A Closer Look at North American Deal Flow for H1
A better title may have been “A Startling Look at Deal Flow for H1”, but I decided against panic inducing headlines. All hyperbole aside, Mergermarket’s new report “North American Private Equity in Review” for Aug 2009, provided some sobering statistics regarding the number and total value of deals completed. While I had previously written about global M&A trends, this was simply a closer look into the North American market. The only silver lining appears to be that rate of decline has significantly decreased or leveled off (depending on the metric) which provides some optimism going into next year.
The large buyout firms mostly remained on the sidelines through the first half with the exception of participation by Blackstone and Carlyle in the BankUnited deal or JC Flowers (depending on your definition of large buyouts) in the IndyMac transaction. All other deal values were $650M and below with a sharp drop off to the $250 range. Not only was overall deal size low, the volumes, even for the smaller mid-market firms, were in the 1-2 range for most firms. [note- total values for a club deal counted fully for each participant regardless of equity percentage] Exit volumes favored venture capital firms (as expected) with Blackstone having the largest exit value by 3x to closest firm’s combined total due to the Stiefel Laboratories sale to GlaxoSmithKline for $3.3B. To sum it up, a few large deals dominated top positions since the balance of the transactions were small value or number. Even if Blackrock would not have swept up Barclays Global Investors from CVC Capital, the numbers would still be poor.
This is not to say all parts of the world have suffered equally. Yes, global M&A is down, but Asia is showing a faster recovery with numerous private equity placements going into China and India both in addition to KKR’s $1.8B purchase of Oriental Brewery in South Korea. Some may call it a flight to quality, however I feel it is simply a flight to opportunity as North America, specifically the US economy, moves along in fits and spurts.
