KC bank deals could foreshadow future M&A

August 19, 2013 11:23 by Jill Mortensen in M&A  //  Tags:   //   Comments (0)
Bank deals in the Kansas City area this year are considered poster-children for the motivating factors under way in the overall banking mergers-and-acquisitions market. [More]

Local M&A slow in first half, but outlook is promising

August 19, 2013 11:17 by Jill Mortensen in M&A  //  Tags:   //   Comments (0)
Mergers and acquisitions activity in the Kansas City area during the first half of 2013 was at the lowest rate since 2009, but experts were anything but pessimistic [More]

Q2 2013 Private Equity Industry Trends

August 13, 2013 12:17 by Clayton Reeves in Capital Markets, Healthcare, M&A, Private Equity  //  Tags: , , ,   //   Comments (0)
McGladrey and PitchBook have reported private equity activity broken down into four sectors: business products & services, consumer products, health care and information technology. B2B: This industry continued to slow down in Q2 2013, with only 95 PE deals completed, totaling $11.0 billion. To put this into perspective, these are some of the lowest numbers in the last decade. Consumer Products: Continuing the trend from B2B, consumer products also slowed to the pace of frozen molasses, with PE completing just 64 deals during Q2.  Again, for perspective, this is the lowest quarterly total in more than a decade. Like other parts of the M&A market, the dollar amount ($31.2 billion) doesn't look too bad until you take out the megadeal for Heinz ($23.2 billion). Health Care: In an industry that has been expected to provide high deal flow, health care failed to live up to the hype.  PE managed only $4.1 billion of investment across 37 transactions. This proved to be the slowest quarter for deal flow since Q3 2009. Information Technology: Breaking the negative trend in PE activity, IT saw an increase in deals from Q1. Private equity invested $12.5 billion across 65 deals in Q2, which is similar to quarterly activity for the last couple years. So, what do these trends indicate for the broader M&A market?  It means that while PE still has considerable dry powder, this remains a seller's market.  Quality companies with earnings growth are hard to find, and when they decide to sell they are able to demand a high multiple.  So far, buyers have been patient, but eventually someone will have to flinch.  Either sellers will need to lower price expectations, or buyers will need to increase their price expectations for high quality targets.  If this doesn't happen, expect continued sluggishness. Click here to read the industry reports.

Would Anyone Buy BlackBerry?

August 12, 2013 17:50 by Clayton Reeves in Capital Markets, M&A, Telecom  //  Tags: , , , ,   //   Comments (0)
Today, BlackBerry halted trading of their shares and announced their intentions to explore strategic alternatives in an effort to ensure their BlackBerry 10 release goes well.  They have formed a Special Committee of the Board in an effort to make these strategic plans more tangible. Timothy Dattels, Chairman of the aforementioned special committee, recently said, "During the past year, management and the Board have been focused on launching the BlackBerry 10 platform and BES 10, establishing a strong financial position, and evaluating the best approach to delivering long-term value for customers and shareholders."  This effort has apparently expanded beyond the walls of BlackBerry to include a potential corporate transaction. So, given the fact that BlackBerry is now exploring their options, what will we see happen in the next weeks and months? There are basically two options: BlackBerry can go private or they can be sold to another company. Going Private: This would remove the quarterly stress of earnings, continuously swirling negative sentiment and allow the company to reinvent itself from the relative privacy a private company enjoys. Right now, they are caught in a downward spiral of tremendously reduced market share, a series of failed products and an angry investor base. Going private could help to stem this tide. However, it won't change the intrinsic nature of the company, which has been producing some lackluster offerings in the mobile sphere. Selling the Company: This is the other primary alternative this special committee is most likely considering.Who would buy a former market leader that has been destroyed in recent years by Apple, Google and Microsoft? Well, Microsoft might be a potential landing spot for BlackBerry. The Windows Phone has picked up some steam, and Microsoft could have an interest in eating up BlackBerry's market share and trying to keep it for themselves. One intriguing possibility for BlackBerry would be a Chinese acquirer.  Companies like Huawei and ZTE have the capital and ambition necessary to play in the North American arena, and it may be more cost and time effective to resurrect a struggling brand like BlackBerry than start from scratch. So, there are two main alternatives for the committee to consider, both with potential pitfalls and challenges.  However, either option could prevent the only way for BlackBerry to halt their downward slide.  It will be interesting to see who comes forward in this process, vying for a chance to buy the former market leader. Click here to read the press release from BlackBerry.

Are Mega Deals Paving the Way for the Middle Market?

August 8, 2013 12:35 by Clayton Reeves in Capital Markets, M&A  //  Tags: , , ,   //   Comments (0)
Last week we wrote an article about a slew of deals announced in a 24 hour period.  We wondered if this may be a good sign for the rest of the market as a whole, in terms of increased deal volume in the future.  The Washington Post agrees with this sentiment, saying that the increase in mega mergers is a reflection of growing confidence in the economy.  As we said, the number of deals is down YoY compared to 2012, but the dollar amounts have increased.  Deals in dollar terms for 2013 have grown to $607 billion, compared to $486 billion during the same period in 2012.  This seemingly good news conflicts with some negative news around corporate margin widening slowing down, which would seemingly indicate at least a lull in growth for the future.  Of course, cheap corporate loans and the availability of dry powder for many companies and private equity firms means there are still plenty of willing buyers to be had, no matter what corporate margins are doing. In the end, deals create more deals.  The larger market players seem to be realizing that all this cash sitting around isn't earning them much of a return, and are acting towards putting it to good use.  The middle market might be the next area that we see deal volume pick up in. Click here to read the entire article.

U.S. Tax Code: Encouraging Foreign Mergers?

August 1, 2013 12:13 by Clayton Reeves in Capital Markets, M&A  //  Tags: , , , ,   //   Comments (0)
As we reported Monday, several major mergers have been announced that involve U.S. companies acquiring foreign companies and changing their taxable residence to foreign countries.  One example is Perrigo agreeing to buy the Irish drug company Elan and move their headquarters to Ireland, lowering their tax rate from 35% to 12.5%.  Additionally, Omnicom Group announced plans to merge with France's Publicis Groupe, lowering their tax rate to 25% from 35% in the process.  This will no doubt rustle the bee hive of negative sentiment around the way some companies creatively avoid taxes (I see you, Apple). So, this begs the question, will these transactions continue and what does it mean for U.S. tax code? CNBC has asked the same question in a recent article. Michael Schwartz, a Director of Accounting & Taxes at WeiserMazars, recently said, "There is a tax on U.S. firms bringing profits from overseas, but if you're incorporated abroad, [the United States] can't tax it if you've merged with another company." Ian Shane, a tax lawyer at Golenbock Eiseman Assor Bell & Peskoe had a similar perspective, saying, "Without tax reform in the U.S., I think you will see more of these types of deals.  You have to start from the premise that most tax laws are a decade behind how business is done. More companies are global and looking globally, and taxes are part of the bottom line." People can complain all they want about the fact that corporations are attempting to lower their tax burden, but the real crux of the matter lies in a tax code that is complex, dated and less attractive than other countries'.  The government needs to realize that they can attempt to restrict U.S. companies all they want, but innovation will continue so long as their is financial incentive to do so.  It will be interesting to see how the tax policy decision makers respond to this trend.  Click to read the article on CNBC here.

Merger Monday: $50 Billion in Deals Announced in 24 Hour Period

July 29, 2013 17:17 by Clayton Reeves in Capital Markets, Financing, M&A  //  Tags: , , ,   //   Comments (0)
For those who slept through the last 24 day, boy has it been a busy time! As reported by USA Today, there were nearly ~$50 billion in deals announced over the past 24 hours - The fashion chain Saks was acquired by Canadian retail giant Hudson's Bay in a deal valued at $2.9 billion - U.S. drug maker Perrigo bought the biotech firm Elan in an $8.6 billion deal. - Allbritton TV stations were purchased by broadcaster Sinclair in deal valued at almost $1 billion. - Michael Baker has decided to sell itself for $392 million, $40.50 a share, to IMS, a privately held provider of professional, engineering and other services. This represents a 37% premium on Friday's closing price. - In a deal that would create the world's largest ad agency, firms Omnicom and Publicis plan to merge. This deal would be valued at $35 billion. - Republic Airways may also have found a buyer for Frontier Airlines (still in a preliminary, non-binding state) What does this mean for deal making in general? Many are pointing to these deals as a sign that equity values are not all that overpriced after all. As Richard Peterson of S&P Capital IQ states in the article, deal proceeds are up from last year. However, the proceeds figures had been skewed by some large transactions, while number of deals was down. If these large deals continue to happen, it may give confidence to the middle market to pursue more deals. Click here to read the entire article.

PwC's M&A Outlook Shows Optimism, Focus on Deal Execution

July 26, 2013 10:50 by Clayton Reeves in Capital Markets, Economy, M&A  //  Tags: , , ,   //   Comments (0)
PwC reports that the fundamentals behind M&A activity remain strong despite a slowdown in U.S. merger and acquisition (M&A) activity in the first half of 2013.  As we at CCCA have seen in the market, deal flow is constricted not by a lack of willing buyers, but a lack of targets with suitable fundamentals.  Acquirers are attempting to find companies with a history of growth, and many have struggled over the last few years to produce meaningful growth. Martyn Curragh, PwC's U.S. Deals Leader, stated in the report that “challenges in the M&A market are being driven by a lack of well-positioned assets for sale, not poor deal fundamentals. A shortage of quality assets and a growing list of willing acquirers dictate a need for confidence and greater preparation to execute, from deal strategy through integration. Greater competition is driving valuations and deal timelines, leaving some would-be acquirers to reflect on missed opportunities, and others with buyers’ remorse for failure to capture deal value.” So, focus shifts to realism around the probability of a deal being completed.  In our mind, this further enforces the need for experienced deal makers to discern the legitimacy of potential acquisitions. Click here to read the entire article.

Advanced Power Components Acquisition: A Sign of Things to Come

As reported in the Wall Street Journal, UK based Advanced Power Components has announced the completion of the acquisition of 25% of Invisible Systems Limited (ISL).  ISL provides cloud-based, end-to-end monitoring and control solutions which are designed to increase the energy efficiency within the built environment using its own battery powered, wireless communications technology.  This provides a quick, simple, non-obtrusive energy monitoring and control capability that is coveted in the power sector.  The technology is proven to enable average savings of between 15-30%, with an ROI between 12-18 months. Mr. Mark Robinson, the chief executive officer of APC, said during the release: "ISL's wireless technology and innovative approach to product development have created a product portfolio which offers clear commercial advantages on which we have no doubt that [we] ... can capitalize on both in the UK and internationally." The advent of wireless technology in the power sector is exciting for market participants.  As energy efficiency continues to increase, and efficient installations are augmented by microgrids and wireless solutions, expect companies like ISL to be considered buys for larger energy players.  All of these moves point to the increasing need of organizations to understand their energy consumption and carbon footprint to attempt to stay ahead of ever restrictive government regulations. Click here to read the entire article.

Healthcare IT the Most Active M&A Market Over First Half 2013

July 23, 2013 10:33 by Clayton Reeves in Capital Markets, Healthcare, M&A  //  Tags: , , , , ,   //   Comments (0)
Berkery Noyes Investment Bankers, a bank with a large research focus, has reported that Healthcare IT was the most active place to find M&A transactions in the first half of 2013. According to the report, Healthcare IT accounted for 63 percent of transactions and 40 percent of total mergers and acquisitions volume during that time frame.  Deal value was estimated at $8 billion.  One of the biggest dealmakers was Constellation Software, who purchased QuadraMed Corp., QMS Inc. and Club Solutions, just to name a few. As we move towards EMR/EHR adoption, the industry will most likely continue to see consolidation.  The technologies required to meet the meaningful use requirements set forth by the government can be complex and are coveted by large players.  Driving the point home, only 42 percent of hospitals report that they have met Meaningful Use Stage 1 requirements, while only 5 percent can boast Stage 2 compliance.  Look for more activity across the Healthcare sector in the coming years. Click to read the entire article here.

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