The Case for Being Either the Pursuer or the Pursued

July 12, 2010 at 11:02 am Leave a comment

Earlier this year I wrote two pieces on expectations and thoughts related to why being a business buyer or a business seller were again beginning to make sense. I also discussed some general wisdom as to how to be either a good buyer or a good seller. As referenced in those pieces, an early year survey of more than 800 senior corporate executives worldwide conducted by Ernst & Young Transaction Advisory Services and the Economist Intelligence Unit provided a strongly optimistic view of expected corporate merger and acquisition activity through the 2010 year.

Ernst & Young Transaction Advisory Services (“EY-TAS”) has just released (June 23, 2010) an update on that earlier survey indicating that M&A activity for the second half of the 2010 year is even stronger than previously expected. While that is good news indeed, a couple of comments contained in the survey release have clear relevance to local companies either considering putting their money to work in select growth markets, or local companies seeing an opportunity to be acquired by those companies considering putting their money to work in select growth markets.

• According to EY-TAS, “The deal market will be defined by smaller, higher-quality deals fueled by low interest rates and corporate cash stockpiles.” The key phrase here is “higher-quality.”

• Further, according to EY-TAS, buy-side companies will be seeking “acquisitions that complement their strengths.”

Last year, we at The Brenner Group undertook a buy side advisory relationship with one of the oldest and most highly respected professional service firms in Northern California. Our counsel to this client, that was seeking to wisely and adeptly find target merger partners or acquisitions to solidify its growth prospects well into the 21st century, was to concentrate on “higher quality transactions that complement existing strengths.” That is the path we pursued on behalf of our client, and it is a strategy obviously shared by acquirers world-wide. It is a continuing focus that we continue to prescribe for both prospective buyers, and for prospective sellers needing to define who and what they are.

Of specific interest from EY-TAS’ survey update, with regard to the Technology sector, they state: “Huge cash reserves are giving leading technology companies the financial flexibility to focus on building revenues through organic growth and M&A. These companies are well-positioned to execute on attractive deals that provide entry into new markets and access to new technologies.”

With regard to the Health Care industry, the following is stated: “Consolidation is and will continue to be a means to achieving cost synergies. Relative to other industries, financing for health care deals is more available.”

As was discussed in my April pieces, there are significant opportunities for intelligent growth through mergers and acquisitions for forward looking buyers. There are also significant reward opportunities for sellers who have built well-performing and well-managed ventures that are strategically strong and well-positioned. Most recent indicators are that the remainder of this year should be a busy time for transactions.

Michael Roy is Director of Mergers & Acquisitions at The Brenner Group where he has focused primarily on middle market advisory and transaction engagements. Prior to his affiliation with The Brenner Group, Mike held posts at firms such as Pacific Marketing Partners, Corporate Finance Associates, and Lehman Brothers. Mike has authored multiple “white papers” relating to the food and beverage industries in the U. S., to commercial real estate acquisition opportunities, and to environmental technology developments. He graduated from the University of Notre Dame and received a Woodrow Wilson fellowship for post-graduate study.

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Entry filed under: Financial Advisory, Restructurings, Shareholder Services.

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