Distressed M&A will be the name of the game in 2009, according to a forecast put out today by PricewaterhouseCoopers' Transaction Services group. As credit remains tight and financial markets weather the worst storm since the 1930's, PwC is predicting "M&A activity in 2009 will be on the light side with a few silver linings."
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According to data from Thomson Reuters, M&A deals in the U.S.
through November 30, 2008, totaled roughly $1.1 trillion, well off the
$1.6 trillion for the same period in 2007. At the same time total deal
volume fell 22% year-over-year to 8,190. The sidelining of private
equity firms by the lack of leveraged debt is especially prominent, as
the number of LBO transactions dropped by 24% to 1,383. Meanwhile deal
values plummeted 75% to $127.4 billion from $501.7 billion during the
same period.
As for that silver lining? It's likely to be corporate, distressed and
(maybe) private equity buyers with cash on hand for purchasing troubled
assets. Money has been flowing into distressed funds at a breakneck
pace since 2007 at the same time that the default and bankruptcy rates
have begun to rise quickly. In the first-half of 2008 alone, distressed
funds gathered up $36.8 billion, according to Private Equity
Intelligence. With that much cash on hand, and a stimulus package from
Barack Obama on the way, there's likely to be plenty of activity in
that arena in 2009. -
George White See PwC website
