Despite all the naysayers about health care reform, finance executives at the Nashville Health Care Council's annual "Financing the Deal" conference expressed confidence in the health care sector, noting increased availability of capital and an uptick in mergers and acquisitions activity.

As of May 2010 U.S. private equity funds have $445 billion in dry powder to invest according to Cambridge Associates, an independent research firm for institutional investors and private clients.  The largest amount since 1998.

After attracting record amounts of capital for three years starting in 2005, the number of private equity transactions plummeted as debt financing dried up. As a result, much of the money private equity groups raised over the last four years remains uninvested posing significant challenges for private equity groups and their investors and opportunties for savvy business sellers.

As mentioned in previous posts, M&A activity is on a strong rebound in the first quarter of 2010. Based on our day-to-day conversations with strategic and financial buyers, which are now confirmed by a recent study by KPMG,LLP and The Deal, we believe the following industries will be the Top 10 hot beds of M&A activity in 2010.

The financial services sector has been getting increased attention from private equity investors as the credit crisis eases and the financial sector's outlook begins to look brighter. According to PitchBook, in the first quarter of 2010,

That little jewel about M&A advisors and investment bankers was buried in Warren Buffett's 2010 letter to Berkshire Hathaway's shareholders. It was his dig at investment bankers and the incentive system that has evolved for corporate "advice" on mergers and acquisitions - namely that bankers are paid

If you are thinking of selling a family-owned business, separating family issues from business issues can often be a challenge. One solution? Create a family council.

Creating and running a family council helps improve communication, accountability, and family harmony. By participating in a family council, family members feel more involved as part of the family-management-ownership system. But most importantly,

In his widely read annual letter to shareholders, Warren Buffett often includes a few folksy comments that provide pearls of wisdom and common sense for all of us.  One of my favorite pearls is  - "It's only when the tide goes out that you learn who's been swimming naked."

Below are a few pearls of wisdom for entrepreneurs (and all of us) that appear in Mr. Buffett's 2009 annual letter to Berkshire Hathaway's shareholders.

MidCap's business valuation services group helped three former senior executives of a nationally recognized casual dining restaurant chain win a sweeping victory in their litigation against the buyer that acquired their company.  The dispute centered around the amount of money MidCap's clients were entitled to receive as part of a change-in-control agreement that was in place when the buyer acquired the casual dining operator.

As we predicted in October 2009, the M&A market for middle market companies is now clearly on a rebound.  Deal activity and transaction multiples are both up sharply from their lows in the 2nd quarter of 2009.

Deal Volume is Up

Middle market M&A deal activity in the fourth quarter of 2009 increased dramatically from the activity levels of the previous three quarters. The total value of middle market transactions (enterprise value greater than $10 million and less than $500 million) increased by 90% in the fourth quarter of '09 from the third quarter. In addition, the total number of all M&A transactions increased 24% in the fourth quarter of '09 after increasing 23% in the previous quarter. The number of transactions for which enterprise value was not reported (mostly smaller transactions) also increased 22% in the same period, reinforcing that M&A activity reached bottom in the second quarter of '09 and is improving for larger and small companies alike.

After a year of searching for stable ground in an environment of unprecedented declines in demand, economic uncertainty, minimal credit availability, inventory repositioning and overall fear, we expect 2010 to be a year where companies focus on growing and repositioning their business.  A year from now, we expect to look back at 2010 and say it was a year of strategic initiatives. 

There is no doubt that 2009 was a challenging time for business owners and business advisors alike.  However, as we look back on 2009 we realized that some of our biggest success stories were about the deals we didn't do.  Let me give you a real world example.

A business owner named Don (name changed to protect his identity) asked us to sell his company. Rather than immediately agreeing to work with him, we asked Don to take "The Sell Test". He  failed. He was shocked. He wanted to know what it meant.