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Dealmakers more optimistic about M&A environment

After 18 months of pervasive gloom dealmakers are increasingly more positive about the mergers and acquisitions environment, according to the twice yearly ACG-Thomson Reuters DealMakers Survey.

While the last three surveys were consistently dreary, with more than 80 per cent of dealmakers reporting a fair to poor M&A environment, the most recent survey reports that 85 per cent of dealmakers expect an increase in M&A activity in the next six months.

A year ago, only 56 per cent predicted an increase in M&A activity.

The survey, by the Association for Corporate Growth and Thomson Reuters, reflects responses from nearly 700 investment bankers, private equity professionals, corporate development officers, lawyers, accountants and business consultants in March and April 2010.

Dealmakers expect the following sectors to experience the most merger activity in the second half of 2010: healthcare/life sciences (20 per cent); manufacturing and distribution (20 per cent); financial services (13 per cent); and technology (12 per cent).

They expect the following sectors to experience the most organic growth: healthcare/life sciences (25 per cent); government-related (15 per cent); business services (13 per cent); and technology (13 per cent).

Eighty per cent of survey respondents identified the current environment as a buyer’s market. Ninety seven per cent of corporate professionals expect strategic investments to accelerate in 2010.

"The pervasive sense of frustration among M&A professionals is lifting as they become increasingly occupied sourcing and evaluating potential deals," says Dennis J. White, Association for Corporate Growth chairman and senior counsel at McDermott, Will & Emery. "There is always a bit of a time lag between the time company owners decide to sell, when the investment bankers and business brokers organise the sales process, and when the private equity firms or strategic acquirers bid and then close the deals."

The greatest drag on M&A activity today is sellers unwilling to sell at multiples offered, according to 38 per cent of dealmakers. This is followed by the credit crunch, which has steadily decreased in importance as the biggest obstacle to M&A activity.

According to Thomson Reuters, the volume of all worldwide mergers and acquisitions totalled USD573.3bn during the first quarter of 2010, a 21 per cent increase over the first quarter of 2009.

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