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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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February 4, 2009 3:59 PM ET
Economic malaise and tight credit put a crimp in big-ticket mergers and acquisitions last year. Smaller deals fared a bit better, but suffered a big decline, too. Expect more of the same in 2009 in M&A’s bargain bin, a pair of middle-market investment banks warned. Plunging valuations, declining CEO and investor confidence and still-tentative equity and debt markets all point toward another tepid year for deal-making, according to a report by analysts at Robert W. Baird & Co. An increase in the availability of credit and any improvement in the economy would boost this year’s prognosis, but “the current outlook for 2009 is uncertain at best,” the firm said in its report. Both Baird and William Blair & Co., another Midwestern middle-market investment bank, predicted companies looking to buy a competitor or expand into new markets through an acquisition for strategic reasons likely will dominate the M&A landscape this year. Deals may be more compelling for strategic buyers now because tough borrowing conditions and the poor economy will probably keep transaction multiples low, the banks said. That means it may be cheaper to expand through an acquisition than through organic growth, the banks said. “Everyone’s focus is on the economy, and there’s very little confidence in earnings numbers, both for buyers and prospective sellers,” said Mark Brady, head of M&A at Blair, on a conference call with reporters. Prospective buyers are increasingly building their expectations solely on figures from the fourth quarter of last year, when the economy ground to a halt and securities markets tanked, with the hope that approach will better forecast this year’s results, Mr. Brady said. “That may be optimistic,” he said. M&A activity will likely fall in 2009 compared with a year ago, but “the lower end of the middle market” should hold up relatively well since smaller deals require less financing, Mr. Brady said. Middle-market deals—defined as transactions worth less than $1 billion—fell 38.9% by value in 2008, compared with a 43.3% decline for bigger deals, according to Baird’s data. Deals valued at less than $100 million fell a relatively modest 26.3% compared to 2007, Baird found.
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