Johnnie Martinez: On today's episode of the Dig, I am joined by three members of
Johnnie Martinez: the altar group and I will let the three of them introduce
Johnnie Martinez: themselves.
Johnnie Martinez: Well, if you'd start us.
Sure. Thanks, Johnnie.
I'm Valerie Gerard Co, CEO of the Alta Group and I lead the
largest practice within Ulta that's focused on providing
general consulting and advisory services. And you know it might
make sense for me just to spend a second to introduce the Alta
group, to your listeners who aren.
Familiar with us, we have been around for 30 years.
We are the undisputed leader when it comes to providing
advisory services.
On a global basis to the equipment leasing and finance.
Industry, we are exclusively focused on equipment finance and
leasing.
We're not distracted by mortgages or consumer autos.
It's just the core equipment leasing business and anything
that a client would have in terms of a need, we do it.
So that could be assisting them with some growth initiatives,
entering new markets, becoming more efficient in what they do.
We have a lot of competitive intelligence, market
intelligence work we.
We do.
We assist in selecting leasing systems.
We have a group that is focused on equipment management, so if
you need some appraisals, valuations, some residual
impairment analysis as well as remarketing, we have a team that
does that.
We offer mergers and acquisitions as a practice which the
Jim Jackson: industry and buy a company and also supporting, you know,
Jim Jackson: sellers in the industry who might be looking to sell their
Jim Jackson: their property to to other financial institutions.
Jim Jackson: So Rick, I'll turn it over to you.
Rick Remiker: Yeah. Thanks, Jim and Johnnie.
Rick Remiker: I'm Rick remicar.
Rick Remiker: I'm vice chairman with the Alta group and Prior to joining the
Rick Remiker: Alta group nearly five years ago, I spent 40 years in
Rick Remiker: commercial banking, specialty finance, and.
Rick Remiker: Equipment, finance and equipment leasing and I provide support
Rick Remiker: and consultation to all the members of the Alta group and
Rick Remiker: clients predominantly in the bank equipment finance space.
Johnnie Martinez: Benja will thank all three of you for joining us here today
Johnnie Martinez: and I think the best place to start now that we have the
Johnnie Martinez: introduction and as well as kind of the background of who you
Johnnie Martinez: guys are covered, the 10,000 foot view part of the reason
Johnnie Martinez: why.
Johnnie Martinez: We are having a discussion today is the release of the Alta
Johnnie Martinez: Group's report on sort of the state of the equipment finance
Johnnie Martinez: industry and when we're talking about the state of the industry,
Johnnie Martinez: I think the best place to start is like I said, that 10,000
Johnnie Martinez: foot.
Johnnie Martinez: View and we get some of the specific areas.
Johnnie Martinez: So going into 2025, as we look at the rest of this year, what
Johnnie Martinez: is the state of the equipment finance industry?
Well, why don't I kick it off and tell you that I I think
Johnnie Martinez: Mm hmm.
there's a lot of opportunity for the industry in 2025. You know,
we're coming off a really rough 18 month patched where you had
the bank failures at Silicon Valley Bank and Signature Bank.
And that really caused a liquidity crisis that's put put
the industry a little bit on pause, if not in a backward step
or two.
And what we're seeing now is we're looking into 2025.
There are a lot of signs that seem to suggest that it's going
to be a good year for us when you're looking at certain
variables in the economy, when you're looking at signals in the
industry itself like industry confidence and then you have a
new administration that's coming.
In with some probusiness.
Policies that certainly would help bolster our industry and
would result in a very positive experience for equipment,
finance and leasing companies.
There are many different avenues that we see in terms of growth
for the industry in terms of, you know, climate finance and
financing, data centers, equipment as a service, you
know, all of those things will certainly bolster the industry
in terms of its growth. I would say, however.
One cautionary note in that is there are a lot of wild cards
out there. And so while we think that there's a lot of
opportunity for the industry, management teams really need to
be thinking about, you know, we're not going to coast.
To growth throughout 2025, there might be some speed bumps along
the way.
Rick Remiker: And let me you know, let me jump in Valerie and just encourage
Rick Remiker: all the all the listeners to pull down the the 2025 Alta
Rick Remiker: Group Insights report.
Rick Remiker: It's a great read.
Rick Remiker: It covers a lot of different segments and a lot of different
Rick Remiker: areas that some of them will touch on during this podcast.
Rick Remiker: But.
Rick Remiker: You know, if I could, if I could summarize what sort of one
Rick Remiker: overarching theme, I think it's net net positive outlook for
Rick Remiker: 2025.
Rick Remiker: But certainly with high degree of element of uncertainty.
Rick Remiker: Maybe the advice to listeners would be expect the unexpected.
Rick Remiker: You know if you go back to if we were recording this podcast
Rick Remiker: exactly two years ago in mid January of 20/20/20 of 2023, I
Rick Remiker: think that we would have been positive.
Rick Remiker: Maybe not as positive as today, but we would have been net
Rick Remiker: positive at that point in two. And just think what happened six
Rick Remiker: or seven weeks later with the collapse of several.
Rick Remiker: Regional banks that created a complete.
Rick Remiker: Completely different industry dynamic for the next year and a
Rick Remiker: half or two years.
Jim Jackson: Yeah, I think.
Jim Jackson: I think that's a great point, Rick.
Jim Jackson: You know we we sort of get lulled into a false sense of
Jim Jackson: comfort sometimes.
Jim Jackson: You know, Johnny, I'd follow that up.
Johnnie Martinez: Mm hmm.
Jim Jackson: You know specifically on the M and a market similar to
Jim Jackson: Valerie's comments. You know the last couple of years in terms of
Jim Jackson: M and a activity, things have been pretty quiet in the
Jim Jackson: industry.
Jim Jackson: But I think 2025 where we're pretty well suited.
Jim Jackson: From an economic standpoint, to have a pretty strong M and a
Jim Jackson: market.
Jim Jackson: This year, you know, the market does not like uncertainty.
Jim Jackson: And there's there's a fair amount of certainty around a
Jim Jackson: number of factors, including the fact that the uncertainty
Jim Jackson: election you know is now behind us.
Jim Jackson: We have an administration in place.
Jim Jackson: Who's committed to reducing regulation and and discussing a
Jim Jackson: reduction in the corporate tax rates?
Jim Jackson: The stock market continues to perform well.
Jim Jackson: Unemployment levels are low. Those traditionally a factors
Jim Jackson: that generally contribute to a pretty strong M and a market.
Jim Jackson: The one factor that that's still a little bit of a you know, an
Jim Jackson: uncertainty at this point and it's just you know reared its
Jim Jackson: head not too long ago when we had a super strong jobs report.
Jim Jackson: You know the interest rate cut has has kind of been sidelined,
Johnnie Martinez: Mm hmm.
Jim Jackson: if you will, by the Fed and they're they're kind of
Jim Jackson: backpedaling a bit on that. And I think some of the Fed members
Jim Jackson: are even thinking a hike might be in order.
Jim Jackson: That, of course, will.
Jim Jackson: Will quell some M and a activity if rates indeed rise.
Jim Jackson: I think if I think you know the other factors in the environment
Jim Jackson: should keep us pretty steady, but I'd caution keep an eye on
Jim Jackson: interest rates cause those do impact the the the level of M
Jim Jackson: and a activity.
Johnnie Martinez: Gotcha. Fantastic.
Johnnie Martinez: And you know one thing I wanted to get into, especially on the
Johnnie Martinez: the M and a side and we can talk about how this sort of plays
Johnnie Martinez: into the wider equipment finance space as well as are there any
Johnnie Martinez: particular segments in terms of you know, bank owned versus.
Johnnie Martinez: Independent or you know, specific asset types where
Johnnie Martinez: you're seeing lenders that are focused on these asset types
Johnnie Martinez: more attractive in the M and a space. Is there anything like
Johnnie Martinez: that that's standing out as we start to look at the rest of
Johnnie Martinez: this year?
Jim Jackson: Well, I think I think a couple of factors.
Jim Jackson: You know.
Jim Jackson: Let let's talk about a couple things that are going on in the
Jim Jackson: marketplace.
Jim Jackson: One area I think is is the lift out teams that we're seeing. So
Jim Jackson: certain strategics and others are investing not not only in
Jim Jackson: focused on complete companies, if you will, but are focused on
Jim Jackson: potentially lift out teams where senior executives are brought
Jim Jackson: over. That might help a strateg.
Jim Jackson: To expand its market offerings or gain some additional
Jim Jackson: relationships.
Jim Jackson: Think of the folks from Madison Capital going over to Oakmont
Jim Jackson: recently.
Jim Jackson: Think again about the folks from Honor Capital moving over to
Jim Jackson: Dex.
Jim Jackson: And I think we'll continue to see those opportunistic lift
Jim Jackson: outs going on throughout the course of 2025.
Jim Jackson: You know, I'd, I'd say the real winners.
Jim Jackson: For for.
Jim Jackson: For the past year and I've seen a lot of private equity
Jim Jackson: investment in there, are these, you know, middle market
Jim Jackson: structured firms where the private equity companies feel
Jim Jackson: there's still a good return to be made.
Jim Jackson: With those businesses basically picking up the slack for the
Jim Jackson: banks as they sort of exited those, those that tranche of
Jim Jackson: assets and that tranche of lending and those private equity
Jim Jackson: firms that went out and actually built teams or acquired teams
Jim Jackson: that were versed in bringing over structured cred.
Jim Jackson: And potentially, you know, structuring those in such a way
Jim Jackson: that they provide a strong return.
Jim Jackson: Similar to the Stonebriar model, if you will.
Jim Jackson: Where they can actually make a decent return on their
Jim Jackson: investment.
Rick Remiker: Yeah, Jim and I would just echo that.
Rick Remiker: I think that one of the big questions hanging over all of
Rick Remiker: the private equity investment in the industry, which has been
Rick Remiker: significant and in some of the most significant private equity
Rick Remiker: investment I've seen in in many decades is when the banks get
Rick Remiker: back into the market if and.
Rick Remiker: When they get back into the market, will, will, will pricing
Rick Remiker: compression margin compression Dr. pricing down across the
Rick Remiker: industry or will it really be constrained to that bank credit
Rick Remiker: quality?
Rick Remiker: Sector.
Rick Remiker: And you know, I think the early signs are hopeful that the banks
Rick Remiker: are the bank equipment finance companies are having greater
Rick Remiker: pricing discipline, focusing on risk adjusted return, focusing
Rick Remiker: on customer relationships and total relationship return. But
Rick Remiker: as they say, time will tell.
Jim Jackson: That's an excellent point, Rick.
Agreed.
Johnnie Martinez: Gotcha. OK. And as we talk about sort of the potential turn of
Johnnie Martinez: the the banks, I know that's a potential risk factor.
Johnnie Martinez: One of the other ones I want to touch on specifically and then
Johnnie Martinez: we can talk about any other risk factors that are worth
Johnnie Martinez: discussing. Is the potential risk factor of tariffs. And
Johnnie Martinez: that's been kind of the the buzz word that's been thrown around
Johnnie Martinez: since the election as one.
Johnnie Martinez: Of the things that can potentially limit what's
Johnnie Martinez: happening in the economy as a whole, but it it transits into
Johnnie Martinez: equipment finance with so much of our industry having
Johnnie Martinez: international firms.
Johnnie Martinez: From where you guys said how much of A role is that going to
Johnnie Martinez: play?
Johnnie Martinez: From how much of A concern should that be as we start kind
Johnnie Martinez: of forecasting the equipment finance sector for 2025?
Rick Remiker: Well, I think it could be.
Rick Remiker: It could be wide-ranging and as we sit here today on in mid
Rick Remiker: January.
Rick Remiker: We don't know what we don't know and no one does, to be honest,
Rick Remiker: at this point, I think what you have to be concerned with is not
Rick Remiker: only, you know, the Trump administration tariffs, that
Rick Remiker: they potentially could impose, but then what's the cause and
Rick Remiker: effect, what are the?
Rick Remiker: Retaliatory tariffs that might be imposed.
Rick Remiker: By an EU country.
Rick Remiker: Or another country that could impact somebody that needs
Rick Remiker: machinery.
Rick Remiker: That's manufactured in Germany or wherever it might be.
Rick Remiker: So you know, the one thing that I think we can be certain of in
Rick Remiker: in the tariff environment is there will be winners and
Rick Remiker: losers, but it's a bit difficult to exactly predict who's going
Rick Remiker: to be the winner and who's going to be the loser at this point.
Rick Remiker: In time.
Jim Jackson: And and I would say from my standpoint, Johnny, you know the
Jim Jackson: thing to be, you know crystal clear about and careful of is
Jim Jackson: you know during you know 2020 we came off a supply chain shortage
Jim Jackson: due to the fact that you know everyone was homesick with COV.
Jim Jackson: And factory workers weren't working.
Jim Jackson: You know, these tariffs could have a similar impact with
Jim Jackson: supply chain shortages if if indeed we don't have.
Jim Jackson: Companies here in the states that are building equivalent
Jim Jackson: products.
Jim Jackson: Or, you know, it could even be from a parts perspective that
Jim Jackson: it's more difficult to get parts and parts are more expensive to
Jim Jackson: maintain existing pieces of equipment which will obviously
Jim Jackson: impact the industry and impact. You know our ability to, you
Jim Jackson: know, hit the higher volumes through those.
Jim Jackson: Equipment finance companies, if, if the supply chain is again
Jim Jackson: disrupted.
Rick Remiker: You know, we touch on it in the insights report and again, I'd
Rick Remiker: encourage listeners to pull that report down.
Rick Remiker: But the one trend that we can definitely speak to is there's
Rick Remiker: been for US manufacturers.
Rick Remiker: There has been a definite trend to diversify their supplier
Rick Remiker: base, so they're not dependent only on China or only on one
Rick Remiker: particular country and then where possible, and where
Rick Remiker: feasible and practical.
Rick Remiker: To bring.
Rick Remiker: Some manufacturing back into the United States.
Rick Remiker: States. So I think you'll see that continued trend towards re
Rick Remiker: shoring to the United States were practical but also
Rick Remiker: diversifying and not relying strictly on China and having
Rick Remiker: manufacturing capabilities in several countries. So that you
Rick Remiker: know significant tariffs or geopolitical activities in a
Rick Remiker: particular country don't create a.
Rick Remiker: Complete shutdown in their supply chain.
Johnnie Martinez: Got you know that makes a ton of sense.
Johnnie Martinez: And you know, as we start looking at the the rest of the
Johnnie Martinez: year, we've talked about kind of two of the the key challenges I
Johnnie Martinez: would just you know ask is there is there any other thing that we
Johnnie Martinez: should be watching from a challenging side and then we?
Johnnie Martinez: Can get into some of the the wider activity in the space.
Rick Remiker: Well, I think we've touched a little bit on trade policy with
Rick Remiker: tariffs.
Rick Remiker: We talked briefly about monetary policy as it relates to interest
Rick Remiker: rates and, you know, uncertainty around if rates will fall if
Rick Remiker: they fall, how much will they fall or could rates remain flat
Rick Remiker: or could they rise the other part of monetary policy to be
Rick Remiker: mindful of is stren.
Rick Remiker: Of the US dollar and how that impacts both imports and
Rick Remiker: exports. And then I think the third leg of the stool.
Rick Remiker: So trade policy.
Rick Remiker: Monetary policy. And then I think we need to be mindful of
Rick Remiker: tax policy, probably a net net positive for most customers, but
Rick Remiker: something to be mindful of heading into 2025.
Johnnie Martinez: Patrick, OK, that makes a ton of sense.
Jim Jackson: I I think the other thing I would add to that, Rick, if if I
Jim Jackson: could, you know we and not that they'll have us you know direct
Jim Jackson: impact but but certainly something to keep an eye on as
Jim Jackson: the geopolitical conflicts that are going on in the world right.
Jim Jackson: Now we, you know, we still have issues in Europe.
Jim Jackson: We still have issues in the Middle East.
Jim Jackson: Who knows what's going to, you know, take place with Taiwan and
Jim Jackson: China, but you know, certainly things to consider along the way
Jim Jackson: as these tend to take a little bit of focus off.
Jim Jackson: You know the US economy and and put it squarely in the rest of
Jim Jackson: the world which you know can obviously impact our ability to
Jim Jackson: continue to do business and and be successful.
Jim Jackson: So something else to consider.
Johnnie Martinez: Gotcha. No, that that is also something that I yeah, I don't
Johnnie Martinez: think it's mentioned enough.
Johnnie Martinez: I've heard a lot more mentioned over the past, maybe six months
Johnnie Martinez: or so that you know, the geopolitical aspect is something
Johnnie Martinez: that even for the US firms, they have to account for.
Johnnie Martinez: And so I I think you for mentioning that one other thing
Johnnie Martinez: I want to touch on and this can be a a positive or a negative.
Johnnie Martinez: And I I say it that way, just because you mentioned as well
Johnnie Martinez: earlier Rick, the the Madison capital aspect.
Johnnie Martinez: One of the things they mentioned in their.
Johnnie Martinez: You know, closing was technology cost being a factor in their
Johnnie Martinez: survival, ability in the equipment finance space. With
Johnnie Martinez: that in mind, what is technology sort of look like especially as
Johnnie Martinez: we start getting into the rest of this year?
Johnnie Martinez: I know AI is kind of the buzzword, but there's so much
Johnnie Martinez: happening in the technology side to account for what should we
Johnnie Martinez: look at as it continues to affect the industry in 2025?
Well, I think that there's a market shift that's happening
when we're talking about technology within organizations.
The technology team is just not necessarily a function anymore.
It's becoming an integral strategic partner in delivering.
A.
Businesses go to market.
And value proposition. And So what we're seeing right now is a
confluence of things. One, a lot of companies.
Now are upgrading their existing lease systems and see you seeing
a lot of that working on. You're seeing also a lot of work around
AI and I don't believe that it is a buzzword.
The there is a lot of activity about bringing AI into companies
and becoming a partner, helping work get done better, faster,
more efficiently.
And I think we're only going to see that grow as different
forms.
Of AI starts to be developed so Gen. AI was the big thing when
November 2023.
Right when that first came out, ChatGPT.
Now people are using those tools everyday, whether or not they're
crafting letters to a client or what have you. Now the new part
about AI is a gentic AI, and this is a gentic AI basically is
artificial intelligence, which has the ability to make
decisions.
And so you're going to see that start to take off.
And improve, I believe different processes around the leasing
cycle as that technology is deployed and AI is just gonna
build on itself and there's gonna be a next generation and a
next generation.
So I think it's very transformative and the function
in of itself is becoming much more strategic.
Rick Remiker: You know, Johnny, I think the other, the other area that that
Rick Remiker: scale really becomes a big factor in is you know you'll see
Rick Remiker: mergers and acquisitions within the banking space and that's
Rick Remiker: driven by technology and the need to spend those technology
Rick Remiker: dollars over a larger customer base and.
Rick Remiker: A larger deposit base, so you know the regulatory environment
Rick Remiker: is probably ripe for increased bank mergers and acquisitions
Rick Remiker: and again.
Rick Remiker: Driven by the need for scale.
Johnnie Martinez: That's it.
Johnnie Martinez: I was.
Johnnie Martinez: I was actually gonna gonna ask Jim around something similar,
Johnnie Martinez: you know, with that we're bringing up, you know, there's
Johnnie Martinez: gonna be generations of AI usage.
Johnnie Martinez: Is that something that is being accounted for in the M and a
Johnnie Martinez: space?
Johnnie Martinez: You know, some companies being very far along in some companies
Johnnie Martinez: being at very base levels.
Johnnie Martinez: Does that change maybe how those M and a conversations start to
Johnnie Martinez: happen?
Jim Jackson: Yeah, I haven't seen much of that yet.
Jim Jackson: Obviously, AI still in sort of the the infancy infancy stage.
Jim Jackson: So you know most of the M and a activity now continues to focus
Jim Jackson: on what it always has strength of the management team, the
Jim Jackson: profitability of the company, the ability, the company to grow
Jim Jackson: their business etcetera, etcetera.
Jim Jackson: So I'm sure it's just a matter of time.
Jim Jackson: Obviously the the correct AI applications will serve not only
Jim Jackson: to help companies grow their businesses, but.
Jim Jackson: Also, do it more efficiently and more effectively with likely
Jim Jackson: fewer full time employees.
Jim Jackson: And do it more accurately.
Jim Jackson: So I would imagine that's that's going to be another leg in the
Jim Jackson: stool that people will consider as we go forward.
Jim Jackson: It's just still a bit at the infancy stage right now, so it's
Jim Jackson: it's it's a consideration, but I wouldn't say it's a major factor
Jim Jackson: just yet.
Johnnie Martinez: Hey, understood. And as we we sort of get into the end of
Johnnie Martinez: this, I know this report is so comprehensive and touches on so
Johnnie Martinez: many different things that we could discuss. But I want to be
Johnnie Martinez: valuable with with your time and obviously the listeners time if
Johnnie Martinez: we could.
Johnnie Martinez: Go through and kind of some some key takeaways, distillation,
Johnnie Martinez: maybe one or two from each of you of things that you know
Johnnie Martinez: sections in the report.
Johnnie Martinez: Key things that you learn while putting it together that the
Johnnie Martinez: reader should be aware of and you know they can.
Johnnie Martinez: They can go in and look at the the report themselves.
Johnnie Martinez: Of them trying to get the the more macro view of it.
Johnnie Martinez: Wait a few would start.
Rick Remiker: Well, I would start with, you know, watch for the continued
Rick Remiker: reemergence of Banks re entering the space. More than likely with
Rick Remiker: a little more pricing discipline and probably a little more
Rick Remiker: measured balance sheet growth focused predominantly on
Rick Remiker: customers.
Rick Remiker: So I don't think that it's an end to the glory days of of
Rick Remiker: independence and captives, but I think you'll see 2025.
Rick Remiker: The banks will come back, particularly the regional banks
Rick Remiker: will come back.
Rick Remiker: Back in a much stronger fashion.
Jim Jackson: Yeah, Johnny, I'd say from my standpoint on the M and a
Jim Jackson: market, you know we're expecting a strong M and a market.
Jim Jackson: I think there's a lot of things in our favor.
Jim Jackson: The caution again is keep an eye on the interest rates.
Jim Jackson: Let's see what the Fed does.
Jim Jackson: Let's hope we can continue on our course to have a soft
Jim Jackson: landing and the interest rates behave so that we can continue
Jim Jackson: to see some progress in the M and a front in 25.
And I would just throw in one cautionary note.
You know the industry has benefited from some very strong
credit quality over the last handful of years and I think
it's just time now where we're starting to see potentially some
stress on portfolio.
So keep a watchful eye.
We're not concerned that there's going to be any big credit
crunch or crisis out there, but just start to just start to pay
a little more attention on the credit book.
Johnnie Martinez: Caviano that that all makes a bunch of sense.
Johnnie Martinez: And you have so much of it is, you know, you can do the due
Johnnie Martinez: diligence on the front end.
Johnnie Martinez: It's less problems on the back end.
Rick Remiker: Absolutely.
There you go.
Johnnie Martinez: Alright. Well, with that all in mind, I would just say if is
Johnnie Martinez: there anything else that our listeners should know about the
Johnnie Martinez: report or the Alta group and then obviously they can read the
Johnnie Martinez: the reporting itself and but anything else in particular that
Johnnie Martinez: stands out that we should.
Johnnie Martinez: Discuss at this moment.
Rick Remiker: Again, go to thealtagroup.com and pull down the 2025 Alta
Rick Remiker: Group Insights report.
Rick Remiker: I think it'll be a excellent 5-10 minute read.
Johnnie Martinez: Alright, well, I thank all three of you for Jim.
Johnnie Martinez: Are you gonna add something? Sorry.
Jim Jackson: No, I was just going to also say and once once you go to the
Johnnie Martinez: Hmm.
Jim Jackson: website and pull down the report and read it, obviously if you
Jim Jackson: have questions about the report, you know, I'd encourage
Jim Jackson: everyone. Our contact information is out on the
Jim Jackson: website.
Jim Jackson: Feel free to call Valerie or Rick or myself.
Jim Jackson: We'll be happy to explain anything that maybe isn't quite
Jim Jackson: clear or expand on any of the discussion items in there as as
Jim Jackson: the reader would see fit.
Jim Jackson: So we're happy to help.
And Johnnie thanks for having us. As your guests on the dig.
We really appreciate the opportunity to connect with you
and your listeners.
Johnnie Martinez: Of course.
Johnnie Martinez: Yes, I appreciate having all three of you on.
Johnnie Martinez: I thank you so much for your time today.
Rick Remiker: Thank you.