This financial rollercoaster known as the summer of 2011--think Capitol Hill's debt ceiling debacle, Standard & Poor's downgrade of the U.S. credit rating and Europe's on-going solvency woes--has left bankers wondering whether the months leading up to the New Year will be busy or if the markets are shaky enough that opportunistic sellers are going to hold the line just a while longer.
On hazy summer days, it's easy to think that the investment banking universe comes to a molasses-like halt where nothing gets done as people head to getaways. It turns out, for this summer at least, that wasn't the case. Plenty got done in power M&A: Energy Capital Partners bought Odessa and Liberty Electric, SunEdison picked up Axio Power in addition to throwing out the welcome mat for its new Fotowatio Renewable Ventures colleagues and Riverstone Holdings bought some gas-fired assets on the East Coast, to name a few.
These deals, however, were mostly leftovers from the spring, with very few new assets coming to the auction block. Most of the summer arrivals featured stake sales and one-off assets (notable exceptions are an ArcLight Capital Partners portfolio and Conti Group's wind joint venture). Calpine, perhaps foreshadowing events to come, called it quits on the sale of two gas-fired facilities that it had put up for sale this spring.
Looking back to this time last year, financing markets were easing and sellers were finding a broader spectrum of buyers looking to plunk down cash. The M&A market was aflutter with mostly gas-fired assets from sellers ranging from Covanta Holdings, Tenaska and U.S. Power Generating Co. to financial consortiums led by Stark Investments and BlackRock.
Whether activity ticks up largely depends on investor confidence in the broader stability of the market, industry officials say, noting that signs of the economy heading into a double-dip recession won't be good for M&A.
But, perhaps those empty offices signal a bullish market, as bankers preparing for a sprint by sunning themselves on yachts in who-knows-where, girding for the year-end dash in all of their bronze glory.