Private Equity is Following M&A Sector Trends for Market Recovery
Overall M&A numbers collected by mergermarket showed approximately 830 TMT deals followed by 630 deals in Life Science/Healthcare, 450 deals in Energy/Utilities, 340 deals in Business Services and 320 deals in Financial Services for the first half of 2009. Playing to script, TMT and Life Sciences/Healthcare lead the way in overall deal activity (total deal value is slightly different than the above rankings). What is really interesting is that in a Private Equity survey, the identified sectors for upcoming investment showed a dramatic shift. Investment for the next 12 months will be made in the following sectors by responder ranking Utilities/Energy 50%, Life Science/Healthcare 48%, Financial Services 40%, Business Services and Industrials at 35%, with TMT at 12%. This would make sense if you follow the path of the recovery with TMT trailing as we move across the curve, but Life Sciences/Healthcare oddly stays surprisingly strong. This assumedly has to do with uncertainty with a pending legislative overhaul and interest in finding new value once the new rules are sorted out. What is not as certain is if we have progressed to Utilities/Energy or if it is also being influenced by pending legislation. In summary, investment trends are showing that we are starting to climb out of the recession with some mixed signals primarily due to market distortions from legislative influences. The bigger story will be if debt financing frees up enough to further enable deal flow increase from this low volume mark and how those backlogged investments play out.
