M&A Outlook: Where the credit crunch and middle market collide

October 29 - Dealscape Blog (The Deal) - "The times, they are a-changin', and for many middle-market dealmeisters, they are a bit confounding, too."

So began an Oct. 1 story by The Deal's Vyvyan Tenorio examining the impact of this summer's credit crunch on the middle market. While the credit freeze threw megabuyouts into the spotlight even more, the impact on the middle market — where there are many more deals and dealmakers, as well as less liquidity and tougher terms of late — has received less airtime. Read More.

Aim market: oil and gas potential M&A targets

October 29 - Telegraph (U.K.) - The oil and gas sector is set for a major M&A boom with every stock in the sector a possible bid target, according to new research from the corporate finance team at Ernst & Young.

The Alternative Investment Market (Aim) has been relatively quiet in terms of deal flow since the credit crisis hit markets over the summer. But that trend could well be reversed as the 90-plus companies in the oil exploration and production sector seem likely to go through a phase of significant consolidation.

Many of the oil prospectors on Aim are running out of cash, says Ernst & Young, and they will either have to take over rivals or be bought out themselves if they are to have a future.

Alec Carstairs, oil and gas partner at Ernst & Young, says: "A combination of weak share performance and low cash balances means that difficult times are ahead for the oil and gas juniors. Read More.

This Just In: Mergers Do Indeed Lower Costs

October 26 - The Motley Fool - As the anniversary integration between Thermo Electron and Fisher Scientific approaches next week, Thermo Fisher Scientific announced third-quarter results that demonstrated how the integration is having a nice effect on the bottom line.

While revenue increased 7% on a pro forma basis as though the company was together in the third quarter of 2006, adjusted operating income rose 17%. The lowered costs of the combined company provided a 150-basis-point improvement of operating margins compared to the year-ago quarter. In addition to cutting costs by sharing overhead and personnel, the company is also dumping low-margin items it sells. That's creating a slight impediment to revenue growth but should improve overall margins down the line. Read More.

International middle-market deals keep pace

October 25 - Dealscape Blog (The Deal) - International middle-market dealflow was very active Thursday amidst the backdrop of megabillion dollar international acquisitions that included Standard Life plc's $17.8 billion bid for Resolution plc, Industrial and Commercial Bank of China Ltd.'s $5.5 billion stake in Standard Bank of South Africs Ltd., and Rexel SA's $4.3 billion cash offer for Hagemeyer NV.

Aside for the aforementioned acquisitions, billion-dollar deals have been few and far between lately. So, the rush of three billion-dollar deals in one day hearkens back to the heady dealmaking days prior to the credit crunch when financing was plentiful and executives weren't spooked by the word recession. Despite Thursday's uptick in billion-dollar deals, middle-market acquisitions — especially foreign ones — kept pace. In general, over the last two months, middle-market M&A has been more plentiful than the billion-dollar deal. Read More.

Dealwatch: Middle Market

October 24 - Dealscape Blog (The Deal) - As the price ceiling of the middle market has inched north, the landscape has taken on characteristics of the megabuyout playing field. Not immune to the credit crunch, the middle market has felt the heat since the summer with less liquidity and tougher terms. The Deal's Vyvyan Tenorio examined the issue in a Deal newsweekly story Oct. 1 how the landscape has changed and what it means for dealmakers. In the wake of the crunch, middle-market deals are dominating the acquisition landscape right now, Dealscape's Gerald Magpily pointed out: Eight of the top 10 domestic deals and nine of the top 10 international deals were in that realm.

But the problems are not lost on the dealmaking arena, which is typically defined by deals worth less than $750 million. Golub Capital LLC, a middle-market lender, retreated from plans to go public in mid-October, given the market for financial services-related offerings. Read More.

Life after the great credit crunch

The heady times for M&A specialists came to a crashing halt in August. With the big takeover show over, corporate lawyers are turning to new plays - many on paths out of the deal desert

October 24 - The Globe & Mail - When Steve Halperin surveyed his calendar in early August, he had every reason to believe the torrid season of deal making would continue.

He and his partners at Goodmans LLP had nailed an unprecedented number of big mergers and acquisition deals, including the record-breaking bid for BCE Inc. by the firm's client, Ontario Teachers' Pension Plan. Behind closed doors things were even busier as he juggled three secret takeover assignments. Read More.

Merger Fever Heating Back Up

What credit crunch? Oracle's bid for BEA underscores a banner year for technology M&A

October 23 - eWeek.com - Oracle's takeover bid for BEA Systems—successful or not—is just the latest example of what is shaping up as a historic stretch of mergers and acquisitions in the technology industry.

Despite a recent slowdown in the credit markets that left private equity firms on the sidelines during the third quarter, M&A analysts still expect 2007 to be a banner year.

"We're very positive on the market right now," said Ward Carter, president of M&A advisory firm Corum Group, of Bellevue, Wash. "There was a slight disruption [in the third quarter] because of the credit meltdown, but Q4 will catch up. There's a lot of pent up demand." Read More.

Energy Sector Roundup

October 22 - Forbes - Following is a summary of top stories in the energy sector Monday afternoon.

Oil Settles Lower as November Contracts Expire

Oil futures fell on concerns about the economy and profit-taking ahead of the November futures contract expiration.

Crude rebounded from earlier lows by the end of the day. Some analysts said prices firmed after an expected cease-fire between Turkey and Kurdish rebels in Iraq looked shakier than first thought. Read More.

Middle-size deals are expected to continue

October 23 - Star Tribune (Minn.) - A top executive of the former Goldsmith Agio Helms doesn't expect a major slowdown in the mergers-and-acquisitions business in the midsize deal market even though bankers are getting more conservative amid the severe credit crunch.

"We had nine deals close in the third quarter, and that's a healthy number," said Mike McFadden, co-chief executive of the M&A advisory firm now called Lazard Middle Market, after its new Wall Street owner. "The private equity firms, the financial buyers were very aggressive on pricing. We're seeing strategic buyers [industry peers] continue to be active, and they are winning more companies at competitive prices."

In short, the premiums are coming down in some cases as chastened bankers, gulping over big third-quarter writedowns on everything from vacant condominium projects to subprime mortgage investments, get more conservative in a tenuous economy. Read More.

Private equity vital to mid-market firms, says survey

October 19 - Gowth Business - Over half of buy-out companies say that their private equity backers add significant value to their business, according to a survey from law firm Eversheds. Just under two-thirds of respondents had achieved their business objectives, with half of these outperforming their plans.

At odds with recent criticism of private equity firms, headcounts in three-fifths of the buy-out companies had gone up, with 18 per cent losing staff and 22 per cent remaining unchanged.

Richard Moulton, corporate partner at Eversheds, comments: ‘In the mid-market sector we are not dealing with Gordon Gekkos. The vast majority of private equity houses provide a supportive partnership which enables management to achieve their goals.’ Read More.

Buyers to ‘benefit’ from M&A market

October 20 - Business in Wales (U.K.) - The mergers and acquisitions market in Wales remains buoyant – despite the crisis that hit the money markets last month, an analyst said yesterday.

A study by accountants and business advisers PKF in association with Deal Drivers UK showed a slowing outside Wales after a ramping up of deals in the last quarter.

The report highlighted a “frantic pace” of deals over the past few years with the last quarter of 2006 being the high point with a record £70.9bn in deal value. Read More.

DEALTALK - Cross-border mergers defy U.S. slump

October 18 - Reuters - Even as tight credit conditions curb the urge among U.S. dealmakers to go shopping, the international mergers and acquisitions market is setting records.

Multinational corporations have been expanding into emerging markets, while foreign companies are using stronger currencies to pursue acquisitions -- especially in the United States.

So far this year, cross-border deals have reached a record high of $1.47 trillion, up 82 percent from the same period in 2006, according to research firm Dealogic.

"The value of the dollar, and the credit situation, are going to have less impact on these types of deals," said Mike Rogers, a partner in Ernst & Young's transaction advisory services group in Dallas. Read More.

Buyouts are big business for Britain whether they are large or small

October 17 - Scotsman.com - THE UK's mergers and acquisitions market is the largest in Europe accounting for a fifth of deal volume and a quarter of deal value in the first half of 2007. Over the past few years M&A activity has risen steadily both in terms of deal value and volume from £15 billion at the start of 2004 to £62.9bn in the second quarter of 2007.

PKF has just produced a report, Deal Drivers UK, in association with the independent Mergers and Acquisitions intelligence service, Mergermarket, which reveals that UK private equity buyout quarterly values have also risen significantly in past years. Read More.

Metals Slump As Housing Market Worsens

October 17 - AP - Base metals declined Wednesday after the Commerce Department reported homebuilding slumped to its lowest level in 14 years, raising concerns that demand for copper and other raw materials could ebb.

In other commodity markets, agriculture futures ended mixed, while oil prices reached a peak and precious metals edged higher.

Although housing news has been grim for more than a year, September's 10.2 percent drop in construction of new homes surprised analysts who on average expected a more modest 4.2 percent decline. It was the slowest pace since March 1993. With the housing downturn showing little sign of a bottom, investors retreated from the industrial metals key to building infrastructure. Read More.

Emerging Market M&A Hits $663 Billion In '07,Beats '06 Record Dealogic

October 16 - CNN Money - Mergers and acquisitions in emerging market countries have reached $662.9 billion so far in 2007, topping the previous record high of $643.3 billion for all of 2006, according to data provider Dealogic.

In the third quarter of 2007, emerging market M&A bucked the global trend with an increase of 7% compared with the second quarter of 2007, and versus a 45% decline for developed countries, it said.

M&A in the emerging markets has been increasing in importance and has so far accounted for 17% of global activity this year, compared with only 11% in 2000, it said. Read More.

Software M&A expected to continue: Names to watch

October 15 - Financial Post (Canada) - Oracle Corp.’s offer last Friday to buy software developer BEA Systems Inc. for US$6.66-billion is yet another sign that the business application market remains highly competitive, as larger players continue to snap up high growth software companies.

Along with Oracle’s tentative deal and SAP’s purchase of Business Objects SA last week, RBC Capital Markets analyst Mike Abramsky said the chance of other mergers and acquisitions for other software companies happening now is high.

“You’re seeing acceleration of some dynamics in the market that are clearly going to increase the probability they will going to be acquired,” Mr. Abramsky said in a phone interview. “Those trends include the slowing in growth of some of the bigger players that have been dominating the market like SAP, Oracle and Microsoft, and the need to fuel that growth through acquisitions.” Read More.

Giants move in on smaller buyouts

rOctober 10 - Telegraph (U.K.) - When Jeff Montgomery's private equity house GMT Communications cast its eye over a small Latvian telecommunications firm recently, it found itself in unlikely company.

The deal was small – requiring around €150m of equity – but among the players was Blackstone, the US private equity giant which eventually won the auction.

Go back a few months and it would have been remarkable to see a major player chasing such a deal – Blackstone has become famous for pursuing buyouts in the many billions of dollars – but, in today's climate, it is the mid-caps that are attracting all the attention. Read More.

Mergers & Acquisitions Institute: The party isn't over for everyone

October 5 - Dealscape Blog (The Deal) - There's been an elephant in the room at the Mergers & Acquisitions Institute in Dallas, and that, of course, is the fact that big private equity deals have virtually vanished after the credit crunch brought on by the subprime mortgage implosion.

Panelists referred to it in their remarks on Thursday — the famed return of the corporate buyer now that private equity firms can't borrow cheaply, deal multiples coming down, the emergence of more stock deals — and there was a lot of chatter about it at the cocktail reception Thursday night. Read More.

Mid-sized companies step up cross border M&As: survey

The key drivers are need for geographic diversification, availability of good targets and access to financing, says the ACG/Grant Thornton/Eureka Private Equity survey

The increasing participation of middle-market dealmakers in global cross-border M&As is a new trend that is developing very quickly, says the findings of the ACG/Grant Thornton/Eureka Private Equity survey. This trend is fast catching up in USA, European and Asia, and is expected to further accelerate in the times to come, the survey says.

Cross-border M&A is now a vital part of strategic plans for middle-market companies and private equity firms, according to the survey. The key drivers in this respect are largely influenced by the need for geographic diversification, availability of good acquisition targets and access to financing, it says. Read More.

Real estate buyout funds still on a tear

October 4 - The Globe and Mail - The private equity party may be over but the news hasn't yet made it to the real estate buyout funds, which are seeking $105-billion (U.S.) in new capital, a sixfold increase from January, 2006.

There are 206 real estate-focused funds in the market raising capital around the world, an explosion of growth in what was once a niche sector of private equity, according to data from London-based Private Equity Intelligence.

Last year, 116 new funds raised a record of $72-billion, and 2007 is set to surpass that amount with a total of about $75- to $85-billion. That's seen further increasing to $80- to $100-billion next year, the research firm said. Read More.

Firms are braced for private equity slowdown

Private equity deal activity is now almost certain to slow as the credit crunch starts to bite

October 4 - Accountancy Age - The profession seems to have accepted that private equity deal activity, a major contributor to sustained double-digit growth at the large accounting firms over thelast three years, is now almost certain to slow as the credit crunch starts to bite.

An analysis of the top 100 private equity exits compiled by Ernst and Young showed that in 2006 the average enterprise value of a private equity business in Europe grew from $800m to $1.5bn at exit. Read More.

Time for a New Corporate Buying Spree?

As earnings take a nosedive, analysts expect to see more companies turn to M&A to pick up the slack. They certainly have the cash

The slowdown in U.S. corporate profits has been swift and stunning. While earnings for companies in the Standard & Poor's 500-stock index grew a robust 14.7% in 2006, profit growth has screeched to a halt amid the troubled financial climate of 2007. With the income-reporting season kicking off the week of Oct. 8, average earnings for the S&P 500 companies are on track to grow just 1.9% during the third quarter, the slowest pace in more than five years, according to senior S&P index analyst Howard Silverblatt. That's down from 7.9% for the first quarter and 9.6% in the second. Read More.

CEN Survey Shows Middle Market Companies Bullish on Economic Growth

Chief Executive Network Surveys Manufacturing, Distribution and Service Sector CEOs

October 2 - Business Wire - Chief Executive Network, the premier industry sector organization for CEOs and senior executives, recently surveyed over 350 companies covering a broad cross-section of the industrial and service sectors. The purpose of the survey was to determine how mid market (non Fortune 500) and smaller companies see their near term business prospects. Read More.

More companies say, 'Let's make a deal'

October 2 - USA Today - So much for the credit crunch killing the merger boom. Canada's TD Bank said Tuesday that it's buying New Jersey-based Commerce Bancorp for $8.5 billion. That came a day after cellphone maker Nokia said it is buying digital mapmaker Navteq for $8.1 billion.

Such deals show that while merger-and-acquisition dealmaking took a breather in August and September, as some buyers had trouble borrowing money, the M&A market is on the comeback. "Suddenly things are looking good," says Richard Peterson at Thomson Financial. "Deals are getting done." Read More.

Private Equity's Feeding Frenzy

A growing appetite for small businesses

Your company might be ready to consider a private equity investment sooner than you think. "There is already a frantic bidding frenzy for the $5 to $15 million deals," says Eric Siegel, a lecturer in entrepreneurial management at Wharton School and founder of advisory firm Siegel Management. "Now you're finding much more activity for the $2.5 million deals, too." That's likely to continue, as these deals don't usually rely on the recently roiled public debt markets. David Lobel, a partner with Sentinel Capital Partners, says his fund considered 56 small business prospects at a recent weekly meeting. "It's an enormous number of deals for us," he says. "A year ago we would have had 30." Read More.

Private Equity Shows Signs of Revival

A mini-flurry of developments indicates that buyouts are coming back and pending deals will go through.

October 1 - CFO.com - It looks like private equity is slowly coming back to life.

Sure, previously agreed-upon deals continue to fall apart. The latest occurred Monday when buyout firm Silver Lake Partners and hedge fund ValueAct Capital opted to terminate their merger agreement with Acxiom Corp. The announcement knocked down the shares of the data management company by more than 22 percent. Acxiom will receive a $65 million termination fee from the two investors.

However, late last week a number of developments suggested that prospects are improving for buyouts in general and the completion of pending deals. Read More.

End of Quarter Brings Steep M&A Slowdown

September 28 - The Associated Press - The tumult of credit market dislocations and volatile stock swings during the third quarter has claimed an all-too-expected casualty: the pace of global takeovers.

There was a marked slowdown in the third quarter with $992.1 billion worth of deals announced _ 43 percent less than during the second quarter, according to data tracker Dealogic. On a monthly basis, there was only $186.3 billion worth of deals announced so far in September _ compared to $231.1 billion in August and $574.7 billion in July.

The numbers aren't all that astonishing to many on Wall Street. The third quarter is typically one of the slowest periods during the year for mergers and acquisitions, but this time around was marred with volatility. Read More.