Down but Not Out

CFO magazine published an article, “Down but Not Out”, describing the state of 2009’s M&A; market. Following are highlights from the article:

§ Global M&A; deal values were down 44% for the first half of the year, but in the United States the decline was 85%.

§ U.S. private equity firms have more than $600 billion in uncommitted capital waiting on the sidelines.

§ Most transactions have been completed by strategic buyers. The author suggests that traditional private, leveraged buyouts won’t return until the credit markets open up.

§ Three factors are identified as essential to revive M&A; activity: (1) Lenders reentering the market with reasonable terms and covenants; (2) Realistic valuation expectations from Sellers; and (3) Buyer confidence in economic recovery.

Regarding buyer confidence, it was refreshing to hear Warren Buffett’s declaration of an “all-in wager” on the long-term strength of the U.S. economy with his recent bid to purchase BNSF Railway. We’re optimistic more business leaders will follow that sentiment and return to the American spirit of bold entrepreneurism, and it appears to be occurring with recent communications from K&A; buyer prospects saying they are ready to put investment funds to work, especially in Texas.

As always, please feel free to call us to discuss.

Link to the full article: http://www.cfo.com/article.cfm/14443078?f=search