Legal Commentary

There is Still Plenty of Buying Power

By davidwanetick

We believe mergers and acquisitions activity will remain strong. It is true that private equity players are hampered by an overhang of unsold LBO debt and that the credit markets have deteriorated substantially. However, there is as much as $250 billion in the private equity sector's war chests. Also, larger companies have accumulated some $800 billion of cash on their balance sheets--which is equal to 10%  of their market cap. Further, the more lax anti-trust environment is conducive to more corporate combinations.

Deals are more rationally priced today than they were seven or eight years ago: According to research conducted by UBS, most deals in 2000 were for stock, and the price paid above actual market capitalization was 35% on average. In the first three quarters of 2007, premiums held below 25%, according to Thompson Financial. The heightened corporate governance and activism by hedge funds has contributed to this greater scrutiny.

These are some of the issues discussed at IncreMental Advantage's Mergers & Acquisitions Due Diligence Conferences. For more information, visit www.incrementaladvantage.com or email neomi@incrementaladvantage.com.

Full post as published by Vertical Pulse on January 22, 2008 (boomark / email).