M&A Market Update U.S. M&A market activity has slowed from the increases experienced in 2010 for the second quarter ended June 30, 2011: Total deal volume increased approx. 2% from 3,001 deals for the three months ending June 30, 2010 to 3,054 deals during the comparable period in 2011 For the first six months ending June 30, total deal volume increased approx. 3% from 5,610 deals in 2010 to 5,790 deals in 2011 and total dollar value of deals increased 27% from $328 billion in 2010 to $416 billion in 2011 Strategic acquirers have been particularly active, accounting for approximately 82% of total deal volume [1]. Many factors support increased M&A activity in the second half of 2011 including: significant capital availability, credit market liquidity, and sustained corporate earnings growth. However, this growth may be muted as fears of a prolonged economic recovery continue due to weak unemployment and housing figures, as well as governmental budget deficits in the U.S. and abroad. Available Capital Still at Historically High Levels Corporations and private equity firms continue to hold significant capital. As of the first quarter of 2011, nonfinancial U.S. corporations are currently holding in excess of $1.8 trillion in cash [2]. With lower interest rates, such corporations will deploy cash more aggressively through employee hires or plant improvements and expansions, or alternatively, through stock buybacks, dividend payouts, or acquisitions. Furthermore, private equity groups have approximately $485 billion (excluding debt financing) in capital with many managing funds nearing expiration [3]. Credit Markets Supporting LBO Activity For the second quarter ending June 30, LBO activity decreased (9.4%) from 510 deals in 2010 to 462 deals in 2011. Total dollar value of deals increased 34% from $29 billion in 2010 to $39 billion in 2011 as improving credit markets supported larger deals. While deal activity fell, market fundamentals remain strong. In addition, the market’s first and second half performance compare against a surge of activity in the fourth quarter of 2010 due to anticipated tax increases. Strength continued in the credit markets since their rebound in 2010. Total debt to EBITDA multiples for middle market deals less than $500 million totaled 4.75x –...

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