Hadley Capital's deal flow was up more than 50% in 2011 – a substantial improvement from a 15% increase in the first half of 2011. But, upon further review, the increase is not as impressive as it might seem. 2011 was a tale of bifurcated deal flow:
1) A consistent number of good deals – where we submitted an Indication of Interest or Letter of Intent. These deals received A LOT of attention and many sold at premium valuations.
2) A substantial increase in marginal deals – companies that generally fit our criteria but, after initial review, were not attractive investment opportunities.
Our deal database confirms this divergence, we reviewed more than twice the number of "immediate kill" deals while Indications of Interest and Letters of Intent were about the same as 2010.
I suspect 2012 will be much of the same. Deal flow will remain bifurcated and will increase over 2011: a stabilized economy will allow small businesses that were pulled off the market in 2008 – 2010 to reenter the market and more baby boomers will decide it's time to sell their small companies.
Hadley Capital is off to a good start in 2012 - we have two new small company acquisitions under Letter of Intent and three additional Letters of Intent outstanding.
PDW
