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Posted by Carl Doerksen on Wed, Dec 23, 2009 @ 10:37 AM

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Recently PricewaterhouseCoopers (PwC) released their annual forecast for M&A activity in the
U.S. As opposed to last year's forecast, their 2010 forecast is relatively upbeat, as they expect
conditions for M&A activity to continue gradually improving. The following are some excerpts
from their forecast.

According to PWC, there have been signs of life in the deal market during the second half of
2009, and mergers and acquisitions (M&A) activity is expected to pick up in 2010. While credit
markets are easing for some participants, financing will remain the dominant challenge to M&A
activity next year. Strategic buyers with strong balance sheets and robust cash reserves will be
well-positioned for strategic M&A opportunities. As these strategic buyers take advantage of
their ability to maneuver in the face of a challenging deal environment, PwC predicts they will
pursue deals with a focus on synergies - including enhancing productivity, providing cost-
savings and adding revenue volume to their businesses.

"Those who have built their balance sheets for a rainy day might come out of last year's storm to
find the rainbow, and at the end of it, nicely-valued acquisition targets that provide opportunities
for revenue growth and enhanced productivity," said Bob Filek, Partner with
PricewaterhouseCoopers Transaction Services. "As a result, M&A activity in 2010 will be driven
by strategic buyers who have access to capital and the strategic vision to capitalize on some of
the best values we have seen in recent times."

"Companies have taken aggressive actions on costs; the low hanging fruit is gone, and to drive
further efficiency they will look to combine with similar players to drive scale and enhance
productivity. The 'merger of productivity' will be a driving force in 2010 as companies look to
drive revenue growth and enhance margins," continued Filek.

According to PwC, the following sectors continue to present the best M&A opportunities:

˜Ê Consumer Products -- As retailers continue to pressure margins and growth through

private label strategies, consumer product companies are accelerating trade spending at
the expense of margins. Watch for high-profile combinations as branded companies look
to gain scale and negotiating leverage with retailers, while enhancing their scale to drive
 productivity. A focus on high-growth categories and emerging markets will also be in
vogue in 2010.

˜Ê Technology -- The headline transactions of the past year - transformative deals - will
continue as the battle over the data center and end-to-end services continues to drive the
larger players. The large, mature players will also continue to absorb smaller companies
who provide intellectual property that can be leveraged - at an array of multiples - as
some will be seen as desirable by multiple players and others are made attractive by a
higher bar to access in the public markets. At the other end of the scale, there is more
consolidation to come among weaker players, especially in semiconductors.

˜Ê ‰nergy -- The opening of the capital markets window (both debt and equity) will pave the
way for increased M&A activity in 2010. The seller/buyer expectation gap is slowly
narrowing. Large-cap exploration and production companies and Master Limited
Partnerships have strengthened their balance sheets considerably and are ready to fuel
growth again via the M&A route. PwC expects natural gas to continue to be a particular
bright spot for acquisitions.

˜Ê ·ealthcare -- Once healthcare reform has run its course, look for the industry to ratchet
up M&A activity. Consolidation will accelerate in the services, managed care and pharma
sectors, driven by the need to reduce costs and increase productivity. Watch for seasoned
leaders to embark on new ventures to shake up the business-as-usual model. The
pharmaceuticals sector will continue pursue smaller acquisition targets, and explore areas
less dependent on government, such as consumer product applications, animal health,
vaccines, and biologics.

The term "merger of productivity" really caught my eye in this forecast. ‰ssentially, PwC is
saying that 2010 will be the year where mergers of necessity predominate the landscape. ·aving
wrung all the operational efficiencies possible out of their firms, now strategic players will begin
looking for mergers as a way to further streamline their operations, grow their companies, and
enhance their bottom-line. Merging with other strategic players will be the best way to gain
additional economies of scale in 2010 according to PwC.

This is great news for middle-market business owners. For where will these strategic players go
to find targets and opportunities? Since financing on mega deals has dried up, premium buyers
will more and more be looking at the middle-market for "mergers of productivity". Given this, it
is vital that you begin to take steps now to be prepared for this increase in deal making interest.

Do you know what your company is worth in today's market? Do you have an exit plan in place?
What would you do if you are approached by a buyer? These are questions that you don't want to
answer on the fly. If you haven't developed a relationship with an M&A advisor, now is the time
to do so. 2010 could be a year of tremendous opportunity for you to gain financial freedom. We
would suggest that you begin planning for this opportunity now. The March Group holds free
information workshops around the country that can help you work your way through this
process. Please contact us so that we can begin working with you to take advantage of the
pending year of the "merger of productivity".

Tags: In the News


 

Great Article...especially for business owners in the selected industries. Contact The March
Group today, because we know Private ‰quity Groups who are interested in those industries.
Posted @ Thursday, December 24, 2009 8:12 AM by Robert White
Since financing on mega deals has dried up, premium buyers will more and more be looking at
the middle-market for "mergers of productivity". Good News for many!
Posted @ Wednesday, December 30, 2009 12:22 PM by rb
PWC shares figures that are usually on the mark. Great news for the mid market in 2010.
Posted @ Wednesday, December 30, 2009 1:10 PM by georgemarkis
Great Article Carl.

All owners should be sure to read the quote from Bob Filek "Those who have built their balance
sheets for a rainy day might come out of last year's storm to find the rainbow, and at the end of it,
nicely-valued acquisition targets that provide opportunities for revenue growth and enhanced
productivity," said Bob Filek, Partner with PricewaterhouseCoopers Transaction Services.

Regards,

TD

Posted @ Wednesday, December 30, 2009 1:55 PM by TD

This article is a must read for any business owner looking to make a business plan for 2010.
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