Jan 25, 2012

4 Major Trends Affecting the M&A and Distressed Business Markets in 2012

I believe 2012 will be a very good year.

It's the year of the dragon after all.  My kind of year.

Four trends  main reasons why I believe 2012 well prove a great year for M&A advisers and distressed business buyers like myself.

1) New Trend: According to Frank Mack, of Saybrook Capital, LLC, Private Equity Groups, (PEG's) entering 2012 have a lot of cash to deploy.  Estimates of funds committed but not yet deployed are about $477Billion.  Most of the over hang is held by mega-buyout funds (over $5 Billion) and this amount is unsustainable - that is, its way too large to be absorbed under the current M&A conditions.  In addition to the trends of too-much-money from the big PEG's in the market, we're seeing smaller PEG's with under $500MM emerging in greater number. 

2) Ongoing Trend: Lenders and debtors continue to kick the can down the road (amending extending, and pretending), restructuring debt outside of Chapter 11.  This of course allows stakeholders a better chance of maintaining control.  Whereas bankruptcy under a Chapter 11 filing used to have a higher probability of turning into an actual restructuring of the debt - the original intent of a Chapter 11 - for the past decade-plus, companies have had a harder time maintaining control of the outcome for a variety of reasons.

3) Short-term Trend: Bush-era tax cuts on capital gains are expiring.  Those looking to sell their businesses in the next 2-3 years, might be better off selling in 2012 rather than waiting.

4) Long-term Trend: Baby-boomers are retiring en-mass over the next 10-15  years, and many of these are business owners looking to exit before the market becomes too saturated with an over-supply of businesses.

Almost one month into the  new year, and for me, 2012 is proving to be a good year already.


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