One of the biggest dealmakers on Wall Street is sounding the alarm on M&A
August, 06th 2015
One of Wall Street's biggest dealmakers is sounding the alarm about the frenetic level of mergers and acquisitions activity. Centerview Partners co-founder Blair Effron highlighted similarities between the current market environment and that of 2007 in an interview with CNBC's David Faber on Wednesday.
"You have to step back and look at valuations," Effron said.
"The average valuation in the M&A market today is 13 times EBITDA. As a reminder, in 2012 it was 10 times. In fact, the last time we were at 13 times was 2007."
"We'll have YTD 40 or so transactions over $10 billion," he continued. "The last time we saw that was 2007."
Total M&A activity is also at the highest level since 2007, with global volumes at $2.9 trillion for the year to date, according to data provider Dealogic. That is up around 38% on the same period last year.
Effron has been one of the biggest beneficiaries. He advised Kraft on its $58 billion merger with Heinz, and is advising General Electric of its disposal of $200 billion of assets, according to Centerview's website.
He added that the high valuations in the M&A wave are being justified in the context of the current low interest rate environment. That isn't likely to last forever.
"You need to be comfortable that across a multiyear cycle, in different rate environments, different equity environments, that if you're advising on a transaction, it would still make sense."