Waiting and watching: Uncertainty keeps businesses out of M&A activity - The Business Journal of Milwaukee:

http://aplusevents.com/staffnew.html
Stock prices are a crucial factor in the succeszs of hisMilwaukee mergers-and-acquisitions consulting business, Emory & Co. Stockk is both the currency of many transactionsx involving publicly traded companies and a barometerf of business andconsumer confidence. With stockj prices and consumer confidence at alow ebb, the mergers-and-acquisitionx field is feeling shell-shocked. Much like the rest of the the industry has gone from overheated to nearly frozen inrecenft months. “For most companies, now is not the optimal time to sell,” Emoryh said.
The challenging stock market is just one of severalo reasons activityhas slowed, said Milwaukee-are a consultants, attorneys and investmen t bankers who handle mergers and Financing, of course, has been difficult since at least Septembe 2008 when the credit crisis hit. Bankss have all but withdrawn from participatingin transactions. Privatwe equity firms, which fueled much of the activityg inrecent years, have pulled That leaves cash as the key to ability to do deals, and even companies with stront balance sheets are hesitant to part with it. Potentia acquirers worry that they’ll need the cash to survivde the recession or to comply with bank credityline covenants.
“They’re reluctant to pull the trigger even on good saidDoug Mitman, a managint director with Milwaukee investment banking firm “Thered is so much fear out there that they’re reticent about making a big bet with their Another deal-industry-killer is uncertainty abou t the economy and business performance. When a company’ds owners are weighing whetherto sell, they need two sets of positivse facts to lure buyers, Emorhy said. The first is strong financial performancw for the latest 12 The second is a strong and reliable business forecast for the next 12 Neither exists right now formost businesses, he said.
Due to the the value of companies beingf sold showed the biggest decline in 2008sincre 1985, which is the first year for which reliable data is available, said Howarr Lanser, who is directort of mergers and acquisitions for Milwaukee-basecd & Co. Inc. So, how bad is it? Activity in 2008 dwindle d to levels unseen since the lastrecessiom and, so far, 2009 is worsde than that, Baird’s Lanser said. During 3,083 deals were announcesd nationally inthe “middles market,” which covers deals with a valued of $1 billion or less, according to a recenft Baird report.
That was the lowes t number of transactions in the past14 years, and ended a five-year streak of escalating deal volumes, Bairrd said. The last transaction Bairdf announced in southeast Wisconsin closedon 8, 2008, when West Bend-based manufacturer was acquirer by its largest of France, for about $450 million. Baird closesd 12 other deals between then and the endof 2008. Bairds had announced just three deals in 2009 through the first weekof “There’s so much uncertainty right now in the Lanser said. “That’s the No. 1 enemy of M&A.” The bottom line for Emoryh is that his firm is no longe swampedwith transactions, as it was a year ago.
Now the dealsx that are happening take longer to if they closeat all, he Despite all the negative factors, some dealse are getting done. The most activd buyers are companies with strong balance sheets whose executives are seekinb strategic acquisitions that will extend or roundd out their productsor services. Those buyers most likel y are in industries that run tothe economy. They include food companies thatsupply grocers, some health care and pharmaceuticals-relate firms, technology firms related to productivity improvement, and companiese that ply the downscale market such as low-incomw housing and low-priced fast-food The good news for buyers is that pricews are about half of what they were a year ago.
But, for that very same the most-motivated sellers are companies in financiak distress that need to sell in a weak Rich Silverthorn, an attorney with in Milwaukee, expects an uptick in “distresse M&A” as well as hostile takeovers. The latteer is more likely because depressed stocl prices are catching the attentiomn of financiallyhealthy buyers. “Although this is a horrific environmentyfor M&A activity, I wouldn’ be surprised to see a couple hostilre bids come out,” Silverthorn “Stock prices are so low, buyers can’t pass up at leastr looking.
” Silverthorn said he recentlty represented a company that was considering a hostilre acquisition of a However, before his undisclosed client could make a bid, the targert filed for Chapter 11 bankruptcy. As for when the deal markert with improve, area experts expect to wait until atleast 2010. The key will be for businessew to regain predictability ontheir outlook, said Mark Witt, an attorneg with in Milwaukee. Any privately held business owner who was thinkingt of selling might need to delauy the process for another two or threer years to fetch anattractive price, said Martty McLaughlin, an attorney with Reinhart Boerner Van Deurejn SC in Milwaukee.