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MINNEAPOLIS, Jan. 3 /PRNewswire-FirstCall/ -- Credit market worries will continue to weigh on the U.S. M&A market through at the least the first half of 2008, especially with regard to large buyouts, according to a report recently released by the Piper Jaffray M&A team. The report titled, "Mergers & Acquisitions Insights: Middle Market M&A Outlook 2008," analyzes M&A activity and trends in the middle market.

Despite the credit crunch, the middle market has remained active as the total deal volume is only off 4 percent through the first nine months of 2007 compared to the same period in 2006*. While Piper Jaffray believes M&A activity in 2008 will cool from the previous year, it will remain well above the recessionary levels seen in 2002 due to the strength of the global economy. The report indicates large deal activity will likely be the hardest hit, as the "mega-buyouts" will have difficulty securing financing in the first half of the year.

In addition, foreign buyers will play an increasing role as both sovereign funds and large foreign companies seek to take advantage of the weak dollar to expand their global capabilities. Domestic middle market M&A activity may weaken, due to overall economic instability and expanding holding periods by private equity investors. However, the impact will be much more muted in the middle market than in the large cap market. Factors including increasingly diversified markets, the health of strategic acquirors and the private equity buy/sell cycle, have supported the growth in the M&A market over the past three years and should mute the potential slowdown in market activity, according to Piper Jaffray.

"Many companies and private equity firms have adopted a wait-and-see approach due to the volatility in the market," says Jeff Rosenkranz, managing director and head of M&A at Piper Jaffray. "As the market becomes more comfortable with the current economic environment and credit issues, we expect a slight rebound in M&A activity through the second half of 2008."

Overall, the report indicates the key to middle market M&A activity in 2008 will be the health of the economy. Major economic and geopolitical questions that will affect the 2008 forecast include:

    -- Housing -- Will the subprime mortgage market continue to deteriorate,
       or will the government's plan to freeze rates halt the downfall?
    -- Interest rates -- Will the Federal Reserve continue to aggressively cut
       rates to support the economy or will inflationary conditions cause Fed
       officials to halt decreases, regardless of the effect on stocks?
    -- Unemployment -- Will employment levels continue to drive the U.S.
       economy and enable consumer spending to keep pace with historical
       levels?
    -- Election year performance -- Will the U.S. economy continue its
       traditional strong election year performance?

The full report, "Mergers & Acquisitions Insights: Middle Market M&A Outlook 2008," is available for clients at http://www.piperjaffray.com.

*Source: Securities Data Corporation

About Piper Jaffray

Piper Jaffray Companies is a leading, international middle-market investment bank and institutional securities firm, serving the needs of middle-market corporations, private equity groups, public entities, nonprofit clients and institutional investors. Founded in 1895, Piper Jaffray provides a comprehensive set of products and services, including equity and debt capital markets products; public finance services; mergers and acquisitions advisory services; high-yield and structured products; institutional equity and fixed-income sales and trading; and equity and high-yield research. With headquarters in Minneapolis, Piper Jaffray has 25 offices across the United States and international locations in London, Hong Kong, Shanghai and Beijing. Piper Jaffray & Co. is the firm's principal operating subsidiary. (NYSE: PJC) (http://www.piperjaffray.com)

Since 1895. Member SIPC and FINRA.

SOURCE Piper Jaffray

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