So far this year, it's been miserable for M&A bankers, which makes sense. If you look back at prior recessions, there was always a big fall in M&A activity. Buyers don't want to take the risks and sellers want higher valuations. According to Reuters, global M&A volume was about $968 billion this year as of June. This is down more than 40% since 2007, which was a peak in dealmaking.
So, should we expect a comeback? Probably, but the return is likely to be steady. After all, the recession has been brutal – and so has the credit crunch. If anything, lending should remain relatively tight.
However, perhaps the biggest help has been the nice rally in the equities markets. This builds confidence and makes valuations more palatable.
Also, global companies have lots of cash on their balance sheets. As cost-cutting has its limits, why not boost revenues via acquisitions?
Finally, there was some hopeful news from Lazard (NYSE: LAZ), which reported strong quarterly results last week. The company's CEO, Bruce Wasserstein, is definitely seeing signs of return. But again, he thinks it will be gradual and take four or more years to get back to the hot-and-heavy levels of prior booms.
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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8-09-2009 @ 7:52PM
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Private Equity's New Entrepreneurs
They run their own firms, seek out smaller deals that don't generate headlines and make returns that are on par with the big boys
Jean Marc Lopez arrived on Wall Street in the early 1990s, just as a trader and consultant in private equity, venture capital deals. He oversaw several IPOs and acquisitions.
Jean Marc Lopez is the is an international entrepreneur and private equity/venture capitalist. He is the founder and managing partner of A-Venture Capital, he is part of a new generation of private equity entrepreneurs who run their own shops.
Jean Marc Lopez’s firm operate far from the spotlight, because they tend to focus on deals that don't generate headlines. But the returns on smaller deals that don't capture public attention can be just as high, if not higher. In 2000, New Mountain took control of Strayer, a publicly owned operator of colleges, for $115 million; it later sold its stake for five times its money.
Private equity entrepreneurs often work well beyond public view, making innovative deals and creating new markets.
Regarding the Financial crisis Jean Marc Lopez says that entrepreneurs who enter the market today will also be well-positioned to take advantage of an increase in private equity investment. The fact that there is more than $1 trillion in private equity capital waiting to be deployed, according to a report by Preqin, a London-based private equity research firm, suggests that continued stabilization will unleash considerable amounts of funding on a marketplace eager to receive investment capital.