Large Deal Activity Will Be Hardest Hit in 2008 While Middle Market M&A Activity to Remain Steady, Says Piper Jaffray M&A Report
January 03 2008 - 12:59PM
PR Newswire (US)
MINNEAPOLIS, Jan. 3 /PRNewswire-FirstCall/ -- Credit market worries
will continue to weigh on the U.S. M&A market through at the
least the first half of 2008, especially with regard to large
buyouts, according to a report recently released by the Piper
Jaffray M&A team. The report titled, "Mergers &
Acquisitions Insights: Middle Market M&A Outlook 2008,"
analyzes M&A activity and trends in the middle market. Despite
the credit crunch, the middle market has remained active as the
total deal volume is only off 4 percent through the first nine
months of 2007 compared to the same period in 2006*. While Piper
Jaffray believes M&A activity in 2008 will cool from the
previous year, it will remain well above the recessionary levels
seen in 2002 due to the strength of the global economy. The report
indicates large deal activity will likely be the hardest hit, as
the "mega-buyouts" will have difficulty securing financing in the
first half of the year. In addition, foreign buyers will play an
increasing role as both sovereign funds and large foreign companies
seek to take advantage of the weak dollar to expand their global
capabilities. Domestic middle market M&A activity may weaken,
due to overall economic instability and expanding holding periods
by private equity investors. However, the impact will be much more
muted in the middle market than in the large cap market. Factors
including increasingly diversified markets, the health of strategic
acquirors and the private equity buy/sell cycle, have supported the
growth in the M&A market over the past three years and should
mute the potential slowdown in market activity, according to Piper
Jaffray. "Many companies and private equity firms have adopted a
wait-and-see approach due to the volatility in the market," says
Jeff Rosenkranz, managing director and head of M&A at Piper
Jaffray. "As the market becomes more comfortable with the current
economic environment and credit issues, we expect a slight rebound
in M&A activity through the second half of 2008." Overall, the
report indicates the key to middle market M&A activity in 2008
will be the health of the economy. Major economic and geopolitical
questions that will affect the 2008 forecast include: -- Housing --
Will the subprime mortgage market continue to deteriorate, or will
the government's plan to freeze rates halt the downfall? --
Interest rates -- Will the Federal Reserve continue to aggressively
cut rates to support the economy or will inflationary conditions
cause Fed officials to halt decreases, regardless of the effect on
stocks? -- Unemployment -- Will employment levels continue to drive
the U.S. economy and enable consumer spending to keep pace with
historical levels? -- Election year performance -- Will the U.S.
economy continue its traditional strong election year performance?
The full report, "Mergers & Acquisitions Insights: Middle
Market M&A Outlook 2008," is available for clients at
http://www.piperjaffray.com/. *Source: Securities Data Corporation
About Piper Jaffray Piper Jaffray Companies is a leading,
international middle-market investment bank and institutional
securities firm, serving the needs of middle-market corporations,
private equity groups, public entities, nonprofit clients and
institutional investors. Founded in 1895, Piper Jaffray provides a
comprehensive set of products and services, including equity and
debt capital markets products; public finance services; mergers and
acquisitions advisory services; high-yield and structured products;
institutional equity and fixed-income sales and trading; and equity
and high-yield research. With headquarters in Minneapolis, Piper
Jaffray has 25 offices across the United States and international
locations in London, Hong Kong, Shanghai and Beijing. Piper Jaffray
& Co. is the firm's principal operating subsidiary. (NYSE:PJC)
(http://www.piperjaffray.com/) Since 1895. Member SIPC and FINRA.
DATASOURCE: Piper Jaffray CONTACT: Rob Litt, Media Relations of
Piper Jaffray, +1-612-303-8266 Web site:
http://www.piperjaffray.com/
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