The Future of M&A, the mergermarket and Merrill DataSite report released earlier this month, reflects a strong expectation of increased merger activity in 2011 and 2012.  The technology, media, and telecom sectors are expected to see a significant increase in merger activity, along with energy/utilities. The report, based upon interviews conducted in the fourth quarter of 2010, also indicates a growing sense that the valuation gap between buyers and sellers is narrowing, along with more optimism regarding financing alternatives. 

Silicon Valley Bank has a new M&A report out as well, Private Life Science M&A Analysis: More Structured Deals and Quicker Exits in Biotech.  Reviewing M&A exits from 2005 through 2010, the report concludes that biotech companies have quicker exits and lower multiples versus medical device companies.  It also found that biotech exits are more frequently structured with some up-front payment and the remainder payable based upon achievement of later milestones. This is a shift from prior years in which most life science acquisitions were paid out entirely at the front end.  This report also finds an increase in M&A activity and notes that exits are happening later in a company’s life cycle than previously.

Relative to 2009 and 2010, we’ve seen an increase in Seattle area private companies being acquired.  The improved exit opportunities seem to be helping some investors decide to start putting new money to work.  It will be interesting to see how the deal volume holds up through the summer.