The Deal's 2nd annual M&A Outlook event at the New York Athletic Club served up some interesting commentary on the current market situation, starting with the opening discussion on the outlook for the M&A equity market. Mark Gallogly, a managing principal of recently formed Centerbridge Partners LP, led the keynote session and was interviewed by The Deal's assistant managing editor, John Morris.

Gallogly offered his review of where the private equity market is going and how that was shaped by the past couple of years. Gallogly said if you look at the really large transforming PE transactions done in the past 18 months, you see that they have turned out really well and the LP's have been getting the kind of returns they want to get. Those firms continue to differentiate themselves in terms of their global scale, the quality of people they have within the firms and the quality of the management teams that contract.
He noted that Fortress Investment Group LLC recently filed to go public. Although Fortress isn't the traditional type of PE fund, they have a major PE component. If they get the kind of valuation that's being reported, Gallogly continues, that could yield more public offerings from firms that would not have traditionally thought about it. He thinks, optimistically speaking, that we could see much larger pools of capital and transactions in correlation. Whereas $15 billion deals two years ago and $10 billion funds 5 years ago seemed unimaginable, now we could see major growth and transactions of a size that are much larger than even today.

On the first panel, "Buyers' tactics in a sellers' market," moderator Michael Flynn, a corporate partner with Sonnenschein Nath & Rosenthal LLP asked about what aspects of the seller's market are particularly noticeable. Panelist T.J. Maloney, president of Lincolnshire Management, responded that this is a very difficult marketplace to buy in and kidded that its looking like 8 times is a value strategy. Other than focusing on the high prices, he noted that the due diligence process is becoming tough because it seems like everything is becoming virtual, referring to virtual meetings and data rooms. Frontenac Co. managing director Troy Noard agreed that the process has seemed to dwindle. They're a very management driven company and it's become more and more difficult to really sit down and have a structured process when things like virtual meetings and, he joked, covenance get in the way.

David Vorhoff, managing director and co-founding partner of McColl Partners, would like to see a shift from what he sees as a PE focus on the management presentation. He said that some firms - excluding present company of course - have not done enough research on a particular company and are looking to make decisions solely based the presentation. He does realize that there's a time pressure and how many deals people look at, but notes that these first impressions can really have a major impact on the managers of the company for sale.

Panelist Richard Kiphart, head of corporate finance at William Blair & Co., said that exclusivity period needs to be cut down without information flow getting stopped up. The general focus at the beginning of the first panel really brought to light the need for these teams to see each other, perform due diligence and get back to business 101 tactics like performing SWOT analyses.
— Baz Hiralal

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