressed or owned. Without new deals to partially mask underperforming positions, LPs and managers place a greater emphasis on issues in the portfolio.

Andrea Guerzoni, Global Vice Chair of Strategy & Transactions, EY: The combination of lower growth, subdued demand, elevated capital and input costs, a shifting competitive landscape and rapid technology-driven innovation is creating a challenging environment. Major companies are already making significant changes to address these issues, and smaller companies, being more vulnerable, will likely drive an increase in distressed sales.

 

Click here to read the PDF.

Click here to read the full article.

After bankruptcy court, Spirit sees future as a higher value airline ‘for years to come’

 

By DAVID LYONS | South Florida Sun Sentinel

November 26, 2024

When Spirit Airlines filed its Chapter 11 bankruptcy petition in New York last week, one of its top executives offered the court a note of optimism.

The troubled South Florida-based airline, said Fred Cromer, an executive vice president and chief financial officer in a court declaration, was entering its financial overhaul process “with an eye towards continuing to deliver low-cost, high-quality service to its loyal customers, and to do so for years to come.”

The question is, does the pioneering discounter have enough time to transform its service profile from a maverick bare-bones carrier to a more upscale airline?

On approach to one of the busiest Thanksgiving travel seasons in memory, Spirit flew as usual last week after filing a “prearranged” Chapter 11 bankruptcy petition designed to quickly reduce a large chunk of debt in a restructuring deal with lenders that calls for the creditors to take $350 million in newly created equity in the airline. They’re also lending Spirit a fresh $300 million to finance operations during the Chapter 11 process.

The lender deal became bad news for existing shareholders, whose stock will be canceled when the airline expects to exit bankruptcy at some point in March. Between now and then, U.S. Bankruptcy Judge Sean H. Lane and a lender-
dominated creditors committee will be co-piloting the airline.

Here is where Spirit stood less than a week after it filed its Chapter 11 petition on Nov. 18:

  • Operating Cash: The judge signed an array of orders that allows Spirit to pay routine operating expenses ranging from employee salaries and fuel bills to a small army of vendors and airport landlords.
  • The Stock: As promised by management, Spirit’s battered common stock was delisted from the New York Stock Exchange, with trading moved to the over-the-counter market. Now the shares are acting as a penny stock (symbol SAVEQ), changing hands at 15 cents a share Friday. Before the delisting, the 52-week high for the stock (symbol SAVE) exceeded $17 with the low at $1.08.
  • Retention Bonuses: Six days before the Chapter 11, the Spirit board authorized $5.4 million in retention bonuses to five upper echelon executives led by CEO and president Ted Christie, who would receive $3.8 million, according to a regulatory filing. Companies typically use such bonuses to keep critical leadership in place during stressful times, according to compensation specialists. Christie, who joined the company in 2012 as chief finance officer, has piloted Spirit through a number of challenges: Spirit’s rough-hewn customer relations, COVID-19, two ill- fated merger/takeover attempts by Frontier Airlines and JetBlue Airways, a manufacturer’s engine recall that is grounding multiple aircraft, debt restructuring talks, and the Chapter 11 bankruptcy filing.
  • Airbus Sales: The bankruptcy court apparently is taking a look at a proposed pre-bankruptcy deal where Spirit agreed to sell 23 Airbus jetliners to the Fort Lauderdale-based aviation firm GA Telesis. A hearing is scheduled for next week, according to the court docket. Asked whether it anticipates that the deal will be approved, a GA Telesis spokesperson said: “YES — We have full intention as does Spirit to continue with the transaction as documented.”

Spirit did not immediately respond to emailed questions about the stock, retention bonuses, aircraft deal and whether travelers might be booking away from the airline.

Bondholders in control

As outlined by Cromer in his declaration to the court, approximately $1.635 billion of outstanding funded debt would be restructured and the company’s total funded debt would decline by approximately $795 million with the lenders collectively receiving $840 million in secured notes and new common stock in the reorganized company. The lenders are, in effect, holding most of the cards, analysts say.

The airline is emphasizing a “business as usual” posture, stating that employees, vendors, landlords and anyone else doing business with the company will be paid on time during the Chapter 11 proceedings while the airline flies the schedule it laid out for the fourth quarter of this year. It currently serves more than 80 destinations in the U.S., Latin America and Caribbean.

“In sum,” Cromer wrote, “Spirit seeks to implement a financial restructuring that positions it for future stability, growth, and success without impacting its vendors or other commercial counterparties and without interrupting its ability to serve its guests during the Chapter 11.”

As of the Chapter 11 filing, Spirit employed approximately 12,800 “direct employees,” approximately 84% of them unionized. They include approximately 3,400 pilots, 5,800 flight attendants, 740 aircraft maintenance technicians, 400 ramp service employees, 330 customer service agents, and 100 flight dispatchers. Their labor agreements would remain intact. The airline contracts out work to nearly 10,000 other workers.

Encroachment by rival airlines

After evolving from a trucking company into a charter airline in Michigan in 1990, Spirit relocated to South Florida in Miramar in 1999 and started operating as an “ultra low-cost carrier” offering customers rock bottom “unbundled” base fares. If they wanted anything else such as checked baggage, seat assignments, priority boarding, refreshments, or Wi-Fi, they would pay for those services a la carte. Spirit used those low fares “to address underserved markets, which helps it to increase passenger volume and load factors on the flights it operates,” Cromer noted in his court declaration.

The business went well until COVID-19 all but grounded the industry in 2020, a year that saw most of the industry seek financial aid from the U.S. Government.

“As the seventh largest carrier in the United States, Spirit was not immune to the macroeconomic effects of the COVID-19 pandemic, an oversupplied domestic market, and larger rivals who have capitalized on premium and cost- conscious travelers alike,” Cromer wrote in his court declaration. “In the post- pandemic period, the U.S. airline industry has seen material change as a result of shifting customer demand and operating headwinds.”

“Business travel through 2023 had not fully returned to pre-COVID volumes,” Cromer added, and “premium leisure demand soared which, in combination with unbundled fare competition,” allowed carriers such as Delta and Southwest to “compete for an even greater portion of basic economy share” held by ultra low-cost carriers such as Spirit.

The airline has cut back its route network as it has sought to slash costs ahead of the Chapter 11 filing. Other airlines including discounters Frontier and Allegiant Air have since added routes in and around Spirit’s traditional Florida airspace. In the meantime, the so-called “Big Four” carriers that dominate 80% of the U.S. market — Delta Air Lines, American Airlines, United Airlines and Southwest Airlines — have been offering their own economy fares.

In a note to investors, Raymond James analyst Savanthi Syth wrote that Spirit’s capacity cuts for November and December along routes that overlapped with other carriers largely benefited Frontier, JetBlue and Minneapolis-based Sun Country, with lesser traffic gains by Alaska Airlines and Southwest.

Project Bravo

In a bid to drive more revenue, Spirit hopes to attract new customers with an upscale program of newly tiered fares and services unveiled over the summer. Dubbed in the court filing as part of a strategic overhaul called “Project Bravo,” the company has new premium offerings for customers that became available in August. They included four new travel options called “Go Big,” “Go Comfy,” “Go Savvy,” and “Go,” the latter of which is the airline’s original base fare category.

In effect, the more passengers pay, the more options they’d receive including free Wi-Fi, cabin baggage, snacks and drinks, “all with the flexibility of no change or cancel fees,” Cromer wrote.

Spirit would also add larger overhead bins and introduce premium cabins with access to free streaming Wi-Fi. People holding premium tickets would have dedicated wait lines at some airports; overall, the airline would seek to simplify boarding zones in its terminals.

The airline is already realigning its route system, dropping less profitable destinations in favor of so-called “top value seeker” cities.

The airline would also renew its focus at Fort Lauderdale-Hollywood International Airport, where it stands No. 1 in passengers carried. More “focus cities” would be added in early 2026 where management thinks it could exercise more pricing power.

But bigger airlines such as Delta think they’re dealing with a better hand than discounters when it comes to premium services. On an investor call, Delta President Glen Hauenstein took an indirect shot at Spirit, saying larger carriers with premium products “had a little bit of a downdraft” after the pandemic versus airlines focused on price.

“I think we’ve seen that manifest itself in the bankruptcy we saw filed this week,” he said.

Another takeover play?

Cromer in his declaration acknowledged that Spirit had renewed merger talks with Frontier before the bankruptcy filing, but they went nowhere.

“Over the last few months, the Company and Frontier restarted negotiations around a possible merger transaction,” he wrote. “In recent weeks, certain members of the Ad Hoc Groups were made aware of such discussions as well. Those discussions were discontinued and are no longer ongoing.”

Frontier has declined comment.

Earlier this year, after a Boston federal judge killed a proposed $3.8 billion takeover of Spirit by JetBlue Airways on antitrust grounds, the company’s stock value plunged by 60%, Cromer said. It was an event that triggered management’s effort to start exploring all of its financial options, while simultaneously figuring out how to drive new business.

Henry Harteveldt, founder and president of Atmosphere Research, a San Francisco-based consulting firm, said another round of buyout talks during the bankruptcy case is not out of the question.

“Nothing is stopping Frontier, or, for that matter, any other airline, from opening discussions,” he said.

“Another option,” Harteveldt said, is that other airlines could ask Spirit about acquiring other planes, airport gates or landing slots, or even pilot training facilities.

The outcome

Whether a Spirit Airlines with a lighter debt load and new marketing strategy will emerge from Chapter 11 equipped to become profitable remains to be seen. Joseph “Joey” Smith, an investment banker and aviation specialist at Cassel Salpeter & Co. in Miami, believes the carrier’s history as an industry disrupter will be an important asset going forward.

“How they’ve been operating to date looks like they are really trying to shake things up again,” Smith said. “And I give them credit for that. I have admiration for somebody who is being true to their founding DNA. I think it will be interesting.”

This article has been updated to include the full attribution for the Cassel Salpeter
& Co. aviation specialist.

Originally Published: November 25, 2024 at 5:00 AM EST

 

Click here to read the PDF.

Click here to read the full article.