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Better Days Are Coming.

Article Excerpt
The multi-year slump in dealmaking has proven to be a painful experience for buyers, sellers, and m&a advisers. A feeble economy, stock market volatility, and tight bank credit have thinned the ranks of potential acquirers, forced sellers into a holding pattern, and left dealmakers pitching fewer transactions and spending more time consulting clients on strategic and business issues.

The economic slowdown, exacerbated by the terrorist attacks in September 2001, has produced a high level of uncertainty - which dealmakers contend is the bane of m&a. Accounting and corporate governance scandals have further dampened m&a activity, and many CEOs have been hunkering down and focusing on their own business and governance issues rather than scouring the market for possible acquisitions.

Yet in this inhospitable mergers and acquisitions environment, dealmakers are spotting signs that the two-year decline in m&a activity may be slackening, offering hope for a modest recovery this year. More-realistic seller expectations and improving financing conditions are giving m&a pros a reason to be optimistic, though, ultimately, the timing and the strength of the recovery will hinge on the performance of the economy and the stock market.

Most m&a professionals are quick to agree that 2002 was one of the most brutal dealmaking years that they can remember. Still reeling from the fallout of the terrorist attacks, the m&a market was burdened by the Enron Corp. collapse and shady bookkeeping and other misdeeds at WorldCom Inc., Tyco International Ltd., Global Crossing Ltd., Adelphia Communications Corp., and a number of other firms.

Nonetheless, the listless m&a market was able to produce occasional sparks of accomplishment last year. Groundbreaking and creatively structured transactions sprouted in spite of the languid deals market. Through skillful negotiations, innovative structuring, and sheer persistence, dealmakers closed strategically significant deals that will have...