The panel, which was moderated by Gary Silverman of luncheon sponsor Kaye Scholer, addressed the “doom and gloom” of the M&A marketplace. While the space witnessed a 50 percent decline from May 2007 to May 2008, it did note a few “silver linings” on the horizon.

“The pipeline for strategic investing has never been higher,” said Lanser, who confessed that as an investment banker his job is to view things optimistically. Citing recent events including Microsoft’s bid to acquire Yahoo! and the Mars acquisition of Wrigley, Lanser noted that though there has been a 77 percent decline year to date in M&A activity there is only a 40 percent decline in strategic activity.

He says these deals are typically done at lower multiples. As for a 2009 forecast, he said: “Though the market is down, it’s definitely not out.”

When asked by IVCA executive director Maura O’Hara whether there are any regional trends specifically impacting the Midwest, Lanser noted that though “the rust belt is having its share of difficulties, [R.W. Baird] is not seeing any geographic differences.”

After everyone was treated with this difficult albeit somewhat optimist overview of the current M&A market, Kaye Scholer’s Derek Stoldt dug deep to discuss what his firm is seeing in deal terms.

“We take a scientific approach to tracking deal terms,” Stoldt noted, adding that his firm has tracked acquisitions of private companies from private equity buyers between 2002 and 2007 that have been funded with the help of debt. A comprehensive overview of the Kaye Scholer research can be found here.

Deal term issues tracked include “material adverse change,” “material adverse effects” and “carveouts”. Stoldt noted that the competitive environment in the private equity industry through the white-hot first half of 2007 caused lenders to agree to more difficult firms. They’re still on the hook for these, too, after the market cratered.

He said of carveouts specifically: “What was very much the territory of public M&A has made its way into private M&A.”

Stoldt continued to discuss caps on indemnity claims. He noted that 78 percent of caps are less than the purchase price in normal markets whereas in hot markets entities agree to no caps. He added that the use of modern communication technologies including e-mail and the Internet have resulted in documents being “turned a lot more and people are focusing on smaller issues”.

Representing private equity investors, Wind Point’s Chaudhary said his firm is now seeing the emergence of “reverse breakup fees after seven or eight years of good times and easy deals”. He added that the Mars deal with Wrigley had a reverse termination fee. Chaudhary also noted that he’s seeing three categories of private equity deals over the last three months.

The first category is the “great businesses” where prices for those transactions are typically equal to what they were prior to the credit crunch. These deals benefit from still being attractive to strategic investors while being highly in demand from the competitive private equity environment. Even without the debt help, Chaudhary says prices have not come down.

The second category is the “average businesses” where deals are still available albeit at reduced valuations. The struggling debt markets have caused an increase in equity from 25 percent to 40 percent. In this environment, many sellers don’t want to sell.

The third category is the “poor, cyclical businesses”. These are the companies “with a lot of flaws” that probably could have been sold a year ago but not today.

The Q&A also covered the emergence of hedge funds. Lanser added: “There has been very little activity from hedge funds for buyers as it is more difficult given shareholder requirements.” Chaudhary, however, said he has “seen a meaningful shift in hedge funds as replacements for financial services”.