Private Equity Perspective:
M&A May Be Regaining Momentum
Uncertainty over the economy and volatile equity markets significantly slowed U.S. deal volume earlier in 2012, but an uptick in activity during the end of the second quarter indicates the M&A market is regaining momentum, says a report by PwC US
Back in our January issue, we polled more than a dozen high-profile dealmakers about their outlook for mergers and acquisitions in 2012, and we found them generally positive in their forecasts. (See “Dealmakers Are Willing, But Economy Looks Weak.”) While the first half of the year didn’t exactly deliver boom times, recent reports deliver encouraging signs about the second half of the year that may warrant continued optimism.
PwC US, for one, remains bullish on M&A for the year. While uncertainty over the global economic environment and volatile equity markets significantly slowed U.S. deal volume earlier in the year, an uptick in activity during the end of the second quarter, in conjunction with an active pipeline, indicates the M&A market is regaining momentum, says a report by the unit of PricewaterhouseCoopers LLP.
“Deal activity has continued at a measured pace over the last several quarters. The uptick in deal value and recent climb in the rate of deals in the second quarter adds to growing levels of businesses looking to execute on transactions,” says Martyn Curragh, PwC’s U.S. Deals Leader (pictured). “During the first half of 2012, we’ve been extremely active in working with clients to prepare for a range of transactions. As deals continue to emerge from the backlog, we expect to see an increased level of activity in the second half of the year.”
Anecdotally, dealmakers also report an uptick in activity. For example, after getting a slow start in early 2012, middle-market lending is starting to pick up steam, says Thomas Aronson, managing director of Monroe Capital in a recent video interview. (Watch the conversation, “Lower-Middle Market Dealmaking Picks Up.”)
Another positive indicator can be found in a report released in August by Preqin, which specializes in providing research on the alternative asset industry. Forty-four percent of investors polled by Preqin expect to commit capital to private equity before the end of 2012. Despite uncertainty in the wider financial markets, private equity investors remain positive, with 90 percent expecting to maintain or increase their allocations to the asset class in the longer term, according to the firm. Interestingly, 86 percent of investors interviewed by Preqin expect to consider at least some new manager relationships over the next 12 months.
As a class, private equity boasts a record amount of money to invest. Assets under PE management rose 9 percent last year, according to an earlier report by Preqin. By the end of 2011, $3 trillion in assets under management were held across the entire industry, the first time the mark has been crossed
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