No Sacred Cows

When times were heady and credit flowed like water—that was only two years ago, in case you forgot—most M&A event panels were self-congratulatory, repetitive and downright boring. Even sessions with strong, Bob Costas-style moderators like yours truly fell victim to mass agreement. With so much money to invest with such great leverage, the only real debate, it seemed, was at what multiple buyers should reconsider a deal. (The answer, by the way, was typically, ‘It depends on the industry.’)

Fast forward to 2009, and the number of debatable issues has skyrocketed. Is the debt market really on lockdown, or are buyers simply waiting for the market bottom? Should private equity firms give money back to their limited partners? Can the mid-tier, mid-market firm survive a protracted downturn? And should traditional PE firms be buying distressed assets?

Those are some of the questions I expect to hear discussed at tomorrow’s ACG Boston conference (www.acgboston.org), where my old colleague Dan Primack, editor of PE Week Wire, will be interviewing four Boston-based general partners – from THL Partners, Audax Group, Advent International and Fidelity Equity Partners. “We’re really going to cover almost everything,” he told me yesterday.

Indeed, against the backdrop of the current market, there are no sacred cows. Whether you’re an M&A banker, a PE firm or a strategic acquirer, the economy is forcing us to re-evaluate everything from spending habits to our growth strategy. A year ago, Bank of America was ridiculed by some for slashing costs via soup and crackers. Today, that type of cost cutting has become commonplace.

If you're a private equity firm, maybe it's time to rethink generalist vs. specialist. For those funds with lots of cash to invest, this market may be the best case for going the generalist route with so-called sub-specialties. Having the flexibility to shift dollars and attention from retail to healthcare, for example, could be vital in a market with fewer deals. Conversely, even a firm that specializes in a depressed industry may be better equipped to value a target correctly and eventually realize strong returns.

Whether it’s prompted by shareholders, lenders or something else, the current economy is prompting people, companies and entire industries to take a hard look in the mirror, and for many it's long overdue. Sometimes the reflection is revealing, shocking and maybe even ugly. But for the M&A community to thrive again, buyers, investors and advisors have to go beyond hoping and praying for lenders to return and examine themselves.

With so few deals in the market, it’s not like we don’t have the time.

-- Adam Reinebach (adam.reinebach@sourcemedia.com)