My latest trip to Spokane in December was enlightening. I tried to get together with a couple of deal attorney friends, but they were too busy.

One was working on closing a handful of transactions, a sharp contrast to his slow December of 2009. The other had a pressing deal he was marshaling along to hit a critical year-end closing target of his client. The executives that I met with were very busy coming off a solid 2010 performance, and all were discussing, if not actively planning, additional growth and transaction objectives for 2011.

Oh what a difference a year makes for the Spokane region.

As we settle into the New Year, there remains a mixed bag of viewpoints on 2011 amongst CEOs and business leaders across the nation. Based on discussions in recent weeks with CEOs in Spokane and throughout Washington, it seems that this same mixed sentiment prevails throughout this region.

While the improved economy, along with the tax relief and capital investment incentives passed by Congress in December, will lead some CEOs to increase capital spending, many other Eastern Washington executives have made it clear that they intend to remain hunkered down, choosing instead to take the conservative route of limited capital spending and hiring until the signs of growth are more clear.

Despite this continued uncertainty, we believe that 2011 will see a resurgence of transactions in the Spokane region, and that with proper planning, companies in the area can take advantage of a number of factors that will drive the M&A and private equity markets over the next 12 months.

Spokane, Eastern Washington, and the Coeur d'Alene region are home to a robust number of superb companies spanning a variety of business segments, including Red Lion Hotels, Kelly/Brady Advertising, Schweitzer Engineering, URM Stores, Zak Designs, Inland Imaging, Buck Knives, Great Floors, Litehouse Foods, and many more. Many of the companies that Cascadia Capital has relationships with demonstrated strong growth in 2010 and will be looking to make moves in 2011.

We believe that the Spokane corridor is an exciting long-term market. In fact, our co-founder, Kevin Cable, moved his family to Spokane a number of years ago, from Seattle. The region's companies represent robust business models in enduring middle-market industries, and we expect that the recovering economy will bring a new influx of growth capital and M&A investment activity to the region in 2011.

Given the economy and challenging markets throughout the past two years, we didn't see much activity in the Spokane market. Only a few companies were interested in selling, largely due to looming capital gains tax changes, and even fewer transactions actually occurred.

Going into 2011, we believe that the activity levels in the Spokane and Coeur d'Alene region will pick up substantially, coinciding with the broader M&A and capital markets activity nationally, as well as the increases across Washington and the Pacific Northwest. The activity will be driven by an improved valuation climate, tax incentives, a thawing of capital and debt markets, and the aggressive return of cash-rich private equity and strategic buyers who are seeking larger and more deals.

For Spokane-area companies that have been waiting to sell due to unfavorable market conditions, 2011 should see a resurgence of favorable market forces, allowing exits at attractive—and sometimes even compelling—valuations. We also believe that many Spokane businesses will be looking to expand through acquisitions in 2011. Indeed, we are in discussions with several who are moving in this direction right now. As more companies look to build their business through acquisitions, we expect to see further expansion of growth opportunities in the region.

In addition to the M&A activity we will see in 2011, we also believe it will be a very active year in the capital markets. While many national and regional banks remain conservative in the region, resulting in more limited bank capital availability for Spokane-area companies, the national capital markets have opened up, offering significantly broader alternatives for this region's companies to tap outside capital sources for growth, capital investment, acquisition, recapitalization, and other capital requirements.

There are several factors contributing to this increase in available growth capital. Between 2006 and 2008, private equity firms raised over $850 billion, but the new investment pace plummeted in late 2008, picking up only recently in the second half of 2010. The result is that the U.S. private equity industry has over $485 billion of committed capital that must be invested in the next four years.

According to Capital IQ, there are more than 1,100 active U.S. private equity funds with a minimum of $100 million under management. However, only three of these funds are in Washington state, and none is in the Spokane-Coeur d'Alene region. The bottom line is that the capital is there, but companies must expand their horizons in order to access it. While this may seem daunting to many local and regional companies, the tactic has already proved effective for Pacific Northwest businesses, notably Lakewood, Wash.-based Thrift Recycling Management, which Cascadia recently advised in its $8.5 million growth equity investment from Baltimore-based QuestMark Partners.

A similar story is true on the debt side, with hundreds of non-bank debt funds holding hundreds of billions of dollars in liquid funds. Record levels of mezzanine debt were raised by institutional funds over the 20082010 time period, and a significant decrease in rates has now made this an even more attractive alternative for Eastern Washington businesses.

Many of these outside funds are actively looking to invest in businesses throughout Eastern Washington and the Pacific Northwest, and the region's companies should work to take advantage of this interest. The magnitude of capital supply, and the pent-up demand to invest it, offers a tremendous opportunity for CEOs, CFOs, and other business leaders in the Spokane region to tap this capital to drive growth in 2011.

While we see an overall resurgence in M&A and private equity in the Spokane corridor this year, the opportunity for Eastern Washington companies will continue to vary significantly by market segment. Some sectors are expected to experience high growth, while others will continue to face severe challenges. The health-care sector continues to be the bright spot, with companies across the spectrum growing and the demographics driving a solid base for this sector. We foresee companies in the food, consumer products, specialty engineering, manufacturing, and aerospace segments likely growing with favorable trends in 2011.

Additionally, we are hearing from many of the region's executives that tax incentives providing for 100 percent deductibility of capital investment this year also will drive growth in manufacturing in the region. Nevertheless, some sectors, notably commercial and residential building products and related cyclical industries, still will face challenges. Most believe, however, that the bottom is here—or at least near—which likely will drive some to start making moves to expand market share through acquisition as the market forces continue to separate the stronger companies from the pack.

While we are certainly not out of the woods yet, and the markets and economy likely will remain choppy for some time to come, we move into 2011 with tremendous overall enthusiasm and a very positive outlook for most of the companies we are tracking in the Spokane and Coeur d'Alene market.

There are many more opportunities now for CEOs to drive growth than in 2009 and 2010, and the Spokane region's companies are sure to benefit from tapping into the broader capital and M&A market activity that picked up across the nation in 2010.