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Dabbling in the Debt Debate; The latest ACG/Thomson Reuters Dealmakers Survey indicated that 76% of respondents see the credit markets improving over the next six months. What's your take on debt?

Article Excerpt
Byline: Editorial Staff

Historically, M&A multiples closely follow debt multiples in four- to five-year cycles. With multiples beginning to decline in 2008 and bottoming out in 2009, we expect to see leverage multiples beginning to increase slightly over the next 12 months resulting in corresponding expansion of M&A activity.

- G. Kent Kahle, Managing Director, GulfStar Group

There is no doubt that the tight, expensive & restrictive debt environment is having an adverse effect on M&A markets. The issue of when material improvement will be realized is the billion dollar question. When it comes to a six month prognostication however, I would comfortably wager that any improvement will be slight.

There are a few key drivers here. One, bank balance sheets are challenged, to say the least. Two, many alternative providers of debt are gone or on the sidelines. Three, the economy remains weak and lenders are concerned about additional deterioration in the credits already on the books thereby necessitating augmenting loan loss provisions.

Many analysts expect default rates to continue to...

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