THE BUYSIDE: Manic/Merger Mondays
Views and news from the most active corporate acquirers
January 23, 2012
Merger Monday may be the nickname given to that first day of the week when acquisition activity is at its highest, but there appears to be a divide over who’s driving the bulk of it.
A January report released by law firm Skadden Arps Slate Meagher & Flom LLP, citing data from Dealogic, indicates that corporate dealmakers hold the title for most deal making in 2011 over their private equity counterparts.
“Strategic M&A was the primary driver of overall activity last year, with an increase in larger, billion-dollar-plus transactions compared to 2010.”
The reason is nothing we haven’t heard before. Indeed, strategic buyers have plenty of cash on their balance sheets and decent access to financing. And naturally, M&A is the go-to strategy for generating quick returns in the current economic environment whereas organic growth is less feasible.
Thomson Reuters, on the other hand, reports a different scenario, calling private equity “by far the brightest part of the M&A market in 2011.”
In pointing out how global deal flow was down more than 5 percent in 2011 from 2010, with deal activity at its slowest in the fourth quarter, it says private equity led the M&A marketplace, posting its highest share of buy-side acquisitions since 2007.
Calls to both sources asking for an explanation of the discrepancy were not returned promptly.
What’s holding each side back from clearly dominating the M&A market? Those consecutive “Merger Mondays” we recall so fondly before the 2008 market collapse are, these days, about as consistent as Mitt Romney’s performance at the polls.
Those days have fallen victim to macroeconomic issues plaguing Europe and the Americas over the past few years, as detailed in this month’s Mergers & Acquisitions. Negotiations that began in the spring fell apart a few short months later thanks to the dramatic changes in stock prices, “which has wreaked havoc on M&A momentum.”
Many deals, Reuters says, are either not getting done or hostile bids are taking too long to complete because transactions have become more “contentious and complex.”
Skadden blames the board rooms of potential buyers for being continuously wary of making major acquisitions during a time of uncertainty.
Once economic conditions stabilize and market valuations improve, maybe Mondays will be more “Merger” and less “Manic.”
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