Morgan Stanley managing director, Paul Kwan, believes 2009 will bring sanity in both the public and private markets
Facebook’s recent $500 million acquisition offer for Twitter was mostly in stock and not cash.
For investment bank Morgan Stanley this is just another sign of a new wave in mergers and acquisitions where “all stock” deals – rather than just cash – are going to come back “in a real form.”
“90% of all the mergers and acquisitions in the last 2 years were cash based. Now we think it’s going to be all stock-for-stock particularly for mid-cap public companies and private companies,” said Paul Kwan, managing director at Morgan Stanley.
Kwan sees a major consolidation happening in the high-tech market next year due to 1) the recession and the need for growth; and 2) the current low valuation of companies, especially in software and the Internet sectors.
Private equity: from 100% debt to 100% equity
On the private equity front, Kwan predicts the market will reverse back to more prudent financing strategies.
“Last year we were talking about doing a 100% debt finance take-privates up to $10 billion. Which is really scary when we think where we are today. Now you will see 100% equity take-privates in the market next year given valuations,” added Kwan.
In a sense, this is just back to basics in a really big big way!
