PRINT THIS PAGE Year-End 2007 DealMakers Survey 09/01/2008. Source: Association for Corporate Growth, Thomson Financial. 
Although 2007 will go down in the books as a record year in worldwide M&A, with nearly three quarters of merger professionals retaining a positive view of the current M&A environment, they are significantly less bullish than they were six months ago, according to the ACG/Thomson DealMakers Survey. The percent of professionals involved in mergers and acquisitions who say the current M&A environment is good or excellent has dropped to 72% from 93% over the second half of 2007. Likewise, the percent who believe the number of M&A transactions will increase in the next six months fell to 25% from 38% in mid-year 2007. Those who say mergers will decrease more than doubled to 38% from 16% mid-year, while 37% say the number will remain the same.
Dealmakers anticipate fewer buyouts in the next six months (75%), and more distressed deals (93%). However, 80% say they are not modifying their investment strategy.
Investment professionals are increasingly looking at cross-border deals, according to survey results. While 45% of respondents have not done a cross-border transaction in the last year, 56% believe that they will be doing a cross-border deal in the next six months, with 25% saying it is somewhat likely, and 31% saying it is very likely. In the June survey, 50% anticipated being involved in a cross-border deal. Western Europe (53%), Canada (45%), and China (37%) are the areas in which they are most likely to be involved.
"In the last six months, the credit crisis has clearly had an impact on dealmakers' sentiment," said Paul Stewart, ACG Chairman and Principal of PS Capital Partners. "Initially, this is having a greater affect on larger sized buyouts that utilized syndicated debt for leverage. As for the middle market buyouts that rely more on relationship lending, although caution is in the air, senior bank and mezzanine leverage are available and deals are closing at a steady pace. If the credit situation leads to a recession in 2008, there is likely to be a shift in investment, as investors are presented opportunities that require capital to shore up the balance sheets of companies. On a global basis, U.S. dealmakers continue to look outside of the U.S. for investment opportunities, while the weak dollar is starting to attract non-U.S. investors to seek U.S. based investment. All in all, middle market private equity looks to remain a vibrant sector of the overall U.S. Capital Market."
The ACG/Thomson DealMakers Survey, completed twice yearly by the Association for Corporate Growth (ACG) and Thomson Financial, polled 813 investment bankers, private equity professionals, corporate development officers, as well as lawyers, accountants, consultants and other service providers involved in the deal economy in November 2007.
Through mid-December, worldwide announced M&A activity shattered all previous records to reach US$4.35 trillion, a 20% increase over last year's record year, according to Thomson Financial. However, as global market conditions worsened in the second half of the year, M&A saw a 30% decrease from the record-breaking first half. Cross-border M&A activity contributed to much of this year's volume, accounting for a record 47% of announced deals this year.
"The high degree of optimism that characterized the private equity buyout market at the start of the year has been replaced by a great deal of caution at the end of 2007," according to Robert Keiser, Vice President/ Proprietary Research at Thomson Financial.
Private equity buyout activity accounted for as much as 41% of total announced US M&A activity as of the first week of July according to data compiled by Thomson Financial, but has only averaged about 15% of weekly announced M&A over the second half of this year. "This clearly portrays how damaging the credit-crunch has been to the business model of private equity firms, and especially the firms that specialize in the larger, so-called mega-deals," said Kaiser. "The extent that private equity insiders remain cautiously optimistic about the deal making environment heading into 2008 can be explained by the fact that the vast majority of buyouts are categorized as smaller to middle-market sized deals, which continue to be announced at the lower end of what is historically considered a normal run-rate for announced deals."
The survey points to more of a balance of power between buyers and sellers of companies. In the new survey, 39% say it is a Buyer's market, 33% say it is a Seller's market, 28% are not sure. In the mid-year 2007 survey, 75% said it was a Seller's market, 13% a Buyer's market, and 12% were unsure.
More than two-thirds (68%) of private equity professionals say the amount of private equity capital available for investment is either much too high (34%) or a little higher than it should be (34%). Not surprisingly, private equity firms identify the greatest threats to their industry as the credit crunch (29%), and competition with other private equity firms (24%).
Dealmakers are generally optimistic that the debt markets will be in better shape a year from now, with 45% saying they will be a little better, and 7% saying they will be much better. Among the pessimists, 18% say things will be a little worse, and 6% say much worse. In the mid-year survey, just before the credit crisis hit, respondents foresaw the coming troubles, with the majority (58%) saying the credit market would be a little worse and 10% said they would be much worse, with another 10% saying they would be a little better and only 1% saying they would be much better.
The survey, conducted in November 2007, was completed by 813 ACG members and Thomson Financial customers. Respondents were comprised of private equity, venture capital and buyout firm members (22%); investment bankers, intermediaries, brokers (26%); lenders, finance providers (11%); corporate professionals, entrepreneurs (14%); and service providers, such as lawyers, workout specialists, accountants and consultants (27%). The majority of respondents were from the United States (721), where 40 states were represented. Internationally, executives from 28 countries completed the survey.
Founded in 1954, the Association for Corporate Growth (ACG) is a global association for professionals involved in corporate growth, corporate development, and mergers and acquisitions. Today ACG stands at nearly 11,000 members from corporations, private equity, finance, and professional service firms representing Fortune 500, Fortune 1000, FTSE 100, and mid-market companies in 53 chapters in North America and Europe. For more information, please visit www.ACG.org.
Thomson Financial is a provider of information and technology solutions to the worldwide financial community. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. For more information go to www.thomson.com.
|
