Another year gone, here we go with 2011

First of all I would like to wish everyone a happy new year and a successful 2011.

Looking back on 2010 I think the best way I might personally describe M&A activity would be to say it was a bit like watching a hedgerow management campaign. This might sound a little odd but I will explain.

The best way to maintain healthy and ongoing growth of a hedgerow is to cut the hedge back severely towards the end of the growing season. This results in the hedgerow looking bare and provokes a fear among the uninitiated that it may have been killed as a result of the severe cutting back it received. But ultimately the growth that occurs in the following year is usually stronger and more fruitful, resulting in a better looking hedgerow than might previously have been in place if the hedgerow management had not taken place.

So you may be wondering now what an earth this analogy has to do with M&A activity in 2010. Well the serious “cutting back” in terms of absolute deal values took place in 2008 and 2009, whereas 2010 has seen some areas of growth starting to return. These pockets of growth included a 51% increase the value of private equity-backed deals, emerging market countries surpassing Europe to show double-digit growth in terms of deal value and, last but not least, the mega deals were evident, even if a number of them did not actually succeed.

So where does that leave us in terms of 2011. Overall growth is still looking sparse in places, there are a number of economies that are still looking sluggish but given that CEOs and private equity firms have been building cash reserves now for a couple of years there is certainly cash to do deals if not the fully-fledged appetite at this time.
 

Filed under: M&A, dealmaking