M&A Trends for 2008/2009

Every year I start off with a retrospective of what’s just happened over the past 12 months. I guess the difference this year is that everyone knows 2008 was simply awful across the board…

Icon Corporate Finance has provided the data points though, demonstrating that 2008 looked very grim:
2008deals
You’ll notice the vast majority of exits were sub $100M last year, while valuations outside of this band are falling fast. This means the venture portfolios are in for tough times… and capital intensive companies will find it much more difficult to raise capital.  Already I’m hearing the “10yr limited life” venture fund model being challenged. People are realizing it might take longer than 3-4 years to build and exit a company. Plus LPs are simply choking…and VCs are feeling the pinch as well in terms of LPs reneging on capital commitments. Yes, some venture funds continue to raise new funds- this is the exception (Accel’s $1bn closed in December and Balderton’s recent $400M come to mind…)
To state the glaring obvious, 2009 will spell the end for many venture funds and venture backed companies. I believe there was always venture funding overhang from the early 2000s- that will have fully corrected by the end of this downturn…
The word on the street in California is “this downturn could be as bad as the great depression”. The word on the street in London still seems to be, “what recession?”. Look for “Sale Now On” signs to change to “Going out of Business Sale” in 2009.

One thought on “M&A Trends for 2008/2009

  1. Hey Jason – like you, I find when getting into valuation discussions it is useful to have the latest data. Here are some updates to the discussion I recently dug up:
    Recent data indicates multiples have decreased significantly (30-50%) across most sectors [Zephyr/BVD] with a more recent (Q1-2009) tech sector review by ICON Corporate Finance indicating that technology valuations were more like 11x EBIT and 1x Sales [ICON M&A Review Q1 2009].
    Cheers, dR

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