Connecticut middle-market merger professionals are close to unanimously negative regarding the state of the current mergers and acquisitions market, though many anticipate it will improve in the second half of 2009.
“The likely increase in deal activity will probably be driven more by circumstance than desire,” said Ramsey Goodrich, president of the Association for Corporate Growth in Fairfield, which conducted a survey on the matter in conjunction with Thomson Reuters. “Many sellers will likely feel forced to do a deal either because of a significant downturn in their business, increased pressure from lenders, inability to raise additional capital, divergent shareholder objectives or even personal liquidity requirements.”
Goodrich said the second-half 2009 rise will be led by distressed sales and mergers in health care and life sciences, manufacturing and distribution and business services.Â
In the latest twice-yearly survey, 94 percent of Connecticut dealmakers said the current merger and acquisition environment is fair or poor, compared to 90 percent in December 2008.Â
Dealmakers said their largest obstacles over the next six months are the credit crunch, sellers unwilling to sell owing to market conditions and an overall anemic economy.
In the coming six months, survey respondents see distressed sales comprising a significant percentage of M&A transactions. According to the survey, almost half of merger professionals predict that distressed deals will comprise one-quarter to one-half of all deals.
According to Thomson Reuters, the volume of all worldwide mergers and acquisitions totaled $480.3 billion during the first quarter of 2009, a decrease of 28 percent over the first quarter of 2008.Â
The ACG and Reuters survey also found that eight of 10 private equity professionals are spending more time working with their portfolio companies this year, with 60 percent retaining chief restructuring officers.
“With today”™s credit crunch, private equity firms are putting more of their own money into a deal,” said Jim Beecher, publisher of Buyouts, a Thomson Reuters publication. “This will put more pressure on their ability to drive higher returns for their investors.”
Private equity professionals are optimistic that the debt markets will improve. Six months from now, 91 percent of private equity professionals expect the debt markets will be better.
