WSJ.com, Deal Journal, August 14, 2007:
For anyone doubting that corporations are taking center stage in M&A, Thomson Financial has a news flash.
Thomson researchers gave a presentation in New York today titled “M&A: At the Crossroads?” According to one slide from the presentation, the contribution of private-equity buyers to U.S. M&A volume has fallen almost two thirds since the pace of declines in the credit and equity markets quickened late last month.
Private-equity firms were the buyers in just 13.5% of the $81 billion of deals struck in the U.S. from July 23 to Aug. 8, down from 36.1% for the year to date before then, according to Thomson. (Using more up-to-date figures, the private-equity share has fallen to less than a tenth, Thomson says.) Corporate acquirers have ratcheted up their participation to 70.4% of the total from 44.5% over the same time frame, according to the data. (Foreign acquirers account for the balance.)
So-called strategic buyers are taking center stage mainly because the high-yield debt markets private-equity firms use to fund their deals are, for all intents, no longer functioning. Corporations, meanwhile, have stock to use as currency, not to mention plenty of cash on their balance sheets. (General Electric, for example, has $62 billion saved up and Microsoft $34 billion, Thomson points out, though GE has made it clear it won’t be spending all that on deals any time soon.) Many of them also have investment-grade ratings, meaning their access to borrowers still is intact. Read more about the resurgence of corporate acquirers in this recent Wall Street Journal article.
In fact, the $57.1 billion of deals that U.S. corporate acquirers have struck since July 23 puts them on a faster pace than they were on this year, with $499.5 billion of deals notched before then.