We have got a slew of articles in this edition of the M&A Weekly Digest, from the opportunity business owners have with the large amount of private equity overhang to a common deal-breaker and why Japanese companies prefer to expand in the U.S.
“A few weeks ago we pointed out that there was a significant amount of “dry powder” that equity firms had accumulated on their balance sheets and needs to be invested. An article from the DealBook, an online M&A site published by the The New York Times, later supported this data…
If the capital is not used in the typical 5-7 years allowance, equity firms have two choices: return the funds (which they hate to do) or ask for an extension.
Of course a third option also exists – rapidly use the capital and invest in as many opportunities as possible. It is this third option that most analysts expect equity firms to pursue during the next 12-18 months when nearly $200 billion of the more than $400 billion of dry powder needs to be invested.”
“More and more dealmakers are identifying this as one of the most frequent deal-breakers they encounter.
In fact, in a the recently released 2013 Pepperdine Capital Markets Report – an annual survey of capital markets professionals conducted by the Pepperdine University Graziadio School of Business and Management – according to investment bankers, this issue was identified as the biggest reason for business engagements not transacting.”
Carl Doerksen analyzes a recent acquisition by a platform company that reveals insight into how private equity firms choose which companies to invest in.
“Despite all the negativity we hear about our economy, taxation, fiscal cliffs, and federal spending, for offshore corporate players the U.S. market still looks inviting. This is especially true for companies that have cash and are located in countries like Japan and facing limited economic prospects at home.”
“Business owners often ask about the timing regarding the sale of their companies. Ultimately, the best time to sell is when the market tells you it is best.
In other words, if you wait until you are ready, chances are good that you will enter the market at a time that may be less than optimal. However, if you take your company to market when external circumstances are right, you will typically get an optimal value for your business.”
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