Structured Deals in Challenging Financial Landscapes: Raising Capital when Capital is Dear

The first quarter of 2023 has proven to be one of the most difficult financing environments in decades. With the gulf region being a notable exception, raising equity in private and public markets has become extremely challenging. Many companies that had planned to IPO in 2022 and 2023 have had to defer their IPO plans.

It has become particularly hard to finance growth companies, even those which continue to grow robustly. Investors are heavily discounting future cashflows given the uncertain outlook, in addition to substantial increases in nominal rates. As a result, valuations have dropped aggressively — greatly amplifying the dilutive effect of equity fundraising. This has resulted in a bid:ask spread between issuers and investors that result in deadlock in any financing discussions, and thus giving rise to structured deals.

Structured deals, such as convertible notes and preferred equity, have gained prominence in the world of private company financing, particularly when faced with difficult financing conditions, risk-averse investors, or divergent views on equity valuations. I will share the advantages of structured deals in these challenging environments and explore the unique investor universe and approaches that differ from those of traditional equity investors.