From The Deal.com, October 2, 2008:
The opening panel at The Deal's Corporate Dealmaker Forum reviewed the current state of an M&A market going through one of its most turbulent times in years.
Dealmakers Kenneth R. Meyers, the vice president of mergers and acquisitions at Siemens Corp.; David Drake, president of Georgeson Inc.; and Douglas L. Braunstein, J.P. Morgan Chase & Co.'s head of investment banking discussed the raft of opportunities opening up to corporate buyers.
"Debt is more expansive," said Drake, "but the prices are cheaper."
"Capital on balance sheet and liquidity are critical," Braunstein added. "Having access to liquidity and cash creates a great opportunity for certain corporate buyers. Those that are prepared for this are going to have some great buying opportunities."
Siemens' Meyers agreed, commenting, "These are the kinds of times that it paid off to be conservative and have a strong balance sheet. There are structural advantages to being a large corporate now."
All of the panelists agreed that the best opportunities for acquirers lay in the future since valuations will likely continue to fall, although the mindset of shareholders at target companies is proving resistant to change.
"Over the past year we've seen old habits dying hard," said Georgeson's Drake. "A lot of arbs and hedge funds are really getting burned as private equity firms and others walk away from deals." Citing the Microsoft Corp.-Yahoo! Inc. and Take-Two Interactive Software Inc.-Electronic Arts Inc. cases, he said, "In both cases some investors lost a lot. I do think it's going to be a game of chicken between the buyer's and the target's shareholders now that prices are coming down." "Pricing hasn't come down enough for people to take advantage of opportunities, but I think we're only about three to four months away from that," Braunstein added. "The buying power of strategics are eventually going to align [with valuations]. The problem is that prices haven't yet fallen enough for that to happen. When those align, I think you're going to see a lot more activity at that point." - George White