This month’s issue of the monthly executive brief providing M&A market insight for C-level management and their professional advisors.
As we put 2012 behind us, we look to see what greets us on the M&A horizon for 2013. Conditions are paradoxically both ripe for improvement and uncertain enough to hint at challenges in the coming year.
On a global scale, deal flow contracted for the second consecutive year in 2012. Investors were skittish due to economic and political uncertainties. Although some of the issues concerning politics and taxation were somewhat put to bed as we entered the new year, as we step into month two we note a quiet time. Is this the calm before the storm, and by storm we mean a flurry of activity?
Private equity investors will be under increasing pressure to put their cash to work in 2013. By design, most private equity investors must invest “old” money before they raise “new” funds. The past several years have proved to be a challenging environment within which to invest, and many private equity funds have been sidelined waiting for conditions to improve. The year of change they have been waiting for may be this year. Slow improvements in the economy over the past two years have translated into healthier balance sheets for many companies. Private equity firms seek out investments that are both risk averse and poised for substantial growth; they answer to their investors and it’s all about ROI.
The sticking point for both strategic and financial investors in 2013 will be realistic valuations. The ability to bridge the gap between what a seller seeks and what a buyer is willing to pay will unlock the key to a successful year in M&A.