M&A market not doing as badly as you think

Posted on Friday, 19 February 2010. Filed under: Commentary, Mergers |

Where have all the mega-deals gone?  There’s certainly been a dearth of deals since year-end.  It’s been a long time since I’ve opened up the newpaper in the morning and seen any front-page headlines about a new deal.  In fact, it’s been more about cancelled deals (IPOs such as New Look, Travelport and Merlin) or more about last year’s deals (such as Kraft / Cadbury and their final agreement).

So it was encouraging to see a monthly briefing report by Regent Corporate Finance Services that talked of an increase in at least one section of the market, European technology, which fortunately also would tend to be a leading indicator of future volumes in other industries as technology is often one of the first in a new merger cycle (after the large cyclical businesses such as pharmaceuticals).

Here’s what Regent said:

‘Although there were few big acquisition deals in January 2010, the overall volume of transactions was up by 12% on the month before. More importantly for those companies seeking a sale in 2010, valuations have continued their steady rise as both the trade and private equity buyers are active in seeking growth or extensions to their portfolio. Acquisition valuations are once again close to their normal relationship with valuations on the public markets.’

It particularly nice to see the participation again of the financial sponsors such as the private equity firms … who have been missing from the market since mid-2007 but who had been so important to the growth of the last merger wave that started in 2004.

Let’s hope this pace continues and that the small- to medium-size market will kick-start the upper, and more public, M&A market as the year progresses.

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