Looking for deal activity in '09? Think energy, healthcare and tech

Nov. 18 - Thedeal.com - The 2009 outlook for M&A activity is bleak for most sectors, but it's not universal. Jeff Bistrong (pictured), a managing director with the middle-market investment bank Harris Williams & Co., predicts relatively robust dealflow in energy, healthcare and technology. Here's what he had to say about each sector:

Energy: "The downward movement in equity and commodity prices in the energy market will temper short-term deal activity," says Bistrong, "but it will not undermine the long-term prospects." He points to the sale his firm helped facilitate in October of energy maintenance, repair and industrial cleaning provider Aquilex Holdings LLC from Harvest Partners LLC to the Ontario Teachers' Pension Plan as an example of the healthy appetite for deals in the sector. "We've invested heavily in this space, and we'll continue to do so," says Bistrong.

Healthcare: Harris Williams helped sell online health counselor HealthMedia Inc. in October to Johnson & Johnson Services Inc., and the company is working on the sale of three additional healthcare companies operating in the Internet space. Bistrong predicts decent dealflow in the healthcare sector because it is secular from the macroeconomic environment, but he says activity will be particularly robust among healthcare IT companies.

Technology: The software-as-a-service model is driving deal activity in the tech sector. That's a change, says Bistrong, from the not-so-distant days when lenders favored deals involving hardware companies with assets to sell over software companies with less predictable cash flow. Now, he says, "lenders are supporting tech growth by focusing on software companies with recurring revenue models, often subscription-based, where there is significant revenue visibility, and therefore significant visibility into cash flow. Read more.