Now that we seem to have passed through the worst of the recession of the last two years, we believe there are some key trends to look for over the next year.
In this article, we will go on the line and make some predictions for 2010. In our view, these are some of the key trends that will impact green industry mergers and acquisitions in 2010:
Strong players will move to take advantage of growth opportunities
This trend began in the latter part of 2009. Many industry players expressed an interest in pursuing acquisitions during 2009. Their efforts in this direction were limited by the lack of available quality sellers and limited access to financing. Both of these limitations are becoming less significant as we move into 2010, so we expect strong industry players to aggressively seek out high quality opportunities.
Weaker industry players will seek exit opportunities
There will be a number of weaker industry players who delayed action in 2009, expecting (or hoping) for a quick turnaround, who will explore opportunities to sell or combine with stronger companies.
Sellers who deferred action in 2009 will make moves in 2010
Our theory is that many transactions are motivated by “life events” instead of industry or economy-wide conditions. Such life events include illness, death, divorce, retirement, etc. Transactions resulting from “life events” can be deferred but not avoided entirely. Many potential transactions of this kind were deferred in 2009 due to market conditions, but will be pursued in 2010, creating a potential “bubble” of available transactions.
New consolidation efforts will emerge
Rumors abounded in 2009 of private-equity backed consolidation efforts emerging in various sectors of the green industry. At least some of these potential projects will likely emerge in 2010.
Government policies will encourage transactions
The Obama administration will continue to support initiatives to help small business, especially Small Business Administration loan programs. However, there will be continued uncertainty on immigration reform, exasperating many green industry employers and causing some to throw in the towel.
Scheduled capital gains tax rate increases will motivate many sellers
Long-term capital gains rates for many taxpayers are scheduled to increase from 15% to 20% on January 1, 2010. While there will likely be efforts to either eliminate or delay the increase, the specter of the federal deficit will make such efforts less likely to be successful. As a result, many potential sellers considering a sale in 2010 or 2011 will seriously consider accelerating potential transactions into 2010.
The focus on all things green will continue to create opportunities
The green industry naturally gets a boost from the trend toward green practices by both businesses and consumers. Green industry firms that cater to businesses and individuals who are “going green” will become increasingly attractive buyers and sellers.