Competition for deals in 2011 is looking a lot like 2006, according to the dealmakers and service providers at ACG Texas.
Private equity buyers are ready and shopping to spend, and more significantly, lenders are lining up for good deals. Lending was one of the missing ingredients that kept deal flow down last year. But now, the mezzanine and equity lenders are finding themselves competing for deals. And when competition comes, lending terms get more friendly for borrowers.
One investment banker tells me he has a recapitalization closing soon that had five mezz lenders lined up willing to get in the deal. That’s hugely encouraging for folks wanting to get deals done.
So you’ve got plenty buyers and ample capital. The final missing ingredient: Good sellers. Distress deals are still available for the folks who like to go down that road. The seller pool filled a bit last fall thanks to the fear of tax law changes (that never came to pass), a deal lawyer tells me, but that inertia that kept sellers on the sideline in 2009 and some of 2010 is trying to creep back in.
Eye-opening deal multiples are helping beat back the inertia monster in a number of sectors, starting with financial services (Comerica’s Sterling deal) and energy (Holly-Frontier). ACG people are awfully interested in health care, energy-related services and even telecom (yes, telecom). Come to think of it, is it back to 2006, or is it back to 1999?