We all look to past experience to explain the present. My first reaction to the financial crisis was to look back at the trends that followed the dot.com bubble, and what I found was rather uninteresting: M&A volumes followed NASDAQ pricing trends in lockstep. The NASDAQ bottom was within months of the M&A volume. Looking two more years into the past is more interesting. Leading up to Y2K market conditions were characterized by uncertainty. Would airplanes fall from the sky on New Years Day? Could we no longer obtain mortgage financing after bank systems shut down? Would all televisions manufactured in Asia stop working? Uncertainty froze the market. It purchasing stopped while buyers waited to see if what they had already purchased would still function in the new year. Uncertainty defines our current market, and has similarly led to a temporary freeze. The big turning point for many professionals was Labor day. They had active deals when they went home for the long weekend. Everything was on hold when they returned. We don't know whether a GM bailout will buy the company a month or a lifetime. We don't have enough visibility on the credit markets to know whether funds are starting to flow. We see deflation at the gas pump, but will it grow into an unstoppable trend?
When uncertainty fades and people start taking action again, there will be a consolidation boom. Companies that are in traffic and ready to take advantage of the opportunity will find good homes.