PwC: Distressed Firms May Boost 2009 M&A

Accountancy sees this year's run of bankruptcies increasing "mergers of necessity."
Stephen TaubDecember 22, 2008

The devastating effect of the worldwide credit crunch and market implosion on dealmaking seem certain to continue well into 2009. But there is likely to be more activity next year from distressed companies desperately seeking buyers, according to a report from PricewaterhouseCoopers’ Transaction Services group.

Its report pointed out that the number of U.S. businesses filing for bankruptcy has been on the rise. In the first half of 2008, business bankruptcy filings totaled 18,456, the highest half year total since the second half of 2005, citing the American Bankruptcy Institute.

“Troubled companies will look to align with larger, stronger players in order to survive, creating the perfect storm for mergers of necessity,” said Robert Filek, a partner in PwC’s Transaction Services group.

Many buyers figure to be private equity firms, which had an especially hard time in 2008 because of the difficulty of raising capital for their leveraged deals. PwC pointed out that distressed funds have raised a total of $36.8 billion in the first half of 2008, citing Private Equity Intelligence.

PwC said that through Nov. 30 U.S. M&A activity totaled roughly $1.1 trillion, compared to $1.6 trillion for the same period in 2007. Its tally of deals for the 11 months of 2008 was 8,190, a 22 percent decrease from the same period in 2007.

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