M&A dynamics: actual, trends, outlook

• M&A update week ending 20th of December 2008
• Further consolidation top segment
• M&A activity in the midsize market
• Relatively more cross border activities

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M&A update week ending 20th of December 2008

As the economic news continues to deteriorate on many levels, deal volumes are holding their own. The deals are generally smaller strategic plays, divestitures and increasingly, distress sales. Though cash is still by far the leading form of payment, we are seeing an increase in both stocks and future earn outs in the transaction structures. Also, take special note of the global nature of these deals: Lebanon, India, Finland, Norway, Sweden, China, France and more.

Click here for the 2008 deal highlights

Further consolidation top segment

Further consolidation to be expected in the top segment under pressure of decreasing demand and leveraged loans as consequence of which payments of instalments and interest cannot be met. There were quite a lot of sharply financed upper segment deals, that must be deleveraged now or else .............must be refinanced ........or else the company must be sold in total or in parts or ......will be pray of the receiver and will then be restructured and so on.

M&A activity in the midsize market

M&A activity in the Small and Medium Business market is expected to keep on firmly. Most of the strategic players (buyers) have a strong balance sheet. They have sufficient cash to buy but don't want to risk themselves too much and be dependent on banks with whom it is difficult to business now if it concerns acquisition financing. Midsize and smaller deals will be closed while the strategic buyer will be in the driver's seat.

Private equity specialized in the midsize ICT market we also expect as investors/ buyers with an offering to execute a joint buy & build strategy together with Management that they respect and trust.

Relatively more cross border activities

There will be relative more cross border activities also in emerging regions/ markets. In the mature/ developed markets we notice the trend with midsize companies to expand to neighbouring territories as sales markets and to outsource production capacity to territories with low wages (mainly CEE and Far East).

The larger corporations have a need for global presence in the world.

M&A transactions follow the same pattern, always more cross border. Focused on more market, more volume, more diversity, less risk, relative lower overheads, less competition in emerging markets, lower production costs and higher net profits.