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The Return of Strategic Buyers

1/15/06

According to Corporate Board Member Magazine’s M&A Trend Report for January/February 2006, this new year is shaping up to be the equal of 2005 for acquisition activity, if not its superior.

The article quotes four factors that contribute to this optimism:

• The high leverage employed by purchasers will remain available and relatively cheap, a fact that especially favors private equity players;
• Private equity firms are beginning to explore previously ignored industry sectors like media and entertainment;
• But multi-nationals, lured by reduced corporate taxes, are repatriating large sums back to their US operations;
• And having finally gotten a grip on the labyrinthine regulations of Sarbanes-Oxley, corporate boards are feeling more confident of their ability to manage this risk.
So maybe in 2006, we will see more spirited M&A competition between corporate buyers (“strategics”) and the private equity groups who dominated 2005’s headlines.
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