If the steady stream of negative financial news has diminished your hopes of raising capital for your next M&A deal, don’t give up just yet. For dealmakers focused on smaller deals, the situation is not necessarily all that bad. M&A deal activity is still taking place and is likely to continue, especially in the mid-market, which is attracting growing interest from a broad group of domestic and international buyers.
Many industry watchers see M&A deals in the middle-market increasingly attractive for large private equity firms moving down-market who are seeking alternatives to large, highly leveraged M&A deals. Financial buyers are looking for attractively priced assets to grow their portfolios and existing portfolio companies; and strategic buyers are seeking to gain market share through strategic acquisitions.
As companies continue to put out good earnings reports and cash flow lending comes back to life, it appears that there is an improved market sentiment in the mergers and acquisitions spectrum. According to the Deal Drivers North America H1 2010 report commissioned by Merrill DataSite from mergermarket, the first six months of 2010 had a relatively active M&A season and the trend is expected to continue for the rest of the year. The first half of 2010 witnessed 1,701 deals resulting in transactions of $362.3 billion with value increasing 8.7% from the same time period a year ago. 1
If recent events have caused a temporary paralysis that prevents transactions from taking place, it is not due to a lack of interested parties. In an article in The Deal recently, Robert Kindler, Head of Global M&A at Morgan Stanley says, “Indeed, the M&A market's relatively slow start this year is linked to volatility in the equity markets.” But Kindler also notes that “credit is available, especially for investment-grade companies, and strategic buyers who have cash.” 2
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