A Resolution
December 29, 2008
I usually start thinking about New Year's resolutions about a week or two ahead of Thanksgiving. I do this because it's a license to channel my inner John Candy for the last two months of the year. Oatmeal is replaced with eggs benedict; tuna with anything that can be drenched in barbecue or buffalo sauce; and blueberries and yogurt give way to French fries or cheese (double-cream havarti being a favorite of mine). This way, I can put on a quick ten pounds, which makes for an easy and obvious area to target for the coming year.
The M&A market, of course, went through this kind of splurge in the years leading up to 2008. You might even say that Cerberus Capital Management's GMAC and Chrysler deals were the diet equivalent to a country fried steak with a side of poutine. Given near total shutdown of the M&A market in 2008, however, it has effectively forced dealmakers to live up to their resolutions from last year.
Spend less? Check. Reduce debt? Check. Avoid style drift? How about avoid dealmaking altogether? Check.
So what's left for M&A pros going into 2009? The market will see to it that it will be a long, long time before things become as unhinged as we saw during the 2006 to 2007 timeframe. And many pros will be paying for these excesses for years to come, ensuring that the urge to leverage something at over 10 times will be suppressed for at least the next decade, or until the fund lives of the most recent vintage of private equity vehicles sunset.
It doesn't leave much in the way of resolutions, although I'd like to suggest one: maintain an even keel. The world has changed, but it doesn't mean that dealmaking is dead. As Martin Lipton described in our January cover story, in any market, M&A is simply "a natural phenomenon." The deals will happen, but it's the acquirers and investors that just plug away and keep things in perspective who'll likely stay active.
Thanks for reading, and have a happy New Year!
Ken MacFadyen
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