Source: Bill Virgin, Seattle Business, November 2011. Mergers and acquisitions are heating up, but shaky companies need not apply.
Michael Butler has an effective tool for assessing the health of the mergers and acquisitions market: the number of unsolicited calls to his investment banking firm from private-equity funds looking to do deals.
In the pre-recession days of 2007, Seattle-based Cascadia Capital, where Butler is chief executive, might receive 35 to 45 calls a week “from funds saying, ‘Hey, I’ve got money to buy companies. What do you have? What are you working on?’”
During the recession, the phones fell silent—as few as two calls a week. And these days? “Now we’re back up to 30 to 50 a week,” Butler says.
Even in the depths of the recession, the regional M&A market didn’t die completely. Deals still got done in beleaguered industries such as manufacturing, and also in banking as well capitalized institutions picked over the remains of shaky ones.
But what’s happening now is a broad revival of activity, involving companies of all types and sizes—big, small, public, private—in just about every industry.
There have been some high-profile deals, such as Microsoft’s acquisition of Skype for $8.5 billion, Walgreen’s purchase of drugstore.com for $409 million, Oregon-based Precision Castparts’ acquisition of Bellevue-based Primus International for $900 million and Electronic Arts’ purchase of Seattle’s PopCap Games, valued at as much as $1.3 billion.
There have also been scores of smaller deals as buyers with stockpiles of cash look for ways to deploy them.
“A lot of pent-up demand has started to develop into activity,” says Michael Brustkern, managing director of Seattle investment banking firm Exvere Inc. “We don’t see a lot of deals being closed presently, but we assume from looking at our own experience that the backlogs are growing. As we talk with the lawyers and different folks around town that are in the transactional business, we find they feel the same. They feel like we’re coming out of it. … We’re probably in the early stages of an upturn that will probably see a lot of deals announced in the fourth quarter of this year and the first quarter of next year.”
And while activity is picking up and the multiples of cash flow or earnings before interest, taxes, depreciation and amortization (EBITDA) that sellers are getting start rising, local dealmakers say they don’t see signs of a frothy or overheated market.
As Butler puts it, “It’s a Goldilocks market. It’s not too hot, it’s not too cold, it’s just right.”