Patience will help to grease M&A wheels
M&A할려면 인내력이 필요하다
By Lina Saigol

Published: April 19 2009 19:32 | Last updated: April 19 2009 19:32

Eight months ago, investment bankers were geared for a flood of asset disposals from distressed companies struggling to meet their short-term capital needs.
8달 전만해도 기업들이 단기자금 조달하기 위해 힘들었다.

Banks beefed up their sell-side operations, bringing together M&A and restructuring specialists, to double the chances of winning mandates to sell businesses. The thinking was that rather than tap investors for cash, chief executives would try to raise capital by divesting anything non-core.

But so far, companies have favoured rights issues and selling corporate bonds over the sale of even underperforming divisions.

This is mainly due to the vast gulf that still exists between buyers and sellers over how much an asset is worth. Both Royal Bank of Scotland and AIG pulled the sale of their insurance assets after balking at the prices bidders were offering.

But if the last downturn provides any clues, the disconnect between bidders and targets should start to narrow soon.

It was two years after the collapse of the dotcom boom in late 2000 before companies started selling assets to reduce debt accumulated from expensive acquisitions. Asset disposals accounted for half of all M&A activity in the European technology, media and telecoms sector in 2003.

That level of activity was due largely to private equity groups’ willingness to buy big assets such as Yell, BT’s yellow pages business that Apax and Hicks, Muse, Tate & Furst acquired in 2001.

This time around, private equity has stayed on the sidelines as it writes down many investments acquired at the height of debt boom in 2006/07 and struggles to find the leverage to make acquisitions work.

But at some stage private equity groups will spend the cash they are sitting on and take the plunge – as CVC Capital Partners recently demonstrated when it bought Barclays’ iShares exchange-traded fund unit for $4.4bn (£3bn).

The UK bank’s shares rose 7 per cent on the sale and that should encourage other companies to look at the structure of their businesses and dispose of anything they will not miss when the upturn comes.

lina.saigol@ft.com