Bart Busby is a director in the SunTrust Robinson Humphrey Mergers & Acquisitions department in Atlanta, where he leads the firm’s middle market advisory practice. He will be the keynote speaker at the Association for Corporate Growth program Thursday at River City Brewing Co. called “Dealmaking in 2012 – A Rebound in Private Equity, Strategic Bidders and the Leveraged Financial Markets.” The reception begins at 4:30 p.m. and the program is 5:30-6:30 p.m.
How will 2012 compare with 2011 in deal-making?
We expect 2012 will usher in measured improvement in transaction volume, while the total dollar amount of transactions will increase more markedly. The financing appetite for larger transactions has improved and buyers are taking advantage of historically low financing costs.
What factors will be different – for better or worse – in 2012 than in years past?
In today’s global economy, information travels rapidly, so overseas events impact domestic business performance. Buyers are extremely focused on the stability of the underlying business in a volatile environment. It’s also an election year, so we expect sellers will focus on the potential increase in the capital gains tax rate, which may drive incremental deal flow.
What makes a good deal these days?
Private equity and strategic buyers are focused on acquiring cash flow generating businesses at reasonable values. There is significant demand for well-performing assets, which creates a robust auction environment in those transactions. The narrowing gap between buyer and seller expectations creates opportunities for win-win transactions.
Who is buying?
U.S. corporate balance sheets are flush with cash. Public companies are on the prowl for acquisitions to enhance revenue growth as organic growth has proven challenging in the current economic environment. U.S. private equity dry powder now stands at more than $450 billion, which will either need to be put to work via acquisitions or returned to limited partners.
Who is selling?
Large corporations are selling non-core assets to redeploy capital to performing business units. Private equity owners are selling portfolio companies as exiting via the public equity market remains challenging. Smaller, privately owned businesses have historically comprised the largest percentage of M&A transactions by volume, and we expect that trend to continue.