Act Now

CALL US:
Speak with an Expert: 866-648-7640
LEARN:
Learn more about M&A in our research center
REQUEST More Info

 

2007 M&A Market Forecast
As we enter 2007 Clear Rock anticipates another strong year for the M&A markets, capitalizing off growth and the pace of acquisitions in 2006. The year is likely to see a continuance of mega-deals as financing remains relatively loose.

All things, however, must come to an end. We believe that we are likely to see a slackened pace in larger deals towards the second half of the year. Why? Large deals have become heavily dependent on high leverage levels. The market is bound for a correction, with the Fed pushing monetary policy in that direction already with a series of rate increases.

What Matters: The Middle Market
So if large deals are going to slow down, what does this mean for the middle market? Fortunately middle market deals have not had access to the same sophisticated - and higher risk - financing mechanisms available for mega-deals. It is this leading edge of financing that are most likely to be hit first in any market correction. To that end, we foresee the middle market remaining relatively steady throughout the year.

Things to Watch For
Inflation
The Fed is clearly concerned with inflation. The dollar has been consistently weak, and inflation numbers are starting to creep higher. The Fed has been addressing this for several quarters, and now runs the delicate balance of fighting inflation while not encouraging "stagflation." We'll keep a close eye on monetary policy as it will have large impact on deals.
Unemployment
Unemployment is the most consistently watched metric on the economy. Especially as we enter an election year, expect unemployment numbers to be constantly in the news. If numbers stay reasonable, we anticipate a much better year than if the unemployment numbers start to creep materially higher.
The Election
We expect a bounce this year to some extent- typical of many election cycles. The outlier will be how the economy performs, and how candidates (and current office holders) react. Further- there is a distinct likelihood that the Democratic Party will take control of the White House. Many sources suggest that an increase in the long term capital gains rate might follow - a move that will have significant impacts for both buyers and sellers, especially in the middle- and lower-middle markets.
Summary
Overall, we anticipate a solid year with tapering towards the close. The strong M&A market will not last forever, but we have to assume it will continue for a good portion of 2007.