Predictions for the M&A markets return??

[T Allen]

Hello everyone...I was hoping to start this thread as a means to facilitate some disucssion on people's opinions as to when they think M&A activity will return to normal and why. There just seems to be NO activity right now and I'm interested to see what others thoughts are regarding M&A markets.

I think we'll see an uptick in activity well before the economy recovers partly due to the large amount of cash being held by private equity companies. In terms of a time frame, I think by the end of this calendar year we should start seeing a larger amount of activity with the combo of cash and distressed companies needing help.

Any thoughts?????

[Moderator 2]

I agree that there is a lot of cash out there in the PE groups...but I'm not so sure I agree with M&A activity returning to normal so soon. Check out this article from Reuters just posted today.

http://www.reuters.com/article/innov...55P10T20090626

It may take a little longer than you are thinking as M&A activity does not only rely on PE cash, but credit is normally a big component and, as we all know, the credit markets are pretty much dried up for now. I think banks need to get healthy again and then we will see a sizeable increase in activity. thoughts?

[John Ball]

I can't help but feel we have several issues to overcome before deal volume returns. A significant chasm has formed between buyer and seller expectations with sellers holding out for a return to the valuations of yesteryear. Credit market strategy has reduced the amount of debt available and made borrowing more expensive, which in turn creates downward pressure on the price a buyer is willing to spend.

The highly leveraged purchases of previous years will not return for quite some time if ever. This is a sea-change event gone unrecognized by sellers and it will take the market at least another 12-18 months to digest this reality and adjust valuation expectations.

[Richard23]

Another component to all this, at least up until very recently, has been how weak the US dollar is. Seems like foreign companies are able to come in and acquire companies at a pretty good discount just based on the exchange rate. I think most all activity has basically stopped as of the last couple months, but up till then, I noticed a fair amount of non-domestic acquirers.

I think Mr. Ball is right though...it will be at least another year to see any decent amount of deal volume. Eventually, sellers will realize that either they take what they can get (which isn't as much as it used to be) or risk getting even less or nothing down the road (bankruptcy). Now is a good time to be in a position with A LOT of cash and an acquisitive mindset.....but not many companies are so lucky