BusinessCorporate FinanceSigns of hope but don’t rush back to transactions

Signs of hope but don't rush back to transactions

Caution should be exercised before jumping back into transactions with both feet

This week’s cover story
gives cause for optimism. One of the most damaging aspects of the recession has
been the near-death experience for mergers and acquisitions departments brought
upon by the drying up of credit markets. Our story says that there is light at
the end of tunnel for transactions and that they are on the brink of
ressurection.

Good news for the firms’ M&A departments, many of whom trimmed their
staff heavily once it was clear that there wasn’t the business to sustain them.
But caution should be exercised before jumping back into transactions with both
feet.

First, the basis for many deals ­ credit and debt ­ is not only unlikely to
come back in quite the way it once existed, but is now positively unwanted in
some quarters. There is a huge question about whether debt or equity is the best
way forward when growing businesses and the M&A departments will have to do
their share of thought leadership when it comes to unravelling this issue.

Second, what shape is this recession? This week
Begbies Traynor put out
research
that concluded the economy is in the middle of a W-shaped downturn
which means we still have another dip in output to come. If that’s the case, any
recruitment drive by M&A departments would be best postponed for a little
longer yet. That’s bad news for the experts who have found themselves out of
job. But the signs are that deals are on the way back.

Further reading:

M&A’s rise from the
dead

Dawn of the deal

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