Deal making in 2007: Is the M&A boom over?

December 27 - The McKinsey Quarterly - Article at a glance:

• A wrap-up of 2007 M&A activity finds that the volume of mergers and acquisitions reached new heights during the year but then fell precipitously after the subprime-lending crisis made credit tighter. Nonetheless, suggestions that the M&A boom has met its demise may be premature.
• Most of the decline in M&A since August was concentrated in private-equity deals; corporate acquisitions continued apace. In a market characterized by tighter credit and a heightened appreciation of risk, this M&A boom will continue only if the more fundamental forces behind it, such as the surging activity of acquirers in emerging markets and increasing cross-border activity, continue as well.
• Furthermore, deal makers largely continued to exert greater discipline in M&A, as evidenced by metrics for the value that deals created and by the smaller number of acquirers overpaying for acquisitions. Read More (subscription required)

Semiconductors: Healthy M&A Prospects

S&P says some recent deals show that chip companies are finding attractive prices and ways to improve by combining

December 26 - Business Week - S&P Equity Research continues to have a positive fundamental outlook on the technology sector and recommends overweighting it, despite recent volatility and negative price performance. Scott Kessler, Standard & Poor's group head for technology coverage, thinks the stocks have been reflecting the potential for a U.S. recession. However, he also believes the sector should continue to benefit from longer-term trends, such as strong international demand, notable new products and upgrade cycles, and a likely growing corporate focus on productivity in light of economic uncertainties.

Further, Kessler believes that tech sector merger-and-acquisition activity among strategic partners will continue, despite the credit crunch, reflecting healthy fundamentals and prospects, strong corporate balance sheets, and ample opportunities to generate related shareholder value. Read More.

M&A will remain high in '08 and shouldn't be feared since Canada can keep up

December 19 - The Canadian Press - CEO Peter Marrone, who transformed his Yamana Gold into the world's fifth-largest gold miner through two major deals this year, says investors should stop fretting about the "hollowing out" of corporate Canada and embrace consolidation secure in the knowledge that the country's young industries have the muscle to keep growing.

While it's true that many well-known Canadian brands were swept up by big multinationals in a record-breaking year of billion-dollar mergers in sectors from mining to oil and gas to entertainment and retail, that doesn't mean the country is being sucked dry, Marrone says.

"People have talked about the hollowing out of Canadian industry going back probably the better part of the 25 years that I've been in the financial world," he says. Read More.

Mergers soar to record despite credit crisis

December 20 - Telegraph.co.uk - The value of mergers and acquisitions announced globally has hit a new record, despite the US sub-prime mortgage crisis and the meltdown of the credit markets in the latter part of the year.

Companies have announced takeover bids worth nearly $4,400bn (£2,200bn) in 2007, up more than a fifth on last year's total, according to preliminary figures from Thomson, the data provider. After a record-breaking first half, the value of M&A has slumped 26pc since July as private equity firms and other companies have found difficulty raising funds. Investment bankers in the US suffered a particularly slow second half, with M&A involving US companies slumping 46pc. European activity fell 17pc. Read More.

Analysts see decline in mergers and buyouts in 2008

December 18 - Bloomberg News - Even Goldman Sachs Group, the world's leading takeover adviser since 2001, is preparing for a decline in income from mergers and acquisitions next year, when analysts predict a slowing economy will reduce the market for leveraged buyouts.

The value of transactions may fall 20 percent from a record $3.9 trillion this year, executives at JPMorgan Chase, Lehman Brothers and Bank of America estimate. According to analysts surveyed by Bloomberg, that may reduce fees on Wall Street and contribute to Goldman's first drop in profit since 2002, the last year of a decline in mergers and acquisitions.

Leveraged buyout firms, responsible for 5 of the 10 biggest purchases this year, now face financing costs that have more than doubled since June to the highest level in four years. The pace of takeovers fell 33 percent since the end of the second quarter as companies including Virgin Media and Cadbury Schweppes delayed asset sales amid signs that economic growth was ebbing in countries including the United States and Britain. Read More.

Colorado dealmakers less bullish on M&A market

December 18 - Denver Business Journal - Colorado dealmakers are less bullish about the current mergers-and-acquisitions market than they were six months ago, according to the latest Association for Corporate Growth/Thomson DealMakers Survey, released Tuesday.

The percent of Colorado professionals involved in mergers and acquisitions who say the current M&A environment is good or excellent has dropped to 77 percent from 94 percent in June.

Colorado dealmakers anticipate more buyouts in the next six months (57 percent), and more distressed deals (86 percent). But 71 percent said they were not planning to modify their investment strategy. Read More.

M&A seen slowing in U.S. next year

After two record-breaking years, U.S. merger and acquisition activity will likely subside in 2008 as the credit crunch sidelines private-equity firms and an economic slowdown quells other deals.

December 17 - MarketWatch - Still, companies that were out-bid by buyout firms in recent years could make more acquisitions next year, helping to keep activity at healthy, if not record-breaking, levels, experts said.

A record $1.5 trillion of transactions were announced in the U.S. this year, through the end of November, according to Dealogic. That's up from about $1.4 trillion during the same period in 2006, which was the highest ever at that time, the firm noted. Read More.

Private equity ain't dead yet

December 17 - Blogging Buyouts - For months, everyone has been talking about the decline of private equity. And while it seems likely that future market historians will refer to a private equity bubble in the mid-2000s, experts are saying that private equity isn't going anywhere, even if it won't reach the lofty heights it reached a few months back for awhile.

Ernst & Young released a report saying that private equity deal flow will remain strong in 2008 -- above its 2004 and 2005 levels, right before the industry really took off. Read More.

Private equity: Maybe down, but not out

A report predicts that private equity deal flow will continue to be healthy in 2008, even if returns are lower.

December 14 - Fortune - Despite turmoil in the credit markets, a string of broken deals, and a dramatic slowdown in M&A this quarter, the private equity deal machine is still humming, says a report released Friday.

According to Ernst & Young, buyout fund deal flow should remain strong in 2008 - even above 2004 and 2005 levels - because private equity firms still have a lot of unspent capital that they have to put to work. There are 150 private equity-sponsored funds with more than $1 billion, compared with only 14 in 1995, and managers at private equity firms tell Fortune fundraising remains strong. Read More.

Tech cos. seen going M&A route, not IPO, in 2008

December 16 - Reuters - Investors fearful of a recession and corporations bullish on acquisitions are likely to push more venture capital-backed technology companies into selling themselves rather than going public next year.

U.S. initial public offerings of technology companies have been on the upswing since 2004, although nowhere near the peak of the dot-com boom. But many bankers and analysts said tech IPOs are slowing down again because markets remain unpredictable in the wake of the subprime meltdown.

"The tech IPO may still be the hottest IPO of all sectors, but the overall activity in 2008 will depend on the end market" of stock buyers, said Glen Kacher, managing director of Integral Capital Management. Read More.

U.S. Credit Markets to Create Some Favorable Valuation Opportunities for Buyers in 2008 U.S. M&A Fueled by Corporate and Cross-Border Activity

December 12 - PRNewswire - M&A activity in 2008 will be dominated by corporate and foreign buyers and the middle market will continue to be active, according to the Transaction Services group of PricewaterhouseCoopers. "The era of public-to-private transactions is on hold for now. However, the downturn in mega-deals by private equity will be offset by an increase in international buyers coming into the U.S. to take advantage of a continued weaker dollar. We also believe that more traditional private equity transactions will build momentum as 2008 progresses. We expect financial markets to quickly respond to put liquidity back into more balanced leverage lending," said Bob Filek, a partner in PricewaterhouseCoopers' Transaction Services group. Read More.

Fed Helps Banks Deal With Credit Squeeze

December 12 - AP - Banks squeezed by a global credit crisis have a new way to get their hands on cash so they can keep making loans to individuals and businesses. The Federal Reserve, under pressure to take more aggressive action, unveiled a plan Wednesday designed to bring banks and their borrowers relief.

Some questions and answers about what the Fed is doing:

Q: Why is the Fed taking this action?

A: The credit crisis has unhinged Wall Street and threatens to hurt the U.S. economy, which is fighting to avoid a recession. Read More.

Global deals to drive record M&A activity from Asia

December 11 - Reuters - Asian companies and government funds are set to keep up their global buying spree in 2008, powered by a sagging dollar, cheap targets in the financial sector and strong balance sheets.

India and China's hunger for foreign assets and a frenzy of activity in the booming commodities sector triggered record merger and acquisition volumes in Asia outside Japan in 2007, with outbound acquisitions on track to triple last year's total.

That momentum is poised to continue as Asian buyers using swelling foreign exchange reserves look for natural resources, brands, distribution and know-how. Banks and government funds, meanwhile, are stepping in to bail out Western financial institutions reeling from the subprime mortgage crisis. Read More.

Fuel retail market consolidation: some European players emerge stronger

December 7 - Energy Business Review - A number of firms seem to have benefited from consolidation within the European fuel retail market.

Over the last few years, the European fuel retail market has experienced significant changes as a result of falling margins and consolidation, as well as a number of large players choosing to exit certain markets altogether. However, there are signs that this realignment has benefited some smaller companies such as Maxol and PKN Orlen, which are now emerging as dominant players.

Over the last five years, fierce competition and squeezed margins have led to significant changes in the structure of western Europe's forecourt retailing market. These changes include increasing M&A activity, a number of large oil companies exiting selected markets and a decrease in the overall number of service stations.

Days of Big Buyouts

December 10 - WSJ - Remember when Blackstone Group and Kohlberg Kravis Roberts & Co. seemed to be competing for the title of World's Largest Buyout? Or when talk of a $50 billion or even $100 billion buyout was bandied about?

No one is pondering that now. The question now on everyone's mind is when will the buyout market rebound. Based on November private-equity-deal volume in the U.S., the answer: not for a while. Read More.

Mergers/acquisitions in global transportation market exceeding ’06 levels, report says

December 7 - Progressive Railroading - There have been a number of mergers and acquisitions among transportation and logistics firms so far this year. So much so, M&A volume worldwide is on pace to exceed 2006 levels, according to PricewaterhouseCoopers' most recent quarterly report on M&A activity in the global transportation and logistics industry.

During 2007’s first three quarters, the value of M&A deals totaled $39 billion, far exceeding the deals totaling $27 billion consummated in the same 2006 period. Declining debt market liquidity and “stock market volatility felt by financial investors” helped spur dealmaking, PricewaterhouseCooper said. Read More.

Asia's private equity investors opt for China and India: survey

December 10 - M&C.com - Private equity investors in Asia regard China as the market of choice followed by India, a KPMG survey said on Monday.

Sixty-one per cent of the respondents to this year's survey of 119 private equity firms said they have assets in China while 37 per cent have assets in India.

Third were Australia and Singapore, with 29 per cent, Taiwan with 28 per cent and Japan with 21 per cent. Read More.

Tech executives see 2008 M&A keeping current pace

December 6 - Reuters - Executives from technology companies including Microsoft Corp and Cisco Systems Inc said on Thursday they will continue to be active deal makers in 2008, snapping up innovative start- ups around the globe.

The success of recent deals and a market bursting with start-up companies has convinced these top corporations to continue shopping for deals, these executives said, speaking at the AlwaysOn Venture Summit West conference here.

"The key to will you do more deals in the future is, have the deals we've done in the past been successful?" said Bruce Jaffe, corporate vice president for corporate development at Microsoft. Read More.

Tracking the cycle - a topsy turvy year in M&A

December 6 - FT.com - Working for an M&A research publisher with clients across three continents has certainly presented its challenges over the past 12 months, writes Ed Lucas, Editor with Remark, the research and events division of The Mergermarket Group.

It has also provided a vantage point on the unfolding world of M&A in what has been something of a watershed year. What follows is a selection of some of those landmarks that have stood out among the sea of headlines, email alerts and wider market sentiment. Read More.

India M&A push undeterred by credit woes

December 6 - Reuters - Armed with strong balance sheets, willing local lenders and unrelenting ambition, Indian companies are well positioned to navigate the credit crunch and maintain their global buying spree, but must be flexible on financing.

Turmoil in credit markets could even serve to open up opportunities for cash-rich Indian corporates looking globally to buy access to materials, technology, and distribution.

"Appetite continues to be there and continues to grow," Chanda Kochhar, joint managing director of ICICI Bank, India's No. 2 lender, told the Reuters India Investment Summit. "The Indian corporate sector has a healthy balance sheet strength to be able to execute some of these large transactions." Read More.

FASB issues new M&A accounting standard

December 4 - Reuters - The Financial Accounting Standards Board, which sets U.S. accounting rules, issued new rules for accounting for business combinations on Tuesday.

The rules, known as FAS 141 and FAS 160, are intended to simplify and converge with international rules on how companies account for mergers, acquisitions, noncontrolling interests and other business combinations in financial statements.

The rules take effect for fiscal years beginning after Dec. 15, 2008, FASB said.

It is the first major joint project that the FASB conducted with its international counterparts at the International Accounting Standards Board. Read More.

M&A deals still overlooking IT integration challenge – study

Research finds no integration within three months of deal completion

The IT integration challenge posed when organisations merge is still being overlooked in many instances of merger or acquisitions, according to research among the membership of the National Computing Centre.

The research found that half of respondents who had worked in the context of a newly merged organisation reported there had been no integration within three months, when the deadline for the merged entity to disclose consolidated financial information comes into effect. Read More.

Transportation & Logistics 2007 Deal Volume is Likely to Surpass 2006 Levels, According to PricewaterhouseCoopers

Deal Value Running High, But Unlikely to Reach 2006 Levels

December 3 - Prime Newswire - Total transportation and logistics deal volume for 2007 is on pace to exceed 2006 levels, according to Intersections, PricewaterhouseCoopers' quarterly report on M&A in the global transportation and logistics industry, released today. This may be due in part to the effects of the decline in debt market liquidity and stock market volatility felt by financial investors.

Total deal value during the first three quarters of 2007 exceeded the total deal value announced during the comparable period in 2006 ($39 billion versus $27 billion, respectively), though it is not on pace to exceed the total deal value announced for all of 2006. Read More.

Credit crunch to hit 'big ticket' mergers

December 2 - Scotsman.com - Big private equity deals such as the recent £11.1bn buy-out of Alliance Boots, the pharmaceutical giant, are set to dry up next year, according to the latest research from Deloitte.

After a record start to 2007, the value of private equity transactions has taken a tumble as the turmoil in the credit markets has led to banks becoming less willing to lend.

With the effects of the credit crunch expected to continue well into the New Year, the number of "big ticket" private equity deals such as Terra Firma's recent £2.4bn takeover of record label EMI will be few and far between, the accountancy firm says. Read More.