The following are details from The Deal’s M&A Market Review webinar last week. Thanks to Nathan Dutzmann for the analyst coverage.
- Average deal value is up 25% in 2011 versus 2010 and stands at $301 million.
- Value is partially attributable to an increase in “mega deals” (greater than $5 billion).
- Total volume is relatively flat year-over-year due to the difficult environment of the last few months.
- Corporates (a.k.a., “strategics”) with large cash reserves can still get deals done.
- It's harder for private equities to make purchases.
- Many auctions are failing because financing is hard to find and prices are too high.
- Some deals are going for double-digit EBITDA multiples.
- Excess cash on the balance sheets of strategics is at record highs.
- Over $1 trillion of “dry powder” is available.
- This is driving the uptrend in acquisition pricing.
- More corporations are gearing up for divestitures, and some are still open to considering the IPO market.
- IPO filings are still active, even though IPOs are not.
- Groupon is slated to begin its roadshow next week.
- 2011 is projected to be a record year for health care M&A.
- The fastest growing sectors are long-term care, medical devices, hospital and pharma, and, interestingly, physician practices.
- Physicians are concerned about specific risks (e.g., litigation or unclear consequences of Obamacare) and are merging in the hope of stabilizing income in coming years.
- Deficit reduction may have a short-term negative effect on deal flow, because of a decrease in available cash in the economy and because of unclear tax consequences.
- The 2012 elections also create uncertainty.