It's deal time again: the dismal dealmaking of the recent past has been a source of anxiety, and though still far from robust it has a new energy that may bring about a flurry of deals--particularly to beat expected hefty tax increases.

• Author: Sweeney, Paul
• Position: DEALS & DEALMAKERS

Deals are heating up as businesses of all stripes are merging and making acquisitions. Private equity firms are once again on the prowl for purchases and leveraged buyouts. Venture capitalists are opening their purse strings and financing start-up companies, especially those in the biotechnology and health care, software development and clean energy sectors.

[ILLUSTRATION OMITTED]

Interviews with a cross-section of dealmakers--including financiers, Wall Street analysts, accountants and attorneys--reveal that, as markets thaw, the high anxiety that permeated much of last year is abating. "The new year [2010] has brought a new energy to the deal market," says Mat Wood, the lead partner in the transaction advisory practice at accounting and consulting firm BDO.

[ILLUSTRATION OMITTED]

While no one is uncorking champagne just yet, dealmakers are experiencing a sense of relief and some are even hiring again. Jack Maier, senior managing director and head of the M&A group at the Arlington, Va.-based investment bank FBR Capital Markets, says conditions are "much better, but still far from robust."

What a Difference a Year Makes

"We've just come through an incredibly challenging time when people were paralyzed with fear," Maier says. "The stock market [DJIA] fell below 7,000, and people were in an absolute state of panic. Lenders were skittish, private equity firms were sitting tight and everyone thought it would get worse."

Steve Levitt agrees. The managing director at Park Sutton Advisors, a boutique New York investment bank, Levitt says that "a year ago it was practically impossible to do a deal because no one knew where the bottom was. Only high-quality credits were getting financing."

Now, economic indicators are generally pointing northward. The total value of global M&A deals through early March, for example, rose to about $477.66 billion, a 16-percent increase over the nearly $411 billion recorded during the same period a year ago, according to Dealogic. Both the dollar amount and the number of initial public offerings, which constitute an important exit strategy for both venture capital-financed businesses and private equity-backed concerns, have also improved since early 2009.

Through the first week in March, Dealogic reports, 16 IPOs went to market, raising $2.8 billion. That's a 164-percent increase in dollar value compared to the same period in 2009. Then, only one lonesome IPO, worth $828 million, was accomplished.

"The turmoil in the public markets that we saw in 2009 had a big influence on venture capitalists' willingness to deploy money in deals until there was stability in the IPO market and M & A in general," says Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers.

There were 2,795 venture capital financings in 2009, reports PwC--a nearly 30-percent decrease from 2008. And dollar amounts declined...