2009 has been far from an IPO-packed year compared to other years in this decade.  Ditto for mergers and acquisitions.  Many of the IPOs that price earlier in 2009 have done well while many of the later 2009 IPO have backed off.  PricewaterhouseCoopers has issued a financial report today with an outlook into mergers and acquisitions in 2010, and one trend that is expected to continue is the involvement of private equity-backed offerings.  Specifically noted was that over half of the 2009 IPOs were by financial sponsor-backed, or primarily private equity, companies.  PwC expects that this trend will continues for what is left of 2009 and into 2010.  Also given was a sector-by-sector breakdown for MA&, as well as a take on IPOs.

In consumer products, this trend of accelerating trade spend at the expense of margins will continue as branded companies look to gain scale and negotiating leverage with retailers, while also enhancing their scale to drive productivity.

In Technology, transformative deals are the goal and “the battle over the data center and end-to-end services continues to drive the larger players.”  Smaller players with intellectual property that can be leveraged will be a fit for large technology companies.  Simultaneously, there will be consolidation of smaller and weaker companies, with a particular highlight on semiconductors.

PwC expects Energy M&A to continue with stronger balance sheets looking to buy smaller assets, and natural gas is expected to be a highlight in M&A.

Financial services will likely see regional bank consolidation, and a focus will be on the asset management sector.

In healthcare, consolidation is expected to accelerate in the services, managed care and pharma sectors after the reform has been passed as a way to trim costs and boost productivity.  Noted as well was pharma buying smaller targets outside of government such  as consumer product, animals, vaccines, and biologics (biotech).

In media and entertainment, strategic buyers are expected to focus on content and distribution buyouts, as well as opportunities in new media.

On the IPO front, there is expected to be more private equity firms continuing to pursue exiting portfolio companies through IPOs in 2010.  That is on the heels of Q4-2009 being the most active private equity IPO-exit strategy since 2007.  The big question, and risk, is of course a double-dip.  As long as no significant equity market correction occurs, PwC is looking for IPO activity to gain in 2010.

Keep in mind that this is just one firm’s outlook on the IPO climate and the M&A climate.  Much of this makes sense though.  Our own discussions with investors and industry professionals does not expect that M&A will dry up.  After all, it was just a month ago that we saw tech giants had $265 billion in cash for deals.

JON C. OGG

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