Survey Says: Dealmakers Dour on Present, Optimistic on Future

Six weeks ago, I asked you to participate in our bi-annual survey of dealmaker attitudes and predictions, which is done in partnership with the Association for Corporate Growth. We got over 900 respondents, and official results will be released tomorrow morning. But since I’d hate for you to have to wait…

Eighty-two percent of respondents expect M&A volume to increase over the next six months, with 72% percent predicting “moderate” growth and another 10% predicting “significant” growth. Only 1% expects any sort of decline.

Such optimism is stronger than in a similar survey six months ago, but also may reflect negative feelings toward current conditions. Fifty-six percent of respondents said that current M&A conditions were “fair,” while 31% said “fair” and just 12% said “good.” The “excellent” option garnered just 1% of the vote.

When asked what would be the largest potential impediment to M&A over the next six months, 37% said it would be buyer unwillingness to sell at offered prices. When asked what would be the largest impediment to general corporate growth, 36% said the credit crunch, followed by reductions in consumer spending (16%), economic deleveraging (14%), recession (13%) and unemployment (10%).

Eighty percent of respondents said that it is currently a buyer’s market, and 74% said that current conditions favor strategic acquirers over private equity sponsors.

Data on all 40 questions will be released tomorrow, but here are a few more PE-focused highlights:

Are you concerned about the public’s perception of the PE industry?
Very concerned: 5%
Concerned: 38%
Not concerned: 57%

In what industry do you see the best opportunities for buyouts:
Manufacturing/Distribution: 26%
Business Services: 15%
Healthcare: 14%

In what industry do you see the best opportunities for distressed investments:
Manufacturing/Distribution: 30%
Real Estate: 25%
Business Services: 15%
Consumer Products: 12%

How much do you expect to pay for companies over next 6 months?
0-3x EBITDA: 20%
4-5x EBITDA: 60%
6-7x EBIDTA: 17%
8x EBITDA+: 2%

Will leverage levels go up in next 6 months?
Yes: 47%
No: 53%

How much equity do you expect to put into an avg. deal over next 6 months?
20-30%: 17%
31-40%: 30%
41-50%: 32%
More than 50%: 22%

How has FAS 157 affected you?
No significant effect: 60%
Drain on our time: 26%
Drain on our wallet: 14%

What % of your portfolio cos are performing above prior year in terms of EBITDA?
0-25%: 61%
26-50%: 25%
51-75%: 9%
76-100%: 5%

There were over 920 survey respondents, consisting of service providers (28%), investment bankers (27%), PE pros (18%), operating executives (12%), lenders (9%), VCs (2%), limited partners (2%) and hedge fund managers (1%)