A lawyer I know (Frank Aquila of Sullivan & Cromwell) recently wrote an article for Business Week entitled, "M&A: A Smart Strategy in a Down Economy." As Frank points out, mergers, acquisitions and divestures are key elements of corporate strategy. Just because markets are down does not mean that there are not deals worth doing or that a valuable management tool should be abandoned. History tells us that deals made during troubled economies often carry the strongest long-term returns.
Clearly, if an acquisition can only be financed with debt, today's climate may prevent the consummation of a merger or acquisition. On the other hand, if a company has available cash or can use its stock as currency, it should be actively considering targets, particularly strategic targets. Sitting on the sidelines, afraid to make a misstep, may itself be a terrible misstep. No one is suggesting that closing a deal will be easy, sellers are just as concerned about making a misstep and the due diligence investigation of the target needs to be exceedingly thorough. Still, there may be great targets out there that have a nice niche but are poorly managed or on the ropes with their lenders.