Fujitronic FA-1300
Stock prices are a crucial factor in the success of hisMilwaukee mergers-and-acquisitions consulting business, Emory & Co. Stockm is both the currency of many transactions involvintg publicly traded companies and a barometer of business andconsumerf confidence. With stock prices and consumer confidenc e at alow ebb, the mergers-and-acquisitions field is feelin g shell-shocked. Much like the rest of the economy, the industry has gone from overheatecd to nearly frozen inrecent months. “For most now is not the optimal timeto sell,” Emory said.
The challenginhg stock market is just one of several reasons activityghas slowed, said Milwaukee-area attorneys and investment bankersx who handle mergers and acquisitions. Financing, of has been difficult since at least September 2008 when the creditfcrisis hit. Banks have all but withdrawj from participatingin transactions. Private equity which fueled much of the activityg inrecent years, have pulled back. That leaves cash as the key to ability to do and even companies with strong balance sheetse are hesitant to partwith it. Potential acquirersz worry that they’ll need the cash to survive the recessionh or to comply with bank crediftline covenants.
“They’re reluctant to pull the trigger even on good saidDoug Mitman, a managing directo with Milwaukee investment banking firm “Therew is so much fear out there that they’re reticenyt about making a big bet with theirf cash.” Another deal-industry-killer is uncertainty abouf the economy and business performance. When a company’s ownera are weighing whether to they need two sets of positive facts to lure Emory said. The first is stronh financial performance for the latest12 months. The second is a strong and reliable business forecast for the next 12 Neither exists right now for most he said.
Due to the the value of companies being sold showedx the biggest decline in 2008since 1985, whicyh is the first year for which reliable data is available, said Howarde Lanser, who is director of mergers and acquisitions for Milwaukee-based Co. Inc. So, how bad is it? Activity in 2008 dwindler to levels unseen since the lastrecessionb and, so far, 2009 is worsre than that, Baird’s Lanser During 2008, 3,083 deals were announcex nationally in the “middle market,” which covers dealsz with a value of $1 billion or according to a recent Bairs report.
That was the lowest number of transactions in the past 14 and endeda five-year streak of escalatingf deal volumes, Baird said. The last transaction Baird announcedx in southeast Wisconsin closedon 8, 2008, when West Bend-based manufacturer was acquiredx by its largest shareholder, of France, for abou t $450 million. Baird closed 12 otherd deals between then and the endof 2008. Baired had announced just three deals in 2009 througuh the first weekof “There’s so much uncertainty right now in the Lanser said. “That’s the No. 1 enemy of The bottom line for Emory is that his firm is no longerf swampedwith transactions, as it was a year ago.
Now the deals that are happening take longerrto close, if they closs at all, he said. Despite all the negative some deals are getting The most active buyers are companies with stronyg balance sheets whose executives are seekingg strategic acquisitions that will extened or round out their productwor services. Those buyeras most likely are in industries thatrun “counter-cyclical” to the They include food companies that supply grocers, some healtyh care and pharmaceuticals-related firms, technology firmsw related to productivity improvement, and companies that ply the downscale market such as low-income housing and low-priced fast-food franchises.
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