‘Introspective’ M&A market has healthy outlook for 2008

BVWireIssue #64-4
January 30, 2008

Following last year’s credit crisis, the mergers and acquisitions markets have been “forced to step back and evaluate where they stood,” says a new article, “State of the M&A markets: 2007 Year-End Wrap-Up,” by PCE Investment Bankers’ Mike Rosendahl.  

After some introspection, it appears that the market for middle market companies (value < $250 million) remains vibrant.  While larger transactions (value > $250 million) suffered due to deteriorating credit markets and company performance…strategic and financial acquirers still exhibit strong appetites for quality assets.  Buyers are on the lookout for companies with good product/service mixes that fill a market need and provide strong cash flow.  Financial acquirers flush with cash and strategic buyers with strong balance sheets continue to seek desirable opportunities. 

“While there has been some impact on valuations and debt levels,” Rosendahl adds, “particularly multiples for acquisitions under $50 million, transaction levels and pricing remain lively.”  Current recession fears—as well as ongoing market corrections—will affect the M&A market, but lower interest rates should help keep activity “healthy” in 2008, “although off previous highs.”   The article presents a summary of transaction volume and multiples in 2007, highlighting in particular the strength of middle market transactions.  It also looks at levels of buyout capital raised by PE groups (a total of $289.2 billion in 2007) and financial versus strategic buyers.  The complete article is available at the PCE website.

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