Conn. Dealmakers See More M&A In H1 2011

Dealmakers in Connecticut foresee continued strength in the market, a new survey says.

Sixty percent of respondents to a survey say they expect a moderate increase in M&A over the next six months, according to the semi-annual ACG-Thomson Reuters DealMakers Survey, sponsored by the Association for Corporate Growth and the publisher of peHub. Another 17% called for a “significant increase” in activity.

The Connecticut results, announced this morning at a networking event in Stamford, are not entirely comparable with the national survey, which is to be released next Tuesday. As a point of comparison, though, the national survey released in May had 85% expecting an increase in M&A activity over the next six months.

The Connecticut survey was part of a national poll conducted in October of 473 ACG members and Thomson Reuters customers.

As for the overall economy, 79% of the Connecticut respondents expect improvement in the next 24 months, and 82% expect improvement in the next 36 months.

“Nobody thinks it’s going to decrease,” says Ramsey W. Goodrich, the president of ACG-CT and a managing director at the Southport investment bank Carter Morse & Mathias, who presented the results at the ACG Connecticut Private Equity Expo. “Hopefully that means we’ve hit bottom.”

In that context, nearly 50% of the dealmakers in the survey — PE firms, VCs and buyout shops — expect job growth at their portfolio companies, in contrast to less than a third in the May survey. (Service providers, investment bankers, financiers and portfolio executives also participated in the larger survey.) But 74% say the current economic environment favors strategic buyers, while only 11% say PE buyers have the edge.

Portfolios are strengthening. In the past 12 months, 41% of private equity respondents say they had held values steady, 34% marked them up, and 24% marked them down. Best sectors for M&A in H1’11: Health care and life sciences, 30%; consumer products and services, 24%; industrial manufacturing and distribution, 20%. Best sectors for organic growth: health and life, 33%; government-related, 21%; energy, 15%; technology, 12%.

And as for the tough fundraising environment, 96% say it should be possible to raise new funds, but 31% say only top firms will be able to, 23% say only if fund sizes are smaller and 23% say only if terms are more LP-friendly.

On the other hand, as for themselves personally, 46% say they plan to start raising a new fund in 2011, and no one says it would be smaller than their last fund.