Industry Sectors

Lower Middle Market M&A Expectations in 2009

Deals valued between $10 million and $250 million will continue to dominate the M&A landscape in 2009 due largely to the continued difficulty of financing multi-billion dollar transactions. “Mezzanine financing has all but dried up”, says David L. Perkins, Jr., Managing Partner of Acquisition Advisors. “This impacts the large deals much more than those under $100 million, the space in which we work.”

So be sure, overall M&A activity will continue to trail the levels of 2006 and 2007, but the lower middle market should continue to perform well when compared to the market for multi-billion transactions. Completed transactions will be split between healthy companies choosing to exit and/or partner with larger firm and firms that seek out deals due to financial necessity.

Strategic buyers, on the hunt for acquisitions at off-peak prices, will continue to provide opportunities for companies seeking an exit.

First Quarter 2009 M&A Results

Global volume dropped 21 percent in 1Q09 compared to 1Q08.  U.S. volume in the quarter fell 30 percent, to 1,668, with smaller deals dominating.

Final Numbers for 2008

The final tally for 2008 shows combined value of global M&A at $3.3 trillion, down 28 percent from the record setting year 2007. Still, despite the meltdown that occurred in 4Q08, 2008 ranks as the fourth-highest year total on record.

There were other unhappy milestones for deal-makers last year. A record 1,362 M&A deals worth $923 billion were withdrawn in 2008 as financing evaporated. Among the casualties was BHP Billiton’s bid for rival mining company Rio Tinto, which was withdrawn in the fourth quarter. With a value of about $148 billion, it was the largest deal ever withdrawn.

Plenty of Cash Remain in Private Equity Fund Coffers

In 2008, PE firms raised $265.6 billion by 363 funds. Cash levels at private equity firms remained high in 2008. $45.9 billion was raised by 71 PE funds in 1Q09. While down from previous years, plenty of cash remains in the coffers of acquisitive private equity firms – many of which are focused on the lower middle market.

SOURCES: Irving Levin Associates, Dow Jones, PricewaterhouseCoopers, Dealogic, Mergerstat.