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ACG New York Women of Leadership - Entrepreneur Series
Barbara Bradley Baekgaard, founder of Vera Bradley (Nasdaq: VRA), is the latest in a series of entrepreneurs highlighted at ACG New York Women of Leadership events. Photo credit: Robert Blumenfeld

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Amid a slow and challenging year for dealmaking, the winners of Mergers & Acquisitions’ 7th Annual M&A Mid-Market Awards outpaced the competition to grow, innovate and lead the middle market

Roundtable

Financial Services Companies Heat Up M&A Market
Speakers from Flexpoint Ford, Genstar Capital, Baird Capital, Madison Capital Funding and Katten Muchin Rosenman discuss the various factors playing a role in M&A activity within the financial services space

Expert's Corner

Pursuing Pharma Manufacturing
The fragmented pharmaceutical manufacturing industry provides plenty of opportunities for private equity investors, says JLL Partners founder Paul Levy

As Economy Improves and Boards Demand Growth, Dealmakers Say M&A Will Pick Up

Dealflow was slow in the first half of the year, but dealmakers are still bullish on 2013, says Deloitte’s David Williams (pictured)

Despite disappointing data from the first half of the year, dealmakers continue to have faith in the second half, finds a recent online poll from Deloitte LLP, a New York firm that provides audit, financial advisory, tax and consulting services. Transactions in the middle market – valued at $1 billion or less – dropped 5 percent in the second quarter from the first quarter, according to Thomson Reuters. And yet 76 percent of the 1,800 professionals who responded to Deloitte’s online poll in May said they were significantly optimistic, more optimistic or maintaining their existing level of optimism about the M&A market for the remainder of the year.

“Deal people by nature are optimistic, but what also explains the overarching optimism now is that people see an improving economy, and  they are being pushed by their shareholders and their boards to show growth,” says David Williams, CEO, Deloitte Financial Advisory Services LLP, in an interview. “There are only a couple of ways to get growth, and inorganic growth is one of the easier ways to get it.”

Depending on the sector they’re involved in, some dealmakers have more to reason for hope than others. “Retail has been extremely hot,” Williams points out. “Oil and gas are reasonably hot.”

Type of financing makes a difference, too. “From a financial perspective, it’s much easier for two types of deals to get done: in the leveraged finance market, relatively high-yield financing has been better than it has been; and smaller, middle-market deals in which you don’t have to use capital -- where you have stock – have seen a tad more activity than others.”

Another trend that bodes well for driving transactions is the move toward globalization. But companies are “very particular” about the deals they do as they expand around the world. “If they can’t find the right target, they just won’t do the deal. Companies have a point of view about what outcomes they’re looking for. They have a strategy and are very allegiant to that strategy.”

In past boom M&A markets, there was “lots of capital and cash and momentum associated with doing a deal,” says Williams. “Today, there’s lots of cash on balance sheets, but there isn’t the momentum. People are not willing to pull the trigger if they don’t get comfortable that they can get the outcomes they want.”

But this discernment doesn’t necessarily translate into conservatism. “Look at the multiples on some of the deals that are getting done and getting done pretty expensively, and I’d say it’s hard to describe that as conservative.”

One trend Williams sees as new is the convergence of capital. “If you look at a portfolio without knowing who owns it, in the old days, you could tell which was private equity vs. a hedge fund or a set of deals done by a strategic buyer or a group of strategic buyers,” Williams recalls. “But today, it’s hard to tell the players without a scorecard.”

For more on the dichotomy between data and dealmaker sentiment, see “Q2 2013: Deal Flow Still Slow, but Hope Springs Eternal.” 

 

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