Are There Harbingers Of the Silly Season?

The M&A market is in the midst of one of its greatest booms in history, and the deal activity appears to be sustainable for some time. Virtually all signs, i.e., buying ardor, availability of targets, strategic trends, abundance of credit, macroeconomic movements, etc., suggest that deal flow will continue at a rapid pace into 2007. Then why do I have some jitters? It’s embodied in “virtually.” Frankly there are some disturbing signs amid the general glow. I get a little antsy when buyers sue to bust up their deals, apparently to avoid paying a breakup fee. I get concerned when companies targeted for swipes don’t sell to either their favored bidders or to the unsolicited parties because neither matches the right price to value. I have some problems when firms put themselves up for sale, under the “strategic alternatives” masquerade, then take themselves off the block, in a market in which dealmakers have told me that they can sell almost anything. Only a few of these developments have been logged to date. But when negatives of that nature started to surface during prior M&A waves, they turned out to be manifestations of overreach, unrealistic expectations, frothy pricing, and all the other indicators that discipline is cracking and the deal numbers are nearing a peak. It’s what some dealmakers who have lived through numerous cycles call the “silly season.” No market is perfect, and maybe some flaws are normal. But I invite those of you in the M&A trenches to share your observations on how dealmaking is going. Martin Sikora, Editor (c) 2006 Mergers and Acquisitions Journal and SourceMedia, Inc. All Rights Reserved. http://www.majournal.com http://www.sourcemedia.com