The current economic downturn is likely to bring a significant increase in business acquisitions over the next several months, as greater discounts on distressed assets become increasingly available, according to a survey led by Carl Marks Advisory Group LLC (CMAG) in conjunction with Pepper Hamilton LLP, a multi-practice law firm that specializes in mergers and acquisitions.

A cross section of 75 financial professionals, including investment bankers, private equity practitioners, hedge fund investors and lawyers, were surveyed during the second quarter of 2009 concerning the current state of distressed M&A and the forecast for the months ahead.

Debt-related issues are a major contributing factor for the rise in distressed M&A activity. Triggering many distressed asset sales are companys' inability to service debt, as well as the inability to refinance impending maturities. Survey experts saw a surge in covenant defaults as another contributor to anticipated asset sales.

"The overall lack of liquidity in the market and resulting compressed time frame to implement strategic alternatives and required operational changes are driving down prices. In the short term, the ability to quickly provide liquidity is likely to be a primary consideration for both buyers and sellers. In other words, cash is again king."          – Duff Meyercord, CMAG Partner

The lack of liquidity has led to a higher than normal number of reorganizations taking place in and out of court. The most common transactions in the upcoming year are expected to be Chapter 11 reorganizations, sales outside of bankruptcy and Section 363 sales.

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