Coming off record levels of mergers and acquisitions (M&A) activity in the first half of 2007, the buyout market is expected to slow in 2008 with the overall economy. A new report from Piper Jaffray looks back at 2007 and forward at 2008, noting that early in 2007 leveraged buyouts, as well as strategic and foreign acquisitions, were numerous, but as the flow of credit slowed in the second half of the year, M&A moves did as well. Piper Jaffray does note that the middle market remained active as deals in this realm did not require the same level of financing.
Looking forward, Piper Jaffray says that M&A activity in 2008 will represent more of a correction of 2007 than a recession, adding that it should exceed levels seen in 2002 and 2003. Several large deals helped push M&A activity for the first nine months of 2007, in terms of volume and value, well past that of 2006, in spite of a slow third quarter. The median multiple paid for packaging companies through the third quarter of last year was 8.2 times the EBITDA (earnings before income taxes, depreciation, and amortization). In 2006 for the same time period, the number was 7.4. Overall, Piper Jaffray characterizes the packaging sector as having two main markets: high-volume, low-cost or low-volume niche, and it anticipates the bulk of the M&A activity in 2008 to come from strategic buyers among the mid-market players within the niche sector.[email protected]