Mergers and acquisitions are showing signs of heating up for the second half of 2012, despite the continued uncertainty the elections pose for companies considering expansion, along with new regulations and any impact Facebook Inc.”™s initial public offering of stock may have in getting some companies to think twice about going public.
Executives are anticipating an M&A uptick over the next two years, according to Deloitte”™s newest annual survey on corporate development released last week, with manufacturing executives the most bullish. As United Technologies Corp. works to complete its mammoth, $16.5 billion acquisition of Goodrich Corp., Eaton Corp. reached its own massive deal to buy Cooper Industries for $11.6 billion.
Closer to home, General Electric Co. is spending some $700 million for Industrea Ltd., an Australian maker of mining equipment, also picking up Virginia”™s Fairchild International for an undisclosed amount. And EDGAR Online, long based in Norwalk before relocating to Maryland in 2011, took a $70.5 million offer from R.R. Donnelley Inc. after racking up an accumulated $86 million deficit since its 1995 inception.
Several private equity companies also announced deals, from Blackstone”™s $1.9 billion deal for Motel 6, to Greenwich-based Catterton Partners”™ divestment of MonoSol L.L.C., a maker of water-soluble films that dissolve to release single doses of dishwasher and laundry detergents.
“The pipeline is much better,” said Len Tannenbaum, CEO of New York City-based Fifth Street Finance and a resident of Greenwich, speaking to investors in late April. “A lot of the deal flow is still at the investment bank level, which means my prediction of a yearend, real boom in M&A activity is going to come true as the banks are full and full of deals.”
The Deloitte survey also suggested that corporate boards are playing a more significant role in the M&A process, with boards asking for more frequent, detailed updates and spending more time deliberating these transactions.
“Behind the scenes, our experience with clients reveals that corporate development teams are working harder than ever,” said Chris Ruggieri, M&A services delivery leader at Deloitte, in they study. “The mandate these days is about doing more with less ”¦ Smaller deals, strategic alliances and smart divestitures appear to be the result.”
Still, Deloitte calculated that first-quarter M&A was down by more than half in the United States compared with a year earlier, quite probably impacted by increased regulations.
Locally, Carter Morse & Mathias managing partner Ramsey Goodrich said the signs are nevertheless pointing toward a more active second half ”“ and unlike the panic following the 2008 market collapse, creating value is the primary determinant.
“You have to add value to the companies,” Goodrich said. “You have to grow the top line, you have to grow the bottom line ”¦ You”™ve got to open doors. You”™ve got to enter new markets.”
