The Banking and Strategy Initiative

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Advantage Dealbook: Cash is your friend

The Wall Street Journal

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Deals in Q2 maintained a constant premium of 6.1 times EBITDA (Enterprise Value ) according to the score cards variously being analysed since mid June. What most have not printed yet, is that the sanity prevailing in deal valuations is a direct result of stock based  or other barter in deals has been usurped by good liquid cash. As the WSJ CFO reports (trial)  , where 36% of Q1 US deals were completed in Cash, the percentage has jumped to 64% making 70% of all global deals in the first six months funded totally by Cash.


Buyouts have continued to hustle corporate america all of 2010 and Q1 values of Buybacks announced and completed rose more than 85% year on year . buybacks having been done, using idle cash is still as important for most mega corporations as hawks look over their shoulders on balance sheets asking uncomfortable questions from management unless a good use is made of billions of cash lying in almost 1 in 3 US balance sheets. Cash deals, also ensure quicker regulatory approvals, less questions on jurisdicition and probably even more effective due diligence by managers before a deal value is created and bought on the term sheet.

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