Examining the M&A Landscape

“Things are getting better and will continue to do so,” was the overall sentiment expressed by a panel of investment bankers at a recent Association for Corporate Growth (ACG) meeting.

“Investment Banking Panel: Examining the M&A Landscape” featured:

Scott Adelson Houlihan Lokey
Robert Brown Lincoln International
Stephen Burt Duff & Phelps
Chrisanne Corbett KPMG Corporate Finance
Gary Rabishaw Intrepid Investment Bankers

John Martin of GE Antares moderated.



A summary follows:

Where do you see the marketplace?

Robert: The mergers & acquisitions middle market is strong and rational. The debt markets are also rational right now. “A” properties are trading at high prices. The belief is that things will continue to get better.


Chrisanne During the first three months of this year we have been busy. Privately held businesses have been selling because there is a concern about the capital gains tax rate. In Europe – in the U.K. and Germany – the economy may not pick up for a few years, so privately held companies are deciding that they need to get on with it and buy or sell.


Scott: It’s a big world. One-third of M&A buying takes place abroad. There are middle markets all over the world. Europe is starting to pick up, but the behavior is not the same all over Europe. In Asia, with the exception of Japan, there is a lot of capital and buyers feel they need to be in the U.S. Businesses understand that they need to be global. M&A activity for the next 3 to 4 years will be strong.


Stephen: Privately held businesses that wanted to sell were near death in 2008 and 2009, but now buyers have decided that they need to pull the trigger. M&A in the next couple of years will be busy. January is usually slow, but this year it was up by fifty to sixty percent. Interest rates have the potential to derail the market. The Fed could potentially increase rates sooner with the economy heating up.


Gary: Taxes are on entrepreneurs’ minds, not the elections as it has been in past election years. The underpinnings of the market are good.

What about financial restructuring?

Scott: The U.S. is great at exporting complicated balance sheets and anywhere you have these, you’re going to have restructurings. In Europe, things are going crazy. One-third of the restructuring that they’re hired on to do is in India.

The private capital markets now are so much deeper and there are more sophisticated pools of capital.


Robert: This recession is different in that the lenders have more patience now than in past recessions and are not forcing restructurings.


John: In 2008 and 2009, it was different for private equity sponsored companies. During this recession private equity firms have been more supportive of their portfolio companies as opposed to trying to get rid of them.

What are the hot industries?

The panel:

  • The U.S. is seeing a pickup in industrial markets, in areas such as auto building products. There is a lot of activity in technology and software.
  • In Asia, it’s industrial and tech software that are hot. In China, the hot markets are media and entertainment, and they want to come to the U.S.
  • Real estate is out of favor everywhere, as is post-secondary education, which was busy in 2008 and 2009.
  • Anything related to the alternative energy markets, such as screens for fracking, is busy. They are seeing huge multiples.
  • Food is in favor now; last year it was on the sidelines.
  • You have to be in South America. Brazil is a very busy market. They are seeing a lot of deals coming out of Australia.


John: When he sees seven or eight businesses for sale at once in the same industry, it sends out alarms to him. What do industry insiders know that we don’t? What is the reason everyone is getting out?


Robert: Forty percent of his company’s recent deals have been cross-border deals.


Stephen: He is bullish on energy and technology, and they’re seeing an increase in the mid-west industrial markets. They’ve never been busier.


Gary: Most of their business is in California, and healthcare is very hot.


Scott: Last year, the most active areas were food and consumer. Now they are busy with aerospace defense consolidation.

The panelists’ other thoughts:

Chrisanne: Trade buyers are very active in Europe. The high-yield market is now screaming back.


Scott: There is going to be an uptick in private equity sponsors selling their portfolio companies because a lot of the private equity funds are now coming to the end of their lives. The companies need to be sold, and the money re-invested.

Owners are getting great prices for great companies. There is going to be a lot of cash, driving higher multiples as long as the economy keeps improving. If it’s an asset that a company wants, they will pay higher multiples. People are looking for reasons to do deals.

The panel:

  • When the banks stopped lending, alternative capital stepped in, and is very quickly going where it’s needed.
  • Strategic buyers have to be optimistic about their business, if they’re buying another business.


-By Berbay Principal Sharon Berman

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