| |
Top Stories
M&A Boom is Over. Wait. No It’s Not.
Addressing audiences of fellow dealmakers, journalists and industry insiders at conferences in Wall Street and Chicago’s Loop, a parade of dealmakers suggested this week that the current historic cycle of mergers and acquisitions may have reached its conclusion, even as they peppered their audiences with examples, anecdotes and insights that suggested the opposite.
Carl Icahn, the activist investor who has profitably taken on such corporate redoubts as Time Warner, Revlon and Motorola, told an audience of mainly alternative investors, bankers and advisors that what he described as “a walk in the park” for private equity might have run its course. Speaking broadly and often humorously, at the Deals & Deal Makers Conference sponsored by Dow Jones in The New York Stock Exchange – a place he has not necessarily been welcomed - the brassy New York native described corporate America as a money pit for aggressive investors thanks to the lazy boards, uninformed shareholders and bottom-feeding senior executives that comprise traded companies in his view.
“What you get are morons,” Mr. Icahn said, describing the ranks of operating executives. His remarks drew appreciative laughter from an audience that clearly admired his moxie – and his track record.
At The M&A Advisor Middle Market Financing Conference in Chicago, Tuesday’s keynote lunch speaker, Daniel Farrar, depicted a financial environment in which good deals are increasingly hard to find. Deals are being made at multiples “two rounds more than they ought to be,”said Mr. Farrar, a partner with Morgenthaler Partners,a Boston buyout shop. Mr. Farrar warned of debt’s increasing prominence in many middle market deals, with covenants increasingly tossed aside in the desire to make deals. Joining the chorus that has grown louder since Bear Stearns fund troubles became public last week, Mr. Farrar likened today’s deal-making environment with the subprime mortgage packaging that threatens to douse a number of banks with red ink.
Yet the deal parade marches on. Transactions involving U.S. firms had a total value of $845 billion through May, 10 percent above the first six months of 2006, according to PriceWaterhouse Coopers. Globally, last year’s historic M&A record could be surpassed by fall.
The walk in the park may be over, but the strollers show no signs of heading the exits.
“Regardless of the quality of the deals, money keeps flowing in to private equity to invest,” said one speaker in Chicago. “And one thing you never hear about in M&A is someone giving the money back.”
Build-A-Bear Seeks Buyer
Build-A-Bear Workshop Inc. (NYSE: BBW), a plush-toy retailer whose international expansion plans have left it wobbling on the shelf, said this week it is “considering a broad range of strategic alternatives” even as it moves forward with plans to nearly triple its stores in Europe and North America. Yesterday the Chicago-based company said it has hired Lehman Bothers to help it evaluate its options. Earlier this month the company cut its second-quarter earnings guidance nearly in half, sending shares falling nearly a quarter in next-day trading.
A Little M&A: French Breast Implant Maker Bought
Mentor Corporation, a manufacturer of medical products based in Santa Clara, has acquired Perouse Plastie SAS, a French manufacturer of silicone gel breast implants, for 42 million euros, or $56.5 million, As part of the deal, Mentor will assume about 3 million euros ($4 million) of debt. The deal is expected to close in July.
CCA Industries Says Failed Deal Lowered Profits
E. Rutherford: NJ - CCA Industries Inc. (Amex: CAW), a health and beauty aid company, announced yesterday that the failed deal to sell itself to Dubilier & Company had cost $405,000, contributing to a second-quarter profit decline of 24 percent. The company said last month that Dubilier’s inability to fund the acquisition had scuttled the deal.
Morgenthaler Plans New Buyout Fund
 Morgenthaler Partners in Boston is planning a new buyout fund, according to a high-level source at the firm. The source said the partners are currently in discussions with LPs. Morgenthaler has $2.5 billion under management and specializes in deals involving profitable,middle-market companies in the $50 to $250 million sales range.
WPP Group Acquires 24/7 Real Media for $649M
The WPP Group has acquired 24/7 Real Media, an online advertising services firm, for $649 million, both companies said earlier this week. WPP is a global advertising and marketing firm; the acquired company, with 20 offices in 12 countries, started out serving ads for Yahoo! And Netscape in the early days on the Internet, and grow organically and through roll-ups.
HM Capital Buys Independent Yellow Pages Company
HM Capital Partners LLC, a private equity firm in Dallas, has signed a contract to acquire Phone Directories Company, LP, a provider of phone directors not associated with a specific telcom. The phone-book company is based in Orem, Utah and publishes directories in 127 markets. Terms of the deal were not disclosed.
More News
Olympus Partners Buys 95 Chili's Restaurants for $155M
Olympus Partners, a money management firm based in Stamford, Conn., has acquired 95 Chili’s Grill & Bar restaurants located in the Northeast and Middle Atlantic states from Brinker International, Inc. The stores will operate as a master franchise under the name Pepper Dining and be operated by John McGlone, a former senior operating executive at Chili’s. The deal was valued at $155 million. The Olympus restaurant portfolio has included Hometown Buffet, a Wendy’s franchisee, a KFC franchisee and a Golden Corral franchisee. Olympus manages over $3.1 billion on behalf of 50 blue-chip investors including corporate pension plans, state retirement systems and university endowment funds.
Florida Capital Sells Katzkin Leather to ClearLight
In a deal between Southern California private equity firms, Florida Capital Partners announced Wednesday it has sold Katzkin Leather, Inc., a high-end auto interior designer, to ClearLight Partners, LLC. Founder Mitch Katz and his management team will remain on board after the closing, the deal announcement said. Terms were not disclosed.
Bradley Nielson, Mity Enterprises C.E.O., Resigns
Chief executive of Mity Enterprises, resigned Wednesday after shareholders approved the sale of the company to Sorenson Capital Partners L.P. for $71.5 million. Peterson Partners LLC is also part of the acquisition team. Mity manufactures institutional furniture. The deal is expected to close by July 16.
The M&A Advisor’s Middle Market Financing Conference and Awards Dinner took place at the Standard Club in Chicago Tuesday night. What an evening it was! With a little help from my Master of Ceremonies, I handed out trophies and congratulations to 15 top financial professionals serving the $10 million to $1 billion middle market.
If you were there, you were part of the drama of that evening, sharing the excitement surrounding the competition and enjoying the MC turn by Chicago Tribune columnist extraordinaire Phil Rosenthal. Phil raced from the Tribune newsroom to our hotel after filing his latest column, arriving just in time to share some after-dinner anecdotes and insider observations about Sam Zell’s ongoing ESOP-financed Tribune deal.
The headline news: David Bench, a partner and managing director with Citi Capital Strategies in New York, was named Professional of the Year. Congratulations David! Our panel of independent judges were impressed with how you managed your company’s $80 million refinance of a closely-held California recreational boat manufacturer last year. The deal expanded the owners’ liquidity, provided operating capital while keeping management in place and work force intact. One judge remarked that you displayed “creative business savvy and brought added value to the deals, creating a win-win for the company, shareholders and employees.”
There was much more on the program that evening, of course. We handed out three Deal of the Year awards: to the Ziegler Companies, Inc. in the Debt category; to Marlin & Associates New York LLC in the Equity category; and to BMO Capital Markets in the Combination category.
In Professional Awards, Circle Peak, LLC won in the Provider category; Phoenix Capital Resources was named Agent of the Year in the Debt category; and Marlin & Associates New York LLC was named Agent of the Year in the Equity category.
Industry Awards went to Marlin & Associates New York LLC in the Computer, Technology & Telecommunications and Financial Services categories; to the Ziegler Companies, Inc. in Healthcare and Biotech; to Fort Dearborn Partners in Consumer Products and Distribution Services; to O’Keefe & Associates in Consumer Products; to Phoenix Capital Resources in Business-to-Consumer; and to BMO Capital Markets in Retail Sales. |
|
|
The M&A Advisor Conference and Awards Dinner
December 10-11, 2007
New York, NY
Distressed Investing Conference and Turnaround Awards Dinner
February 24-25, 2008
Palm Beach, FL
|
|
|
Sale of Triple
Point Technology
The global slump in energy and commodities markets in the ‘90s decidedly dampened the market for companies like Triple Point Technology, Inc, a software company based in Westport, Conn. Triple Point provides energy-trading and risk management solutions for commodities including power, oil, gas, coal, metals, agricultural products, and freight.
Despite adverse conditions the  company’s three principal owners continued to pour money into product improvements, growth and expansion into new market niches. By 2006 the company was serving commodity and energy companies in 17 countries across Asia, Africa, Europe, North America and South America.
Two of the three owners, pleased a t the market’s rebound and their company’s growth, saw a rosy future and intended to stay the course. The third partner, however, at a different point in life, had already significantly reduced his operating role and sought to cash out. The owners were eager to bring greater liquidity to their investment and thereby arrive at a mutually agreeable next phase.
But how?
At this point the owners contacted Marlin & Associates New York LLC, a boutique investment bank and strategic consulting firm focused on providing strategic and specialized services to transaction-oriented firms. Marlin determined that conventional evaluations of their new client would under-price it, failing to take into account the long-term value of the investments the owners had made, according to Kenneth Marlin, managing partner of Marlin.
Mr. Marlin and his team outlined what he called a “disciplined process” of approaching and engaging with both strategic and financial sponsors. The owners had crafted detailed operating plans; Marlin helped re-write and re-package those plans into a strategic document aimed at prospective strategic buyers, focusing on potential top-line growth and profitability with attention to exit potential. Then, Marlin wrote a summary and sent it to what the firm called “a small group of carefully selected parties.” At least one of the choices was not intuitive: Abry Partners, a well-established Boston-based private equity fund. Abry specialized in traditional media, communications and information industries, rather than software companies serving energy, agriculture and transportation.
A stretch? Not with the right presentation.
“Abry had made most of its investments in the traditional media,” Mr. Marlin said. “They were open to more technology- focused investments as long as these targets had the right characteristics.”
He continued, “The challenge was to get both parties to see the potential benefits of working together.”
On August 17, Abry invested an initial $38 million in the form of convertible preferred stock with performance provisions and commitments for future capital infusions. In return, they took a majority ownership position. It was one of Abry’s first forays into the software sector. According to Mr. Marlin, the arrangement was a “creative transaction that gave disparate liquidity to founders, provided appropriate growth capital for the company and allowed management to participate significantly in the future success of the business.”
At the M&A Advisor’s Middle Market Financing Conference in Chicago this week, the deal was named Financing Deal of the Year in the Equity category.
- Warren Strugatch |
|
My personal congratulations to all the finalists and everyone in their deal teams, many of whom accompanied the nominees to the conference and gala. Nothing happens in a vacuum, and I’m certain that behind every finalist was a deal team as dedicated to excellence and success as the leader. If I could find trophies big enough to list every name, I’d use them – if I could lift them.