Economics, Commerce and Trade Management: An International Journal (ECTIJ)
Merger Tracker Monthly March2009.2
1. MERGER TRACKER
M&A
Market
Monthly Overview of Global
Analysis
Middle-Market M&A Activity
March 2009
Steven M. Bernard, CFA
Director of M&A Market Analysis
sbernard@williamblair.com
312.364.8221
2. Table of Contents
Commentary 1
Global Activity 3
Regional Transactions 3
Middle-Market Regional Transactions 4
U.S. M&A Activity 5
Annual Transactions 5
Transaction Detail 6
Valuation Multiples 7
Private-Equity Transactions 8
Transaction Detail 9
Sector Breakdown 10
Cross-Border Transactions 11
U.S. Financing Markets 13
Debt Capital Markets 13
Equity Capital Markets 14
European M&A Activity 15
Transaction Detail 15
Annual Transactions 16
Valuation Multiples 17
Private-Equity Transactions 18
Emerging Markets M&A Activity 19
Select William Blair & Company Transactions 20
William Blair & Company Corporate Finance Contact List 23
Notes 24
Disclosures 25
3. Commentary
Commentary
OVERVIEW
Two months into 2009, global M&A activity remains anemic and prospects for any meaningful near-term bounce
appear remote. This weakness is affecting all global regions and industry sectors as well as strategic and
financial buyer regardless of deal size.
While there has been the occasional multibillion-dollar transaction, the majority of activity remains in the small
sub-$50 million category. We expect this pattern to remain the norm and believe that the near-term outlook
remains negative. The continued weakness in the equity markets has made it difficult to finance transactions with
equity, while the credit markets remain mostly closed, limiting access to debt financing. Furthermore, the
uncertainty regarding the economic outlook has forced most corporate CEOs to focus inward on their own
financial performance rather than assessing acquisition opportunities.
GLOBAL M&A HIGHLIGHTS
February M&A activity was down significantly across all geographic regions.
The total number of global transactions for the month was 2,125, representing a 37.9% decline compared with
last year while the total dollar volume declined 52.8%, to just $97.2 billion. Both North America and Europe
saw declines of more than 30% in the number of transactions. The dollar volume declined in excess of 35%
for all regions, with an 80% decline in Latin America.
Results for middle-market activity were also extremely weak. The global number of deals for the month totaled
1,139, a decline of 37.1%, while the dollar volume of disclosed transactions was $41.0 billion, a decline of
63.8%.
U.S. M&A HIGHLIGHTS
U.S. M&A activity remains on a downward spiral, reflecting the weak economic environment, declining stock
prices, and near shut-down of the credit markets, which have been weighing on the market for more than a year.
Overall, U.S. M&A activity in February totaled just 584 announced deals, down 36.0% from last year and
32.0% below the trailing-12-month monthly average of 859. This transaction total was the lowest monthly total
since mid-2003.
The dollar volume of transactions totaled just $34.1 billion, a 52.2% decrease from the corresponding period
last year and significantly below the depressed trailing-12-month monthly average of $94.5 billion.
In the middle market, the number of transactions totaled 234, a decline of 43.5% from the year-ago period,
while the dollar volume of middle-market transactions declined 70.9%.
The best-performing segment continues to be the lower end of the middle market, where the number of
transactions under $50 million declined by less than 20% in February. However, the dollar volume of these
transactions declined more than 35%, indicating that even this segment was experiencing a decline in
transaction size.
The U.S. private-equity market remains under significant pressure. For the month, there were just 47 private-
equity transactions, representing a year-over-year decline of 73.6%, while the total dollar volume declined
18.2%.
As a result of this weakness, middle-market transactions involving acquisitions by private-equity firms declined
to 11.3% of all deals, down from 11.4% at the end of 2008 and 15.2% in 2007.
Overall EBITDA multiples continue to decline, reflecting the slowdown in the economy and reduced
competition between strategic buyers and private-equity firms. For the LTM, the overall valuation multiple for
all transactions was 9.9x EBITDA, compared with 11.0x EBITDA during 2008
Public companies remain the most active middle-market acquirers, representing 33.2% of all transactions,
although private-company acquirers and foreign acquirers have both continued to significantly increase their
share of the total compared with recent totals.
For middle-market transactions and those with an undisclosed dollar value, the most actively targeted
industries by foreign buyers were computers/electronics and healthcare. Companies from Canada and the
United Kingdom were the most active buyers of U.S. middle-market companies.
1
4. Commentary (cont'd)
Commentary (cont'd)
EUROPEAN M&A HIGHLIGHTS
European M&A activity also remains extremely weak. In February, there were 781 announced transactions
involving European companies. This total represented a decline of 44.5% compared with the corresponding
period last year.
The total dollar volume of $46.1 billion was more than 60% below the trailing-12-month monthly average of
$103.9 billion.
European middle-market activity was also very weak, with the number of deals down 53.6%, while the dollar
volume declined 73.3% compared with the corresponding period last year.
European private equity was also down significantly as the number of transactions was just 56, down 66.5%
from the corresponding period last year.
For middle-market deals over the past 12 months, the EBITDA multiple continues to decline and is currently
8.7x EBITDA, compared with 9.5x for 2008.
The EBITDA multiple for all European transactions also continues to decline, coming in at 9.4x for the LTM,
ending at 9.4 in February, down from 10.2x at the end of 2008 and 11.5x for 2007.
Global M&A Activity
Number of Deals Deal Value
Undisclosed Middle Market >$750M Deal Value
($ in billions)
40,689
45,000 $4,500
40,550
35,997
40,000 $4,000
35,000 $3,500
30,721 30,792
30,000 $3,000
26,573
27,251 25,811
24,880
22,864 22,758
25,000 $2,500
20,000 $2,000
15,000 $1,500
6,980
10,000 $1,000
4,659
5,000 $500
0 $0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09
YTD YTD
Number
of Deals
>$750M 404 563 646 340 296 292 439 580 799 1,032 625 118 47
Middle Market 11,853 12,923 15,870 12,998 12,412 11,932 13,745 16,742 18,756 21,468 21,131 3,611 2,369
Undisclosed 10,607 13,765 14,205 13,235 12,172 10,534 11,627 13,470 16,442 18,189 16,973 3,251 2,243
$2,224 $3,059 $3,031 $1,575 $1,242 $1,355 $1,943 $2,751 $3,648 $4,275 $2,781 $429 $290
Deal Value
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
2
5. Global Activity
Regional Transactions
Global Activity
The pace of global M&A activity continues to decline substantially from prior-year levels.
No region has been spared, with significant double-digit declines in both the number of deals and dollar
volume experienced across all major geographic regions.
The one exception is North America, which has a modest year-to-date increase in dollar volume due to
the impact of the Pfizer/Wyeth transaction. Without the impact of that transaction, it would also show a
sizable double-digit decline.
Global M&A Activity Detail
NUMBER OF DEALS DEAL VALUE
% Change % Change
2009 '09 vs. '08 2009 '09 vs. '08
2007 2008 2007 2008
FEBRUARY
North America 874 923 574 (37.8%) $178,054 $52,243 $33,024 (36.8% )
Latin America 78 73 38 (47.9%) $4,517 $5,400 $1,050 (80.6% )
Europe 952 1,250 685 (45.2%) $93,340 $95,162 $37,196 (60.9% )
Africa / Middle East 44 74 42 (43.2%) $8,730 $7,637 $2,189 (71.3% )
Asia Pacific 832 1,102 786 (28.7%) $49,897 $45,661 $23,726 (48.0% )
TOTAL 2,780 3,422 2,125 (37.9%) $334,539 $206,103 $97,185 (52.8%)
YTD
North America 1,889 1,986 1,347 (32.2%) $271,346 $122,973 $147,044 19.6%
Latin America 154 167 85 (49.1%) $7,664 $15,680 $9,407 (40.0% )
Europe 1,847 2,410 1,567 (35.0%) $171,576 $181,029 $81,185 (55.2% )
Africa / Middle East 110 151 98 (35.1%) $12,279 $13,352 $5,362 (59.8% )
Asia Pacific 1,691 2,254 1,558 (30.9%) $75,572 $95,927 $47,019 (51.0% )
TOTAL 5,691 6,968 4,655 (33.2%) $538,436 $428,962 $290,016 (32.4%)
LTM
North America 11,323 12,403 9,894 (20.2%) $1,650,180 $1,468,400 $1,015,826 (30.8% )
Latin America 866 1,218 975 (20.0%) $79,540 $101,438 $103,749 2.3%
Europe 11,672 13,146 11,469 (12.8%) $1,370,444 $1,799,546 $945,464 (47.5% )
Africa / Middle East 646 798 870 9.0% $73,474 $108,219 $46,240 (57.3% )
Asia Pacific 11,470 14,361 13,142 (8.5%) $552,040 $687,970 $530,798 (22.8% )
TOTAL 35,977 41,926 36,350 (13.3%) $3,725,677 $4,165,572 $2,642,076 (36.6%)
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
3
6. Global Activity (cont'd)
Middle-Market Regional Transactions
Global Activity (cont'd)
Global middle-market activity was also down in February, with all regions showing significant declines (more
than 50% in most cases) in dollar volume. In aggregate, the total deal value was down 63.8% compared with
the year-ago period.
The number of transactions also declined dramatically for the month, down 37.1% from the year-ago period,
with North America down 35% and Europe declining 56.1%.
Two months into the new year, all the regions remain solidly down for the year. Overall, the total number of
transactions has declined 34.4%, ranging from North America down 24.3% to Latin America down 60.2%.
The dollar volume year-to-date is also down significantly, with an overall decline of 58.7%. The Asia-Pacific
region had the smallest decline, at 43.6% while Europe declined 72.3%, the largest of all regions.
Global Middle-Market M&A Activity Detail
NUMBER OF DEALS DEAL VALUE
% Change % Change
2009 '09 vs. '08 2009 '09 vs. '08
2007 2008 2007 2008
FEBRUARY
North America 253 381 247 (35.2%) $27,300 $27,799 $10,568 (62.0% )
Latin America 38 44 20 (54.5%) $4,517 $3,050 $1,050 (65.6% )
Europe 398 553 243 (56.1%) $35,392 $47,472 $10,587 (77.7% )
Africa / Middle East 30 39 25 (35.9%) $3,813 $4,036 $1,262 (68.7% )
Asia Pacific 608 793 604 (23.8%) $25,667 $30,917 $17,539 (43.3% )
TOTAL 1,327 1,810 1,139 (37.1%) $96,688 $113,274 $41,007 (63.8%)
YTD
North America 492 758 574 (24.3%) $58,076 $53,595 $23,179 (56.8% )
Latin America 74 93 37 (60.2%) $7,664 $5,534 $2,419 (56.3% )
Europe 766 1,015 535 (47.3%) $63,004 $84,342 $23,385 (72.3% )
Africa / Middle East 69 79 55 (30.4%) $7,361 $6,291 $3,539 (43.7% )
Asia Pacific 1,260 1,665 1,168 (29.8%) $49,156 $62,096 $35,024 (43.6% )
TOTAL 2,661 3,610 2,369 (34.4%) $185,260 $211,857 $87,546 (58.7%)
LTM
North America 3,922 4,399 4,384 (0.3%) $361,205 $378,572 $261,947 (30.8% )
Latin America 425 662 489 (26.1%) $41,272 $53,733 $34,045 (36.6% )
Europe 5,269 5,781 4,655 (19.5%) $429,788 $517,764 $335,893 (35.1% )
Africa / Middle East 379 500 479 (4.2%) $34,621 $42,546 $31,950 (24.9% )
Asia Pacific 8,587 11,073 9,882 (10.8%) $294,756 $406,610 $314,232 (22.7% )
TOTAL 18,582 22,415 19,889 (11.3%) $1,161,643 $1,399,225 $978,066 (30.1%)
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
4
7. U.S. M&A Activity
Annual Transactions
U.S. M&A Activity
Total announced U.S. M&A activity in February was just 584 transactions, down 36.0% from last year and
32.0% below the trailing-12-month monthly average of 859.
This transaction total was the lowest monthly total since mid-2003.
The dollar volume of transactions totaled just $34.1 billion, a 52.2% decrease from the corresponding period
last year and significantly below the depressed trailing-12-month monthly average of $94.5 billion.
Middle-market activity was equally weak this month, with the number of deals down 43.5% and the dollar
volume down a staggering 70.9%.
The best-performing segment continues to be the lower end of the middle market, where the number of
transactions under $50 million declined by less than 20% in February. However, the dollar volume of these
transactions declined more than 35%, indicating that even this segment was experiencing a decline in
transaction size.
Year-to-date, the U.S. dollar volume has declined just 6.0%, which reflects the impact of the Pfizer/Wyeth
transaction rather than a pickup in activity.
U.S. M&A Activity Detail
NUMBER OF DEALS DEAL VALUE
% Chg. % Chg.
2009 '09 vs. '08 '09 vs. '08
2007 2008 2007 2008 2009
FEBRUARY
< $50M 163 223 180 (19.3%) $3,105 $3,470 $2,244 (35.3% )
$50M-$250M 100 138 43 (68.8%) $11,579 $15,875 $4,962 (68.7% )
$250M-$750M 47 53 11 (79.2%) $19,906 $22,104 $4,869 (78.0% )
(43.5%)
Total Middle-Market 310 414 234 $34,590 $41,449 $12,075 (70.9%)
Monthly Average 361 386 364 (5.6%) $35,498 $38,801 $26,232 (32.4% )
> 750M 42 18 8 (55.6%) $145,277 $29,770 $21,988 (26.1% )
– – – –
Undisclosed 601 481 342 (28.9%)
Total Deals 953 913 584 (36.0%) $179,867 $71,219 $34,063 (52.2%)
Monthly Average 1,019 1,075 859 (20.2%) $145,767 $135,754 $94,452 (30.4% )
YTD
< $50M 310 485 442 (8.9%) $5,593 $7,520 $5,363 (28.7% )
$50M-$250M 195 252 96 (61.9%) $23,292 $28,720 $10,350 (64.0% )
$250M-$750M 96 95 24 (74.7%) $40,959 $38,154 $10,071 (73.6% )
Total Middle-Market 601 832 562 (32.5%) $69,844 $74,393 $25,785 (65.3%)
> 750M 76 49 20 (59.2%) $214,340 $86,709 $125,649 44.9%
– – – –
Undisclosed 1,232 1,050 811 (22.8%)
Total Deals 1,909 1,931 1,393 (27.9%) $284,184 $161,102 $151,434 (6.0%)
LTM
< $50M 2,503 2,635 2,968 12.6% $43,016 $42,123 $41,937 (0.4% )
$50M-$250M 1,288 1,372 1,036 (24.5%) $149,935 $157,736 $116,272 (26.3% )
$250M-$750M 544 624 366 (41.3%) $233,024 $265,750 $156,569 (41.1% )
Total Middle-Market 4,335 4,631 4,370 (5.6%) $425,975 $465,609 $314,778 (32.4%)
> 750M 392 438 219 (50.0%) $1,323,225 $1,163,443 $818,645 (29.6% )
– – – –
Undisclosed 7,499 7,835 5,714 (27.1%)
Total Deals 12,226 12,904 10,303 (20.2%) $1,749,201 $1,629,053 $1,133,423 (30.4%)
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
5
9. U.S. M&A Activity (cont'd)
Valuation Multiples
U.S. M&A Activity (cont'd)
Overall EBITDA multiples continue to decline, reflecting the slowdown in the economy and reduced
competition between strategic buyers and private-equity firms.
However, multiples have not fallen as much as one might expect, given the decreased availability of quality
companies for sale. The data are also slightly skewed by the heavy reliance on public-company transactions,
which tend to have a higher valuation than private-company transactions.
One-week and four-week acquisition premiums for public companies continue to creep upward as buyers
continue to see attractive valuations despite sharply lower stock prices.
U.S. EV/EBITDA Valuation Multiples
12.0x
Middle Market Overall Market
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
Middle Market 9.8x 8.5x 7.5x 8.1x 9.2x 8.0x 9.1x 11.2x 12.1x 9.9x 9.2x 8.6x
Overall Market 10.4x 9.1x 8.1x 8.5x 9.3x 8.5x 9.5x 11.2x 12.0x 12.4x 11.0x 9.9x
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
U.S. EV/EBITDA Middle-Market Valuation Multiples
< $50M $50M-$250M $250M-$750M
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
< $50M 8.2x 7.9x 7.1x 6.6x 9.5x 8.3x 8.8x 8.9x 11.8x 9.2x 6.7x 5.8x
$50M-$250M 10.7x 9.2x 7.4x 8.6x 8.5x 7.3x 9.2x 11.7x 12.0x 11.4x 10.0x 10.0x
$250M-$750M 11.3x 8.9x 8.2x 8.4x 9.6x 9.3x 9.3x 11.2x 12.2x 9.8x 12.5x 11.4x
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
Median Acquisition Premiums
1-W eek Premium 4-Week Premium
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
Premium
1-Week 38.4% 39.2% 41.2% 47.3% 44.9% 35.3% 26.2% 32.3% 27.5% 29.3% 37.4% 41.3%
4-Week 42.3% 47.2% 49.0% 53.1% 47.3% 41.8% 29.6% 36.1% 30.3% 31.3% 41.0% 43.0%
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
7
10. U.S. M&A Activity (cont'd)
Private-Equity Transactions
U.S. M&A Activity (cont'd)
Private-equity transaction activity continues to significantly lag the prior-year periods, especially for
transactions over $750 million.
For the month, there were just 47 private-equity transactions, representing a year-over-year decline of 73.6%,
while the total dollar volume declined 18.2%.
Year-to-date, the total number of transactions is down 53.2%, with each of the three size bands all registering
a 50% or greater decline.
U.S. Private-Equity Activity Detail
NUMBER OF DEALS DEAL VALUE
% Chg. % Chg.
2009 '09 vs. '08 '09 vs. '08
2007 2008 2007 2008 2009
FEBRUARY
Middle-Market 57 85 24 (71.8%) $9,069 $13,382 $1,049 (92.2% )
Monthly Average 82 71 53 (26.1%) $10,648 $11,243 $5,681 (49.5% )
> 750M 18 2 1 (50.0%) $75,037 $3,183 $12,500 292.7%
– – – –
Undisclosed 101 91 22 (75.8%)
Total Deals 176 178 47 (73.6%) $84,107 $16,565 $13,549 (18.2%)
Monthly Average 184 183 120 (34.5%) $52,295 $47,227 $17,189 (63.6% )
YTD
Middle-Market 115 159 77 (51.6%) $17,919 $20,168 $3,163 (84.3% )
> 750M 27 11 3 (72.7%) $95,141 $20,076 $27,700 38.0%
– – – –
Undisclosed 211 185 86 (53.5%)
Total Deals 353 355 166 (53.2%) $113,060 $40,244 $30,863 (23.3%)
LTM
Middle-Market 978 855 632 (26.1%) $127,771 $134,920 $68,176 (49.5% )
> 750M 130 146 46 (68.5%) $499,773 $431,803 $138,094 (68.0% )
– – – –
Undisclosed 1,103 1,198 762 (36.4%)
Total Deals 2,211 2,199 1,440 (34.5%) $627,544 $566,723 $206,269 (63.6%)
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
U.S. Private-Equity Activity
Deal Value
Number of Deals
Undisclosed Middle Market >$750M Deal Value ($ in billions)
2,242
2,500 $800
2,197
2,021
1,828
2,000 1,629 $600
1,358
1,500 1,221 1,071
1,012 1,010 $400
1,000 686
355 $200
166
500
0 $0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2/08 2/09
Number
YTD YTD
of Deals
>$750M 23 32 29 21 26 33 74 92 117 162 54 11 3
Middle Market 347 521 717 530 588 695 973 963 1,039 811 714 159 77
Undisclosed 316 459 475 459 457 630 781 966 1,086 1,224 861 185 86
$89 $128 $130 $85 $96 $131 $250 $331 $572 $640 $216 $40 $31
Deal Value
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
8
11. U.S. M&A Activity (cont'd)
Transaction Detail
U.S. M&A Activity (cont'd)
There continues to be a shift in the composition of acquirers, with private-equity firms continuing to account for
a decreasing percentage of the overall market. Private equity currently accounts for just 11.3% of transactions
for the LTM period, compared with 15.2% for all of 2007 and down slightly from 11.4% in 2008. Public
companies still account for the largest number of acquirers in middle-market transactions, at 33.2%, although
this number has declined in recent months due to the sharp drop in equity prices. Foreign acquirers and
private companies both continue to increase their share of the total compared with the year-ago period,
although foreign acquirers have slowed down in recent months.
Private companies continue to account for the majority (54.7%) of all transaction targets, although the number
of deals involving divestitures and public companies has been increasing steadily. Public-company targets
now represent 12.4% of the total, a level not seen since the last bear market in 2002, while private-equity
portfolio company exits continue to represent a shrinking percentage of the total.
U.S. Middle-Market M&A Activity by Acquiror
Percent of Deals Private Private Equity Foreign Public
100.0%
75.0%
50.0%
25.0%
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
Private 9.7% 17.1% 35.3% 21.6% 21.3% 26.2% 19.2% 17.5% 22.0% 22.5% 30.2% 32.0%
77.9% 61.8% 43.0% 52.6% 51.5% 47.4% 50.9% 46.7% 40.4% 40.7% 34.2% 33.2%
Public
Private Equity 4.9% 9.1% 8.5% 8.1% 11.5% 14.1% 16.3% 18.6% 21.0% 15.2% 11.4% 11.3%
7.5% 12.1% 13.2% 17.6% 15.6% 12.3% 13.5% 17.3% 16.5% 21.6% 24.2% 23.5%
Foreign
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
U.S. Middle-Market M&A Activity by Target
Percent of Deals Private Priv ate Equity Divestiture Public
100.0%
75.0%
50.0%
25.0%
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
Private 51.2% 48.1% 58.9% 39.8% 36.4% 30.8% 40.1% 54.7% 54.8% 56.5% 55.5% 54.7%
12.3% 18.8% 13.9% 13.7% 12.8% 11.5% 7.8% 8.0% 9.3% 10.7% 11.3% 12.4%
Public
1.0% 0.2% 2.3% 4.3% 5.2% 6.5% 9.1% 8.6% 8.6% 7.3% 4.3% 3.8%
Private Equity
35.5% 33.0% 24.9% 42.2% 45.6% 51.2% 43.0% 28.6% 27.3% 25.4% 28.9% 29.1%
Divestiture
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
9
12. U.S. M&A Activity (cont'd)
Sector Breakdown
U.S. M&A Activity (cont'd)
The downturn remains steep and broad, with virtually no sector left untouched.
For both the overall market and the middle market, not a single industry of the 14 we track is currently
experiencing an increase in the number of transactions.
The consumer products sector has suffered the largest decline in the number of transactions, with a 63.2%
decline in middle-market deals and a 62.1% decline overall.
In terms of dollar volume, none of the 14 segments in the middle market had a year-over-year increase, with the
consumer products segment experiencing a 90.8% decline.
Looking at the broader market, 12 of the 14 industry categories have experienced lower year-to-date dollar
volume. The healthcare and financial segments are the only segments to show an increase in activity compared to
last year.
Transaction Activity by Target Sector
2006 2007 2008 2008 YTD 2009 YTD
TRANSACTIONS Mid-Mkt Total Mid-Mkt Total Mid-Mkt Total Mid-Mkt Total Mid-Mkt Total
Business Services 356 1,699 335 1,727 354 1,271 62 268 41 170
Computers & Electronics 694 1,791 595 1,698 703 1,634 123 324 117 259
Construction/Building 85 406 77 394 72 290 14 66 9 39
Consumer Products 76 293 110 449 87 240 19 58 7 22
Consumer Services 240 695 172 660 157 417 35 84 31 65
Energy & Power 290 681 304 719 398 709 68 122 49 80
Financial 274 882 268 996 248 758 35 150 24 98
Food & Beverage 56 212 39 201 45 169 10 35 5 19
Healthcare 426 957 345 930 430 861 84 162 61 129
Industrial Products 111 495 116 493 127 415 22 78 10 40
Materials 160 530 185 640 220 573 25 95 25 73
Real Estate/Property 278 546 236 554 203 430 36 78 29 61
Telecommunications 215 488 156 447 158 336 26 64 14 32
Transportation 70 222 58 247 56 189 11 42 6 22
Other 60 222 60 222 65 181 14 44 5 14
TOTAL 3,391 10,119 3,056 10,377 3,323 8,473 584 1,670 433 1,123
$ VOLUME (M)
Business Services $25,193 $60,900 $25,729 $91,137 $20,540 $28,512 $3,608 $6,940 $517 $517
Computers & Electronics $43,816 $115,629 $42,188 $119,338 $28,885 $76,728 $5,300 $14,420 $3,526 $4,301
Construction/Building $9,777 $32,124 $7,610 $45,379 $5,423 $8,625 $1,473 $3,813 $356 $356
Consumer Products $7,549 $17,792 $7,178 $28,675 $5,313 $21,448 $1,959 $1,959 $180 $180
Consumer Services $27,509 $129,702 $21,125 $87,050 $13,157 $26,896 $2,791 $3,736 $1,251 $3,101
Energy & Power $34,728 $160,737 $43,974 $210,528 $47,956 $119,497 $9,256 $15,428 $2,757 $2,757
Financial $33,470 $177,328 $32,445 $209,148 $25,951 $155,137 $3,021 $27,312 $940 $39,640
Food & Beverage $7,768 $11,849 $3,679 $30,195 $3,967 $98,577 $845 $2,069 $364 $364
Healthcare $35,092 $177,421 $32,799 $141,275 $28,430 $136,523 $6,036 $9,070 $3,198 $76,218
Industrial Products $9,211 $24,777 $13,985 $46,378 $9,267 $11,217 $2,121 $3,021 $640 $640
Materials $19,093 $90,262 $22,845 $100,474 $14,665 $70,445 $2,673 $12,686 $1,374 $7,808
Real Estate/Property $31,936 $164,666 $35,402 $136,942 $23,420 $37,519 $4,740 $7,705 $1,390 $2,196
Telecommunications $18,692 $205,017 $18,529 $83,155 $9,701 $81,557 $1,566 $1,566 $794 $794
Transportation $7,766 $22,275 $8,916 $31,226 $4,982 $13,068 $1,244 $1,244 $1,163 $1,163
Other $4,732 $9,329 $6,152 $19,454 $5,685 $7,657 $664 $664 $190 $190
TOTAL $316,333 $1,399,808 $322,557 $1,380,355 $247,340 $893,406 $47,295 $111,631 $18,638 $140,223
ENT. VALUE/ EBITDA
Business Services 12.0x 12.5x 11.3x 14.1x 13.3x 12.6x 0.0x 10.3x 17.7x 17.7x
Computers & Electronics 17.9x 17.0x 16.7x 16.8x 15.9x 15.8x 0.0x 0.0x 10.0x 10.0x
Construction/Building 0.0x 11.5x 10.6x 11.3x 8.2x 8.2x 0.0x 0.0x 0.0x 0.0x
Consumer Products 13.4x 11.9x 10.5x 12.2x 6.4x 10.1x 0.0x 0.0x 0.0x 0.0x
Consumer Services 14.0x 13.9x 10.7x 13.4x 11.2x 12.8x 0.0x 0.0x 0.0x 0.0x
Energy & Power 12.4x 11.5x 11.7x 11.8x 17.5x 14.1x 0.0x 0.0x 7.4x 7.4x
Financial 13.4x 12.7x 11.4x 11.7x 10.5x 10.7x 17.7x 23.1x 5.0x 5.0x
Food & Beverage 7.3x 7.3x 0.0x 19.7x 12.8x 15.1x 0.0x 17.4x 5.8x 5.8x
Healthcare 14.4x 16.7x 13.9x 15.4x 15.0x 17.3x 8.7x 10.3x 0.0x 17.3x
Industrial Products 10.6x 12.9x 0.0x 10.8x 15.4x 15.4x 0.0x 0.0x 0.0x 0.0x
Materials 12.5x 13.0x 10.7x 10.9x 9.4x 12.1x 18.0x 10.8x 6.5x 5.0x
Real Estate/Property 11.1x 16.4x 15.7x 16.4x 12.2x 13.0x 0.0x 0.0x 6.6x 11.8x
Telecommunications 15.3x 15.4x 15.9x 15.2x 15.8x 12.3x 0.0x 0.0x 0.0x 0.0x
Transportation 18.0x 14.1x 12.7x 13.2x 3.2x 5.4x 0.0x 0.0x 3.9x 3.9x
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
10
13. U.S. M&A Activity (cont'd)
Cross-Border Transactions
U.S. M&A Activity (cont'd)
Overall U.S. cross-border activity and middle-market cross-border continue to decline moderately from prior
levels.
For the overall market, the LTM transaction breakdown is about 60%/40% in favor of outbound transactions,
similar to the totals for all of 2006 and 2007.
In the middle market, the LTM transaction breakdown favors the outbound transactions 60% to 40%.
For middle-market and undisclosed transactions, the most actively targeted U.S. industries by foreign buyers
were computers/electronics, healthcare, and mining.
The most active country buying in the United States is Canada, followed by the United Kingdom and
Germany.
The top foreign industries targeted by U.S. buyers were technology, business/professional services, and
mining.
The top country targeted by U.S. buyers was Canada, followed by the United Kingdom and Japan.
U.S. Middle-Market Cross-Border M&A by Number of Deals
Number of Deals Deal Value
Outbound Inbound Inbound Deal Value Outbound Deal Value
($ in billions)
2,500 $120
2,060
2,006
$100
1,919 1,881
2,000 1,837
1,699
1,602
$80
1,078 1,439 1,410 1,413 1,362
1,500 1,301 1,271
1,255
1,116 $60
1,050
1,018 1,013
786
864
1,000 850
679
$40
620
500
$20
Number 0 $0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 LTM
of Deals
Inbound
Middle Market 383 471 682 572 442 366 435 527 514 603 737 687
Undisclosed 296 393 396 446 408 254 351 523 741 810 625 584
Value $37.2 $47.6 $65.2 $38.9 $30.2 $24.3 $40.6 $44.5 $57.5 $64.6 $53.5 $47.8
Outbound
Middle Market 755 838 867 671 553 521 689 744 810 1,059 1,064 966
Undisclosed 944 999 1,052 768 563 492 612 666 792 947 996 915
Value $55.6 $76.3 $72.0 $49.0 $36.7 $38.5 $57.5 $61.0 $70.8 $104.4 $90.6 $74.4
Source: Dealogic and William Blair & Company, L.L.C. Mergers and Acquisitions market analysis.
11
14. U.S. M&A Activity (cont'd)
Cross-Border Transactions
U.S. M&A Activity (cont'd)
U.S. Cross-Border M&A — Number of Transactions
INBOUND OUTBOUND TOTAL
2009 YTD 2009 YTD
2007 2008 2007 2008 2009 YTD 2007 2008
Middle Market 603 737 67 1,059 1,064 105 1,662 1,801 172
> $750M 93 54 7 65 39 3 158 93 10
Undisclosed 810 625 83 947 996 115 1,757 1,621 198
Total 1,506 1,416 157 2,071 2,099 223 3,577 3,515 380
U.S. Cross-Border M&A — Transaction Value
INBOUND OUTBOUND TOTAL
2009 YTD 2009 YTD
2007 2008 2007 2008 2009 YTD 2007 2008
Middle Market $64,630 $53,480 $3,269 $104,400 $90,624 $5,055 $169,030 $144,104 $8,324
> $750M $297,267 $232,367 $20,831 $150,092 $95,211 $3,044 $447,358 $327,578 $23,875
Undisclosed
Total $361,897 $285,847 $24,099 $254,491 $185,835 $8,100 $616,388 $471,682 $32,199
U.S. Cross-Border M&A Transactions — 2009 YTD
INBOUND to U.S. OUTBOUND from U.S.
Target Industry Deals Acquiror Country Deals Target Industry Deals Target Country Deals
Computers & Electronics 33 Canada 45 Computers & Electronics 26 Canada 35
Healthcare 25 United Kingdom 26 Professional Services 16 United Kingdom 10
Mining 15 Germany 12 Mining 11 Japan 8
Professional Services 12 Japan 10 Healthcare 9 Germany 7
Oil & Gas 9 Switzerland 9 Telecommunications 7 China 7
U.S. Cross-Border M&A Transactions — 2008
INBOUND to U.S. OUTBOUND from U.S.
Target Industry Deals Acquiror Country Deals Target Industry Deals Target Country Deals
Computers & Electronics 262 Canada 382 Computers & Electronics 417 Canada 304
Healthcare 145 United Kingdom 184 Professional Services 229 United Kingdom 267
Professional Services 140 Australia 88 Finance 158 China 213
Mining 109 Japan 80 Healthcare 122 Japan 163
Oil & Gas 103 Germany 74 Real Estate/Property 102 India 141
12
15. U.S. Financing Markets
Debt Capital Markets
U.S. Financing Markets
The tight credit markets continue to force buyers to put up significantly more cash to finance LBO
transactions. The average equity contribution for 2008 rose to 40.2% for transactions involving
companies with EBITDA of less than $50 million. For the second half of 2008, this number rose
42.9%.
The IPO backlog continues to shrink, as a record numbers of filings are withdrawn or postponed.
Loan pricing is up significantly due to the near absence of institutional investors and heading higher
as a result of the current turmoil. For 2008, the average spread of LBO loans was LIBOR +364, up
from +270 in 2007. For transactions with over $50 million of EBITDA, the spread was +338,
compared with +270 in 2007. For transactions with less than $50 million of EBITDA, the spread
jumped from +292 in 2007 to +431 in 2008.
Average Equity Contribution
50.0% 42.9%
40.8% 41.9%
40.2%
39.7%
37.9%
36.3%
36.1% 38.3%
36.7% 35.4%
40.0% 34.2% 34.1%
32.4% 32.1%
31.0% 31.5%
29.9% 29.9% 30.3%
28.9% 29.2%
29.6%
30.0%
26.8%
30.0% 25.2%
20.0%
10.0%
0.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2H08
Left Column - less than $50 million EBITDA Right Column - more than $50 million EBITDA
Source: S&P’s Leveraged Lending Review.
LBO Debt Multiples
7.0x Series7 Series1 6.2x
5.7x 5.6x
6.0x 5.4x 5.4x 0.8x
5.2x
4.9x 4.9x 4.9x
0.4x
4.8x 4.8x 4.8x 4.6x 4.7x
4.6x
4.5x 0.7x 4.5x
5.0x 1.7x 4.3x
4.0x 4.2x
4.1x 4.1x 4.1x 4.0x
0.4x 1.3x 0.6x 0.8x
3.8x
1.2x 2.2x
1.3x
0.8x 1.6x 0.8x
1.6x
4.0x 1.3x 1.4x
3.4x
0.7x 0.7x
0.8x 1.0x 0.8x 1.8x
1.4x 1.5x
0.6x
3.0x
5.2x 5.4x
4.7x
4.2x 3.9x 4.2x
3.7x 4.1x
2.0x 3.6x 4.0x 3.6x 3.2x 3.5x 3.3x
3.4x 3.2x 3.4x 3.3x 3.3x
3.2x 3.2x 3.0x 2.7x
2.8x 2.7x 2.5x
1.0x
0.0x
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2H 2008
Left Column = Less than $50MM EBITDA Right Column = More than $50MM EBITDA
Source: S&P’s Leveraged Lending Review.
Average Spread of LBO Loans
Libor
EBITDA of $50M or less All LBOs EBITDA More than $50M
+450 441
+400 400
377
+350
+300
+250
+200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2H08
Source: S&P’s Leveraged Lending Review.
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