A barrage of merger deals were announced in the first few weeks of January involving Fairfield County companies, as a survey predicted heightened activity in the first half of 2011.
Local deals involved both private equity investors, such as Greenwich-based Brynwood Partners”™ deal to acquire the Zest brand of soap from Procter & Gamble Co., and operating companies making acquisitions, such as Bolt Technology Corp. acquiring San Diego-based SeaBotix Inc., which has sold more than 800 remote-controlled submersible robots for a range of applications, including research, recovery and underwater inspections. Norwalk-based Bolt Technology makes towed “air guns” that emit massive underwater air bubbles to help oil and gas exploration companies take seismic readings.
There was a noticeable rising tide of activity after business resumed following August vacations and all the more so after the November elections, according to Ramsey Goodrich, managing director of Southport-based Carter, Morse & Mathias and president of the Connecticut chapter of the Association for Corporate Growth.
“You have companies that should have sold in ”™07, wouldn”™t sell in ”™08, couldn”™t sell in ”™09 and didn”™t sell in ”™10,” Goodrich said. “Some of them will sell in ”™11 ”¦ I think it”™s going to be a banner year.”
Despite uncertainty over the federal government”™s tax policy going forward, more than three in four merger dealmakers in Connecticut expect an increase in buyout activity in the first half of 2011, according to the Connecticut chapter of the Association for Corporate Growth in conjunction with Thomson Reuters Corp., which has a large office in Stamford. The companies polled nearly 450 investment bankers, private equity professionals, corporate development officers, lawyers, accountants and business consultants in October 2010.
The greatest drag on M&A activity last year was sellers unwilling to sell at multiples offered, according to 37 percent of respondents. This is followed by uncertainty over the political and tax environment (29 percent), weak economy (14 percent) and credit crunch (14 percent).
In the past 12 months, 24 percent of private equity firms say they have marked down their portfolio company values, 41 percent have held values steady and 34 percent have marked them up.
Still, nearly half of private equity companies polled said they expect renewed hiring at their portfolio companies, up from less than a third who had those expectations in May.
Sixty percent of those polled expect a moderate increase in M&A activity over the next six months and another 17 percent foresee a significant increase.
Nearly a third of respondents indicated that uncertainty around taxation levels has influenced their investment strategy.
For the first time, the DealMakers survey asked respondents for their long-term prognostication on the economy. In the next 24 months 79 percent of Connecticut-based respondents believe the economy will improve, while 6 percent expect it will get worse.
Federal health reform has caused more than a quarter of private equity companies to change their investment strategy.
Despite recent speculation that fundraising will slow down and that funds will be smaller, 46 percent of investors polled plan to start raising a new fund in 2011, and not one respondent said that it would be smaller than their current fund.
