The Merchant Magazine
1/2008
Byline Article from Nicholas V. Beare, Managing
Director
Worldwide M&A activity reached a record $3.8 trillion over
the first nine months of 2007, according to Dealogic. Much of the
activity was directly attributed to private equity interests, which
raised nearly $198 billion worldwide during the year. Flush with
cash, private equity firms like Bain Capital, Carlyle Group and
Clayton, Dubilier & Rice, Inc. entered the industry, purchasing
both large and small building products companies, culminating with
the August 2007 $8.5 billion purchase of HD Supply. Yet, this
transaction seemingly may have signaled the end of a private equity
run in the industry – as evidenced by the deal price reduction.
The record year-to-date M&A volumes are deceptively buoyed
by an extraordinary first half of the year. In the third quarter,
the credit crunch left a noticeable impact on worldwide deal
volumes, which were off 42% to $1 trillion compared to $1.7
trillion in the second quarter. Over the past few months, the
residential housing market has continued to soften, with no general
consensus on the timing of a rebound. Subprime market concerns have
led to an overall tightening in the credit markets. Facing such
strong headwinds, private equity has reigned in its spending.
However, this reticence by private equity has given more power to
strategic buyers, who are less constrained by timing and credit
issues. In 2008, expect to see plenty of transactions unfold, as
small building products companies are acquired by strategic
industry players.
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