Rebound year for M&A and private equity

Few predicted a turnaround in M&A activity in 2010. However, following the dismal year of 2009, year 2010 saw a marked increase in global M&A activity overall. Financial sponsor deal activity increased even more than global M&A markets as a whole (Thomson Reuters). Debt financing re-emerged as a key driver for much of the activity of many financial sponsors. In addition, financial sponsors saw many of their portfolio companies begin to realise significant operational gains following the prevalence of restructurings that occurred over the course of the previous few years. Carrying over from the momentum in 2009, there was a continued rise in initial public offerings of portfolio companies in 2010, with many financial sponsors retaining large stakes. In addition, there was a significant increase in private equity sponsor exits from their investments, with financial sponsors realising the highest median prices on exits in 2010 compared to any previous year (Pitchbook).

Global announced M&A deals in 2010 totalled approximately US$2.4 trillion, which was an increase of 22.9 per cent from 2009 totals. Interestingly, there were over 40,000 announced deals worldwide in 2010, representing just a 3 per cent increase from 2009, and for the third consecutive year there was a notable spike in transaction volume in the fourth quarter. Worldwide announced M&A transactions during the fourth quarter of 2010 totalled approximately US$716.2 billion, which was the largest quarterly total since the third quarter of 2008 and a 21.2 per cent increase from the fourth quarter of 2009. Financial sponsor buyouts totalled US$225.4 billion worldwide in 2010, representing an 89.2 per cent increase over 2009. As a result, financial sponsors accounted for approximately 9 per cent of announced M&A transactions worldwide during 2010 compared with approximately 6 per cent in 2009 (all of the above statistics supplied by Thomson Reuters).