Cockeyed Optimist

Last week’s blog called for courage, an attribute in rather short supply in this presumed credit crunched environment. This week, let’s turn the tables and dig out some cockeyed optimism from a decidedly bearish headline last Thursday: “Deal value slumps as credit crunch hits.”

Reuters, citing numbers reported by Dealogic for deals through March 25, writes, “The value of deals struck in the United States slumped 56 percent to $195.8 billion in the first three months of this year as the credit crunch thwarted buyers’ ability to finance transactions.” Reuters went on to report global volume at $652.6 billion. Before I could wring my hands some more, I was struck by these numbers. Wow! That is not an inconsequential tally and must represent a heck of a lot of deals – 8,413 deals globally to be precise.

What’s up? Well the answer lies in the next statistic: average US deal size fell to $256 million from $611 million. Mega deals that had dramatically distorted upward the average deal size in part quarters are all but absent now, although a few have managed to get done. (Dan Primack posted a chart earlier this week).

What remains, and what we need to start crowing about, is that the middle market, long the tortoise of the buyout world’s acclaim, is still steadily going about its business and is certainly winning the race. Doing 8,413 deals in this first quarter means that a vast proportion of middle market deal shops (along with an increasing amount of strategic buyers) have said no to pessimism and done the deals. Hurrah!

So, while the central banks are working like mad to shore up the venerable foundations of our global financial systems, our middle-market Average Joe’s, with their optimism intact and with the help of buy-and-hold lenders, just might save the day for M&A.

Gail Long is CEO of ACG Boston, a chapter of the Association for Corporate Growth. She previously was an Executive Vice President of specialized banking at Citizens Bank of Massachusetts, and, previously President of Citizens Capital, that company’s $500 million private equity subsidiary.