Is 2010 the year of the M&A, the IPO or the return of Private Equity ?

I keep getting asked about this – it seems to be the topic de jeur in many of the meetings I find myself in these days.

Of course everybody has their reasons why they might favour one dominant player (M&A versus IPO versus PE Funds) over the others, and ultimately that’s what it tends to be … people pushing their own wheelbarrow on the coat-tails of one of these types of trends.

Irrespective of which one ultimately dominates during 2010, there are some things we can definitely observe and therefore make some educated guesses about:

  • Mergers & Acquisitions will be very busy during 2010, continuing on the 2009 trend.
  • The number of IPO’s in 2010 will be at least double that of 2009 and half that of 2007.
  • Private Equity is one the way back, after some very difficult tradings conditions courtesy of the GFC.

Now, whilst those observations are very much SFW, there are some specifics to consider.

M&A.

  • M&A activity will actually be stronger in 2010 than 2009, as businesses start leveraging balance sheets again.
  • Businesses can be picked up at 3 x EBIT still right now, but it will be 6 x EBIT by the end of 2010.
  • Hiring of staff is already starting to tighten, so acquisition is actually an easier way to get the right people.

IPO’s.

  • Public interest/appetite in solid businesses looking to list has jumped markedly through Q4-2009 and Q1-2010.
  • IPO’s have realistically become a viable option again, starting in February of 2010.
  • There are some heavy duty businesses looking to list, an example is the Ed Hardy business in Australia.

PE Funds.

  • The Facewash/Strip/Sell strategies are still not viable because of the EBIT multiples available.
  • PE Funds have had to hold and run businesses for the last 2-3 years, previously they’d have been out in 12 mths.
  • The PE Funds have now got a totally different skillset/timeframe/approach courtesy of the GFC.

Given all of the above, it will be a very active and interesting year for Corporate Advisory firms (like ours) and for those businesses out there that have a good story to tell.

Feel free to contact me if you want to explore this topic in greater detail.

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14 Responses to Is 2010 the year of the M&A, the IPO or the return of Private Equity ?

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    • investoritis says:

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