PwC sees 2007 as another busy year for deals

By James B. Kelleher

CHICAGO (Reuters) - One of PricewaterhouseCooper's top deal-making experts said on Monday that he thinks 2007 will be an even busier year for mergers, acquisitions and restructurings than 2006.

Robert Filek, the leader of PwC's transaction advisory team for the industrial and consumer sectors, also said that the uncertainty surrounding Detroit's troubled automakers made deal-making in that space a strong possibility during the coming year, and that private-equity groups now have the scale to be players in those transactions.

"The major automotive manufacturers have market caps that are smaller than some of the private equity funds today," Filek told the Reuters Investment Banking Summit.

That, coupled with low interest rates and banks eager to lend, "tells you it could be a reality," Filek told reporters at Reuters' Chicago bureau. He added that the car-making business -- despite its current woes -- actually had the kind of underlying fundamentals that attract private-equity investors.

"It meets the criteria," Filek said. "Declining margins, yes, but predictable cash flows, and in need of a lot of restructuring that may not be best done in the public marketplace."

Although Filek said he was not sure that deal-making activity this year would beat the record volume set in 2000, he said he was confident 2006 would "finish strong" and that 2007 would be stronger still.

He said a combination of factors, including the results of last week's midterm elections, where Democrats recaptured control of the U.S. House of Representatives and the U.S. Senate had created a "Goldilocks environment" for deal-making.

"We've got balance (on Capitol Hill) versus the president, interest rates are moderating, oil's coming down," Filek said.

"Everything's kind of working against each other in this nice Goldilocks way that keeps us on a nice, even keel, which is great for the deal market, great for the lending market and creates an environment where companies can continue to perform and make money."