Summer Surveys, Part II

For our next foray into survey-land, peHub has the goods on a survey taken by our own readers, the ACG-Thomson Reuters Mid-Year 2008 DealMakers Survey. Based on the opinions of more than 500 bankers, PE pros and those providing services to them, TR and ACG came to a few surprising and a few obvious conclusions. (Update: Download full survey results: SurveyFinal.doc)

Most surprising:

* One third of those surveyed expect M&A to increase in the second half of the year. Six months ago only about a fourth of the respondents were as optimistic. (See chart below.) A slightly smaller group of respondents answered that things will get worse.

* One third of respondents are adjusting their investment strategy. Eek. I know there are many ways to talk around a strategy shift (or worse, drift), but at the end of the day, even the smallest adjustment is still a move away from what investors thought they were getting when they committed. If a firm has to adjust because its strategy no longer works in today’s environment, perhaps it should consider Guy Hands’s suggestion—give the money back.

* To follow on that point, those surveyed recommended the best ways to weather the drought. In order of most to least popular: Stick to their original strategy, focus on portfolio companies, cut costs at portfolio companies, diversify geographically, diversify by industry, sit it out till things get better, cut costs at the firm (a mere 8% liked this idea), and lastly, focus on their LPs.

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  • Least surprising:* Less than half of those surveyed say the current deal environment is “good” or “excellent.” No surprise there, the deal landscape stinks. But it is interesting to note that even in December, 72% of those surveyed said things were peachy keen. Perhaps reality hadn’t sunken in yet? And compared with that figure one year ago, when 93% said the dealmaking environment was excellent, it’s certainly telling of the drop-off.