Mid-Year 2007 ACG/Thomson DealMakers Survey

Illinois Merger Professionals Bullish Yet Concerned About Continued Availability of Debt, M&A Pros Say it is a Sellers Market

CHICAGO, July 18, 2007 – A record $2.7 trillion in first half 2007 worldwide mergers has led Illinois dealmakers to call the current M&A environment good or excellent (97%), according to a new survey by Association for Corporate Growth (ACG) and Thomson Financial. However, there is growing concern among private equity professionals – who have played an increasingly important role in the merger boom – that the easy availability of debt financing which has helped fuel transactions will tighten, with 64% saying the debt markets will tighten in the next year.

The ACG/Thomson DealMakers Survey polled 1,011 investment bankers, private equity professionals, corporate development officers, as well as lawyers, accountants and other service providers involved in the deal economy in June 2007.

“Increasingly active corporate acquirers with global ambitions, financial acquirers raising large new funds and quickly making substantial investments and dealmakers of all types doing more cross-border deals are the driving forces that make us confident that we will shatter all M&A records this year,” said Michael Sklar, President of ACG Chicago. “It’s a seller’s market right now, and private equity firms’ portfolio companies are doing well, increasing revenues and employment, and fueling economic growth. Private equity is making a substantial contribution to our continued economic expansion, and significantly outpacing the returns of the Standard & Poor’s 500 over the last five years. The big questions right now are legislation and tighter debt markets – will they curtail this extraordinary boom?”

Illinois Results

Sellers Market
When asked which side of the transaction is in the best position today, M&A pros overwhelmingly said:
1. Sellers (85%)
2. Buyers (13%)

"One result of this being a sellers' market is that many sellers are urging prospective buyers to refrain from making substantive comments to deal terms and conditions and in some cases even insisting that the seller's representations and warranties not survive, thus limiting the buyer's post-closing recourse to bringing a claim for outright fraud," said Dennis White, ACG Director and partner-in-charge, McDermott, Will & Emery LLP.

Cross-Border M&A
Almost half (46%) of dealmakers polled expect to be involved in an international cross-border deal during the second half of 2007, and 44% say cross-border deals are becoming more important to their firms. Geographically, they anticipate these deals will be with:
1. Canada (48%)
2. Western Europe (45%)
3. China (40%)

Cross-border activity accounted for a record-breaking 47.5% of worldwide activity for the first half of 2007 as global consolidation continued to drive activity in the Financials, Materials and Energy & Power sectors, according to Thomson Financial. In first half 2007, European deals increased 77% to $1.04 trillion, even more than the 52% increase to $1.1 trillion in the United States. “As we predicted, dealmaking in Western Europe is soaring as European economies gain strength and mergers become more accepted and easier to complete,” says Harris Smith, ACG Vice Chairman and Partner, Grant Thornton.

“Chicago is a strong leader in all of these driving sectors,” added Jim McNair, ACG Chicago Executive Vice President. “Our position as the world’s third largest intermodal port behind Shanghai and Hong Kong combined with our diverse international economic base make this region a leading candidate for cross border activity. More strength comes from the governmental and corporate support of biofuels and other cleantech markets positions and, of course, Chicago is one of the leading financial markets for middle market corporate finance.”

Total mergers in the first half of this year are 67% higher than last year’s first half total, and surpassed the previous first-half record of $1.93 trillion set in 2000, according to Thomson Financial. Private Equity-backed buyouts in the United States accounted for 36% of total US M&A volume during the first half of 2007, compared to 24% during the first six months of 2006. Private equity firms have been playing an increasingly active role in global transactions fueled by record-sized funds and easy access to debt financing.

M&A Drivers
Survey respondents say the primary driver of M&A activity in the next six months will be:
1. Hefty capital reserves of some acquirers (46%)
2. Good multiples for companies being acquired (14%)
3. Historically low interest rates (14%)

Hot M&A Sectors
Dealmakers anticipate the following sectors experiencing the most merger activity in the second half of 2007:
1. Manufacturing & Distribution (24%)
2. Healthcare, Life Sciences (17%)
3. Energy (17%)

M&A Objectives
Survey respondents say the primary objective of mergers and acquisitions is to:
1. Increase revenues and profitability (49%)
2. Grow market share (19%)
3. Acquire competitor (6%)

Private Equity
Portfolio Company Performance
For the latest completed fiscal year, private equity professionals say 72% of their portfolio companies were above the prior year in revenue and 50% above plan, while 70% of portfolio companies were above the prior year in EBITDA, and 41% above plan in EBITDA.

“The strong performance of private equity firms’ portfolio companies underscores their ability to take on debt and keep growing revenues because of the greater management practices and oversight brought to bear by the private equity firms,” said ACG Chairman Paul Stewart, Principal of PS Capital Partners.

Liquidity Events
Private equity professionals say the greatest opportunities for liquidity events for their portfolio companies in the next six months are:
1. Sale to strategic buyer (52%)
2. Sale to financial buyer (35%)
3. Merger (4%)

Acceptable IRR
Private equity professionals say the lowest internal rate of return they will accept when bidding on a transaction is:
• 5-10% (0%)
• 11-15% (5%)
• 16-20% (30%)
• 21-25% (35%)
• 26-30% (10%)
• 31-35% (10%)
• 36%+ (10%)

Greatest Threat
Private equity professionals say the greatest threat they face is:
1. Lower returns (50%)
2. Competition with other private equity firms (21%)
3. Lack of exit opportunities (8%)

Debt Market
The days of easy financing may be ending. According to survey participants, one year from the now the debt market will be:
1. Worse (64%)
2. The Same (32%)
3. Better (4%)

Organic Growth

Hot Growth Sectors
Survey respondents say the sectors that will experience the most organic growth are:
1. Healthcare, Life Sciences (48%)
2. Energy (26%)
3. Business Services (11%)

Potential Growth Impediments
Executives caution, however, that the following factors could slow growth:
1. Interest Rates (33%)
2. Energy Costs (25%)
3. Terrorism/War (14%)
4. Labor Costs (10%)
5. Inflation (10%)

Survey Methodology
The survey, conducted in June 2007, was completed by 1,011 ACG members and Thomson Financial customers. Respondents were comprised of private equity, venture capital and buyout firm members (22%); investment bankers, intermediaries, brokers (24%); lenders, finance providers (11%); corporate professionals, entrepreneurs (16%); and service providers, such as lawyers, workout specialists, accountants and consultants (27%). The majority of respondents were from the United States (1,114), where 41 states were represented. Internationally, executives from 26 countries completed the survey.

About ACG
Founded in 1954, the Association for Corporate Growth (ACG) is a global association for professionals involved in corporate growth, corporate development, and mergers and acquisitions. Today ACG stands at nearly 12,000 members from corporations, private equity, finance, and professional service firms representing Fortune 1000, FTSE 100, and mid-market companies in 53 chapters in North America and Europe. ACG Chicago, one of the largest networks in the global association, produces over 20 programs annually for members to network as well as advance their knowledge and expertise in the corporate growth arena including award winning conferences in International Growth, Alternative Energy opportunities, and the country’s largest Capital Connection with over 1200 dealmakers and keynote speaker Alan Greenspan featured this October. For more information, please visit www.acg.org/chicago.

About Thomson Financial
Thomson Financial, with 2006 revenues of US$2 billion, is a provider of information and technology solutions to the worldwide financial community. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson Corporation (www.thomson.com), a global leader in providing essential electronic workflow solutions to business and professional customers. With operational headquarters in Stamford, Conn., Thomson provides value-added information, software tools and applications to professionals in the fields of law, tax, accounting, financial services, scientific research and healthcare. The Corporation's common shares are listed on the New York and Toronto stock exchanges (NYSE: TOC; TSX: TOC).

Jason Abrahams
KemperLesnik Communications
312-755-3533
Jason.abrahams@kemperlesnik.com

This release was published on openPR.