The March Group M&A Musings Blog

With Cash in Abundance Strategics Are on the M&A Hunt

As we have posted before, strategic players are sitting on large sums of cash because of the cost cutting strategies implemented in 2008 and 2009 (Strategic Buyers and Cash - February 2, 2010). Now the question becomes what will they do with all that cash?

According to a recent article in the Wall Street Journal, one option will be to aggressively pursue acquisitions. As the Wall Street Journal put it, one year removed from the trough of the recession, American corporations continue to hoard more cash than ever. There are now tentative signs that they are finally comfortable using the money to do some shopping.

The 382 nonfinancial firms in the Standard & Poor's 500 that have reported results for the fourth quarter of 2009 are now holding $932 billion in cash and short-term investments, according to a Wall Street Journal analysis of data from Capital IQ. That sum is up 8% from the third quarter and up 31% from a year ago.

At a time of low interest rates, reopened credit markets and growing optimism about the economy, CEOs and their boards seem to be questioning the wisdom of sitting on all that cash. And with the S&P 500 still trading 29% below its October 2007 peak, companies are deciding that cash is their preferred currency for acquisitions-rather than shares they see as undervalued.

After a season of saving for a rainy days, some corporations are starting to become more comfortable with spending money and hunting for new deals, Money & Investing deputy editor Dennis Berman reports. "We are sitting on a lot of cash and generating a lot as well," said Wade Miquelon, chief financial officer of drugstore chain Walgreen Co., which last month spent $618 million for the New York City drugstore chain Duane Reade. "Sitting around on all that cash and have it earning very little interest really does not make a lot of sense."

Like a lot of U.S. companies, Walgreen cut costs during the past year, in its case halting store openings and reducing inventory. Mr. Miquelon said the moves saved the company about $2 billion in cash-freeing up money it later used in the Duane Reade deal. "We are conservative with our cash, but hoarding it right now isn't probably the best use of it," he said.

That wasn't the corporate approach for the past two years. As the economy suffered in 2009, corporate executives assumed a defensive crouch, cutting jobs and capital spending, waiting to survive the storm. Alcoa Inc., for example, pegged top executives' 2009 compensation to goals for increasing the company's stash of cash, according to regulatory filings. Because of this, despite a 31% drop in revenue, Alcoa nearly doubled its cash to $1.5 billion during the year.

The most visible use of cash is coming in the mergers arena. When taking into account all the money spent on deals, 55% of the consideration during 2010 has come in the form of cash. That number was 40% in 2009. The highest figure during the past decade was 57% in 2007, at the height of the leveraged-buyout boom, according to Thomson Reuters.

"In many cases, if you use cash for share buybacks or dividends you are signaling to the market you don't have a better use for the cash," said Paul Parker, Barclays Capital head of global M&A. "For most CEOs, that message is the last one they want to send."

Among the all-cash deals to be completed this year: Bank of New York Mellon Corp.'s $2.31 billion purchase of a PNC Financial Services Group Inc. division, and Diamond Foods Inc.'s $615 million purchase of Kettle Foods Inc. last week. Other all-cash offers made this year, but not completed, include Air Products & Chemicals Inc.'s $5.12 billion hostile offer for Airgas Inc. and hedge fund Elliott Associates' offer this week to acquire technology provider Novell Inc. for $2 billion in cash.

"The specter of late 2008 was still fresh in our minds, but we felt more comfortable using cash now because we are seeing some positive signs of where the economy is going," said Sal Ianuzzi, chief executive of Monster Worldwide Inc., which on Feb. 3 announced plans to acquire Hotjobs.com from Yahoo Inc. for $225 million in cash. The online job site was sitting on $250 million in cash, had access to about $300 million in a credit line and felt like it could get even more if needed.

Mr. Ianuzzi said that he and other CEOs also expect their shares will move higher so it is better to use cash now for deals. "Our view about the economy also makes us think our stock is undervalued. So you take what your shares trades at now ... and you compare that to the cost of cash and financing that cash. For us, it was pretty easy decision to go with all cash," he said.

The data discussed above can be seen visually in the following chart:

As shown, the amount of cash sitting on the balance sheets of nonfinancial firms is an astounding $932 billion. Obviously, not all of this will be used to fund acquisitions. Many firms will continue to horde it for fear of a double dip recession. Others will use it to buyback stock (although as mentioned, some CEOs may not want to send the message that this is the best use of their cash).

The really good news for middle-market business owners is that given the typical size deal in this niche, cash will begin to make up an even bigger part of the overall deal structures used by corporate buyers. Simply put a deal valued below $20 million is more easily closed using cash than a deal valued at $200 million.

Because of information like this, it is time for you to begin exploring your exit plan options. We find that too many middle-market business owners do not have an exit plan in place to take advantage of situations like this. If nonfinancial strategic players are sitting on over $900 billion in cash, and are looking to make acquisitions, it is imperative that you begin to plan for your exit in the next cycle. Don't wait until a crisis forces you to sell your company. Be proactive and contact The March Group so we can help you get started on your exit planning process today so you can be one of the business owners that "cashes" in on the cash being horded!

http://online.wsj.com/article_email/SB10001424052748704541304575100070504794264-lMyQjAxMTAwMDAwNDEwNDQyWj.html

The March Group: CoreTech Acquires U.S. Staffing Services Company

CORAL SPRINGS, Fla., March 8, 2010 - The March Group (TMG), a leading, private mergers and acquisitions advisory firm specializing in the sale of middle-market businesses, announced today that CoreTech Consulting Group LLC (CoreTech) acquired the assets of a March Group client. The March Group's client provides comprehensive consulting and staffing services for leading telecom and technology companies. The March Group introduced the parties last September and finalized the $11.8 million purchase on Feb. 1, 2010.

The March Group's client began building his privately-held IT staffing company eight years ago. The company has grown rapidly and now serves clients across the United States. The founder/president and all company employees will remain with CoreTech in their current capacities. Most of the company's assets were purchased and CoreTech has an option to buy the rest.

CoreTech, based in King of Prussia, Pennsylvania, is a provider of quality IT staffing, consulting and project solutions. Its services help companies leverage technology to enhance business processes. This is achieved by delivering high-impact, high-value staffing solutions and innovative strategies that bridge the gap between business and technology. This purchase increases CoreTech's U.S. market share and customer base.

The March Group created and executed a comprehensive marketing plan, evaluated suitors and financials, negotiated the deal and counseled its client through the entire purchase process.

"Seventy-five companies expressed interest in purchasing our client's company before we settled on three finalists," said The March Group's Managing Director Eric F. Rosenbaum who spearheaded this deal. "Of these finalists, CoreTech was the best fit because it satisfied our client's goals of providing economic security for his family and offering a retirement option in three to five years."

About CoreTech
CoreTech was founded in 1992 and in 2001became a subsidiary of Israel-based Magic Software Enterprises Ltd. (NASDAQ: MGIC). Magic Software is a global provider of multiple-mode application platform solutions - including Full Client, Rich Internet Applications (RIA), Mobile or Software-as-a-Service (SaaS) modes - and business and process integration solutions. Magic Software has 10 offices worldwide and a presence in over 50 countries with a global network of ISV's, system integrators, value-added distributors and resellers and consulting and OEM partners.

About The March Group
Founded in 1986, The March Group is headquartered in Coral Springs, Florida, and has offices throughout the United States and worldwide. The company employs over 200 professionals and has built a dynamic network of business contacts all over the globe. The March Group specializes in the marketing, negotiation and sale of privately held middle-market businesses. The March Group has successfully helped hundreds of business owners sell their companies by connecting them with buyers.

For more information about The March Group, please visit the following:
www.MarchGroup.com
www.Corporations4Sale.com
www.facebook.com/TheMarchGroup
www.Twitter.com/TheMarchGroup

Media contact:
Kelli Matonak
Corporate Marketing Director, The March Group
954-282-3336
kmatonak@marchgroup.com

The March Group Finds Improved Consumer Spending and Manufacturing

Recently released data points to continued improvement in several segments of the U.S. economy. According to an article in Reuters last week, U.S. consumer spending increased slightly faster than expected in January while the U.S. manufacturing sector grew, underscoring views economic recovery is progressing.

The Commerce Department said last Monday that spending rose 0.5 percent, increasing for a fourth straight month, after advancing by an upwardly revised 0.3 percent in December. Consumer spending in December was previously reported to have increased 0.2 percent.

Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.4 percent in January. "The message is continuing progress for the economy, if not as fast as hoped," said Pierre Ellis, a senior economist at Decision Economics in New York.

Also, an industry report said the U.S. manufacturing sector grew in February but at a slower rate than was expected. Analysts said it was still proof the economy is on the mend. The Institute for Supply Management (ISM) said its index of national factory activity declined to 56.5 in February from 58.4 in January. The median forecast of 80 economists surveyed by Reuters was for a reading of 57.5.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

The ISM number "is still at the second highest level since late 2005," said Peter Boockvar, equity strategist at Miller Tabak and Co in New York. "The data provides more evidence that manufacturing continues to lead this economic recovery."

Data like this continues to provide ample evidence that the economy is improving and that 2010 should be a year of economic recovery. Certainly no one can accurately predict what will happen economically. The only constant we do have is that every recession on record has been followed by recovery. Although this recovery may be different from others, being lead by growth in manufacturing and exports rather than consumer spending, it will still eventually occur.

The critical issue facing you as an owner of a middle-market business is timing. Your company has just survived the worst economic downturn in decades and your business may only just beginning to improve. Having missed the last M&A boom in 2007, you are probably, like most middle-market business owners, beginning to consider the eventual exit of your company. As you know too well, owning a business is high risk financial proposition! Having nearly all of your assets tied up in an illiquid investment is not wise in the longer term.

The March Group has been helping business owners just like you to determine their exit strategy and timing. The first step in deciding when you want to exit is determining how much your company is worth today. Once you know that, you can then decide if 2010 is the right time to exit.

We believe that with all the data pointing to recovery, 2010 should also be a year of growth in M&A activity. We hold free information workshops around the country that are designed to help you begin your personal exit planning process. Don't miss the next M&A recovery cycle as you did in 2007. Having managed to survive the latest recession, do you really want to be running your company during the next one? If your answer is no, then contact us so we can help you begin the process of exiting your company.

http://www.reuters.com/article/idUSTRE6202E120100301?type=GCA-Economy2010

The Private Equity Industry Off to a Busy Start in 2010

According to data released earlier this week, the private equity industry is showing signs of a solid turnaround in deal activity. According to Pitchbook News, 210 private equity investments have been completed or announced so far in 2010. February accounted for almost half of the total with 90 completed or announced deals, a nice improvement over the 77 deals last February.

Trends are beginning to emerge such as the attractiveness of the commercial services (45 deals), healthcare (30 deals) and information technology (27 deals) industries, as well as the increasing number of add-on deals, totaling 71 or 44% of all buyouts to be exact.

As we have been posting for months, with $400 billion in dry powder, equity groups will become much more active in 2010. The early data as reported by Pitchbook News certainly supports this assumption. And this also provides further support to our posting yesterday where we discussed the fact that financing is beginning to thaw as well.

What we find most interesting in the Pitchbook data is that 44% of all deals completed so far in 2010 are add-ons. For those of you not familiar with the term, add-ons are companies that are acquired by a PEG to be "added" on to an existing platform or portfolio company. As we posted on March 1^st, add-ons are a key strategy for equity groups. Essentially an equity group will make an initial investment via the acquisition of a company in a specific industry that the PEG believes will provide an ample return. Then, over the course of the next 5-7 years, the PEG will look for strategic acquisitions of add-on companies. This allows for the growth of the platform company in terms of revenue but also an improvement in the bottom-line as synergies combine to reduce overhead and other costs.

Most middle-market business owners do not realize that their companies may be attractive as add-ons to existing platforms. Keep in mind that PEGs, especially PEGs that specialize in middle-market deals, have revenue and EBITDA criteria that can go quite low for add-on opportunities. So don't assume that you are too small to be attractive as an add-on.

However, not every company will be attractive to a PEG as an add-on. Dozens of factors come into play as PEGs look at potential acquisition possibilities. And keep in mind that PEGS are professional buyers. They will look at hundreds of targets to acquire just one. Given these factors, it is really vital that you obtain the services of an experienced M&A advisory firm like The March Group. As we posted on March 2, 2010 (Why You Need an M&A Advisor) so many things can go wrong to kill a deal if you attempt to sell your company on your own. The March Group has successfully closed deals for over two decades. We would be glad to do the same for your company. Please contact us so that we can see if your business might make sense as an add-on for an existing PEG platform (or for any other buyer type as well).

Financing Beginning to Loosen for Private Equity Groups

Earlier this week Reuters ran an article covering a "summit" comprised of key players in the private equity arena. Called the "Reuters Private Equity and Hedge Fund Summit", it was being held earlier this week in several cities concurrently. The main theme was the on-going recovery in the private equity industry.

According to Reuters, private equity funds that were hit by the storm of the financial meltdown are now benefiting from a return of bank financing, deals, and pockets of opportunity to exit investments.

As financing and the ability to leverage deals returns, private equity firms are competing hard for deals and auctions are drawing crowds of names. "You have got a huge amount of private equity money chasing a small amount of decent assets that are being brought to market," said Simon Tilley, head of the European Financial Sponsors Group at Close Brothers Corporate Finance.

The thawing has been welcomed by firms which have been sitting on huge amounts of "dry powder," or available capital to spend. Tilley said a number of firms which raised capital in the strong fundraising climate of 2006 and 2007 face an ever-narrowing window in 2010 to deploy capital before their five-year investment period expires, at which point they have to go back to limited partners (the investors in private equity funds) to extend the period or cancel some of their commitments. This can have pretty serious negative consequences. If LPs feel firms have not managed their commitments well, they may not want to invest in subsequent funds, he cautioned.

This is great news for middle-market business owners! As financing continues to loosen, it will enable more and more equity groups to become active. More importantly, as mentioned, the investment window for many groups that raised tremendous amounts of capital in 2007 and 2008 is closing. Because of this, they literally will be forced to become more active as the time frame for either investing or canceling commitments approaches. Keep in mind that equity groups are sitting on over $400 billion in dry powder right now. Do you honestly believe that they will want to begin canceling those commitments? I highly doubt it.

Certainly not every middle-market business is a candidate for an equity group. However, as equity groups begin to become more active in 2010, they will start to compete with strategic players for deals. As this occurs, it will drive up valuations across the board.

The only way you can know for certain who the best set of buyers would be for your company is to seek the advice of experts in this field. An M&A advisory firm like The March Group can help to position your company to be attractive to a large buyer pool. We can then negotiate on your behalf to ensure the best terms and valuation for your company. Please contact us so that we can assist you in understanding the M&A process overall and show you how The March Group's time proven processes can help you gain your financial freedom.

http://www.reuters.com/article/idUSTRE61P4K120100226

Entrepreneur Magazine | E-mail is Making You Stupid

Thanks to The March Group's George Markis for sharing this article.

Be sure to check out "Climbing Out of the Inbox", tips for optimizing productivity with email.

By Joe Robinson | Entrepreneur Magazine - March 2010 

The research is overwhelming. Constant e-mail interruptions make you less productive, less creative and--if you're e-mailing when you're doing something else--just plain dumb.

Within the heart of your company, saboteurs lurk. Disguised as instruments of productivity, they are subverting your staff's most precious resource: attention. Incessant e-mail alerts, instant messages, buzzing BlackBerrys and cell phones are decimating workplace concentration. The average information worker--basically anyone at a desk--loses 2.1 hours of productivity every day to interruptions and distractions, according to Basex, an IT research and consulting firm.

That time is money. Computer chip giant Intel, for one, has estimated that e-mail overload can cost large companies as much as $1 billion a year in lost employee productivity. The intrusions are constant: each day a typical office employee checks e-mail 50 times and uses instant messaging 77 times, according to RescueTime, a firm that develops time-management software. Such interruptions don't just sidetrack workers from their jobs, they also undermine their attention spans, increase stress and annoyance and decrease job satisfaction and creativity.

The interruption epidemic is reaching a crisis point at some companies and shows no sign of slowing. E-mail volume is growing at a rate of 66% a year, according to the E-Policy Institute. More people are texting. More are using Facebook or Twitter for work.

"It's worse than it's ever been," says Michelle Rupp, owner of NRG Seattle, an insurance brokerage with a staff of 12 who feel pounded by the avalanche of messaging. "It's so hard to stay focused. Everything bings and bongs and tweets at you, and you don't think."

Yes, it is possible to blunt the interruption assault. But business leaders must go on the offensive in a realm most are oblivious to: interruption management.

The Myth of Multitasking
Human brains come equipped with two kinds of attention: involuntary and voluntary. Involuntary attention, designed to be on the watch for threats to survival, is triggered by outside stimuli--what grabs you. It's automatically rattled by the workday cacophony of rings, pings and buzzes that are turning jobs into an electronic game of Whac-a-Mole. Voluntary attention is the ability to concentrate on a chosen task.

As workers' attention spans are whipsawed by interruptions, something insidious happens in the brain: Interruptions erode an area called effortful control and with it the ability to regulate attention. In other words, the more you check your messages, the more you feel the need to check them--an urge familiar to BlackBerry or iPhone users.

"Technology is an addiction," says Gayle Porter, a professor of management at Rutgers University who has studied e-compulsion. "If someone can't turn their BlackBerry off, there's a problem."

The cult of multitasking would have us believe that compulsive message-checking is the behavior of an always-on, hyper-productive worker. But it's not. It's the sign of a distracted employee who misguidedly believes he can do multiple tasks at one time. Science disagrees. People may be able to chew gum and walk at the same time, but they can't do two or more thinking tasks simultaneously.

Say a salesman is trying to read a new e-mail while on the phone with a client. Those are both language tasks that have to go through the same cognitive channel. Trying to do both forces his brain to switch back and forth between tasks, which results in a "switching cost," forcing him to slow down. Researchers at the University of Michigan found that productivity dropped as much as 40 percent when subjects tried to do two or more things at once. The switching exacts other costs too--mistakes and burnout. One of the study's authors, David Meyer, asserts bluntly that quality work and multitasking are incompatible.

Brian Bailey and Joseph Konstan of the University of Minnesota discovered that sleeve-tugging peripheral tasks triggered twice the number of errors and jacked up levels of annoyance to anywhere between 31 percent and 106 percent. Their interrupted test workers also took 3 percent to 27 percent more time to complete the reading, counting or math problems. In fact, the harder the interrupted task, the harder it was to get back on track. (A Microsoft study suggests it takes a worker 15 minutes to refocus after an interruption.)

The damaging effects spread well beyond the office cubicle. Kate LeVan, a communications consultant in Evanston, Ill., coaches executives whose brains are so scrambled by electronic interruptions that they stumble during key face-to-face interactions: board meetings, investor pitches, sales presentations. "They can't have an extended conversation for more than a few minutes," LeVan says. "That's the impact of having all this data going back and forth. They have problems in conversation because they can't focus."

Here's how the brain behaves when your attention slips away from a task: The hippocampus, which manages demanding cognitive tasks and creates long-term memories, kicks the job down to the striatum, which handles rote tasks. So the gum-chewing part of the brain is now replying to the boss's e-mail. This is why you wind up addressing e-mails to people who weren't supposed to get them. Or sending messages rife with typos.

The striatum is the brain's autopilot. And no part of your business should be allowed to run on autopilot.

Climbing Out of the Inbox

E-mail multiplies like rabbits, each new message generating more and more replies. Want fewer distractions? Send fewer e-mails. Here are some helpful rules.

• Turn off all visual and sound alerts that announce new mail.

• Check e-mail two to four times a day at designated times and never more often than every 45 minutes.

• Don't let e-mail be the default communication device. Communicating by phone or face-to-face saves time and builds relationships.

• Respond immediately only to urgent issues. Just because a message can be delivered instantly does not mean you must reply instantly.

• Severely restrict use of the reply-all function.

• Put "no reply necessary" in the subject line when you can. No one knows when an e-conversation is over without an explicit signal.

• Resist your reply reflex. Don't send e-mails that say "Got it" or "Thanks."

• Use automatic out-of-office messages to carve out focused work time, such as: "I'm on deadline with a project and will be back online after 4 p.m."

Paying Attention to Paying Attention Read More-
 

The March Group Finds GDP Revised Upward

Last Friday, revised 4^th quarter 2009 GDP figures were released. The good news is that instead of being revised downward, which is usually the case, the annualized rate of growth seen in the 4^th quarter was revised upward!

According to an article in the Los Angeles times quoting the Associated Press, the economy rocketed ahead at a 5.9 percent pace in the final quarter of 2009, stronger than initially estimated. The fresh reading on the nation's economic standing, released by the Commerce Department last Friday, was better than the government's initial estimate a month ago of 5.7 percent growth. It would mark the strongest showing in six years.

Roughly two-thirds of last quarter's growth came from a burst of manufacturing. Indeed, factories were churning out goods for businesses that had let their stockpiles dwindle to save cash.

As we have posted before (Economists Say Recovery is Firmly on Track - February 25, 2010), forecasters at the National Association for Business Economics (NABE) predict the economy will expand at a 3 percent pace in the first quarter of this year. The next two quarters should log similar growth, they predict.

Unlike past rebounds driven by the spending of shoppers, this one is hinging more on spending by businesses and foreigners. Stronger spending by businesses and foreigners contributed to the bump-up in economic growth in the fourth quarter. So did the fact that companies stopped slashing their stockpiles of goods. During the worst of the recession, companies cut inventories at record rates.

Businesses boosted spending on equipment and software at a sizzling 18.2 percent pace, the fastest in nine years. Foreigners snapped up U.S.-made goods and services, which propelled exports to grow at 22.4 percent pace, the most in 13 years.

In normal times, such growth would be considered significant. But the nation is emerging from the worst recession since the 1930s. For all of this year, the economy is expected to grow 3.1 percent, according to the NABE forecasters. That pace would mark a big improvement from 2009, when the economy contracted by 2.4 percent -- the worst showing since 1946.

As many of you know, in the past the economy's recovery following recessions has been driven by pent up consumer spending. As noted, this recovery will be different and will be driven by business investment and exports, not short term consumer spending. Although this will moderate growth, in many respects, this could actually be beneficial to the longer term health of our economy. Everyone is well aware of the excesses of consumer spending the past ten years and the ravaging effects of credit's contraction because of these excesses. Having a recovery based on more stable, long-term growth factors such as business investment and exports may, in fact, be a good thing.

Also, pundits like to point out that unemployment is an issue. We are all aware that unemployment remains very high. However, unemployment has always been a lagging economic indicator in nearly every recession. In fact, according to many experts, unemployment doesn't tend to increase for two or three quarters after the economy starts to improve. This recovery will certainly be the same. As the economy recovers, and businesses continue to invest in plant and equipment, employment growth will surely follow.

However, we are not economic experts. We are experts in helping middle-market business owners navigate through uncertain times such as these. The key issue for you to consider is that despite uncertainty one thing is true: There are always active buyers in the market for well run, profitable middle-market companies. If you are considering the sale of your company, or if you are just interested in finding out more about the process with a goal of selling in 4-5 years, give the The March Group a call. We would be glad to discuss your many options with you. And, in fact, if the economy does grow by over 3% in 2010, you can expect M&A activity to expand as well. Meaning that this year may be a prime time to begin exploring your M&A options.

 

M&A Shows Signs of Big Rebound?

Thanks to The March Group's Joe Sagarra for sharing this article from CNBC-

Good News for Stocks: M&A Shows Signs of Big Rebound 

By: Jeff Cox
CNBC.com 

A spate of recent corporate deals has market pros thinking that M&A is back, providing opportunity for investors looking for a way to make money in a slow-moving market.

Three big weekend deals have highlighted a 10 percent increase this year in global mergers and acquisitions, a welcome change following an anemic year in 2009.

Companies used the past year to shore up their balance sheets after the wipeout in 2008 and now are expected to start putting that money to work.

"There's a tremendous amount of cash sitting on corporate balance sheets right now and it's earning almost nothing," says David Twibell, president of wealth management for Colorado Capital Bank in Denver. "My guess is we're going to see slower growth in the second half of the year than we're seeing now. If that's the case, companies looking for growth may have to go out and purchase it."

Investors have mostly welcomed the spate of recent deals, sending stocks up Monday despite some weak economic news:

• Prudential [PRU-LN  501.505    14.50  (+2.97%)   ] in London said it would purchase AIG's [AIG  25.03  ---  UNCH  (0)   ] Asian arm for $35.5 billion in the industry's second-biggest deal ever.
• Germany's Merck (not the Dow component) agreed to a $6 billion cash deal for US biotech tool maker Millipore [MIL  104.90  ---  UNCH  (0)   ].
• Analytics firm MSCI [MSCI  4628.63  ---  UNCH  (0)   ] agred to buy corporate advisory firm RiskMetrics Group [RISK  21.98  ---  UNCH  (0)   ] for $1.6 billion in a deal that will be about 75 percent cash.

The three acquisitions come on the heels of Dow component Coca-Cola's [KO  53.30  ---  UNCH  (0)   ] agreement last week to buy distributor Coca-Cola Enterprises [CCE  26.23  ---  UNCH  (0)   ] and a slew of smaller deals involving IBM [IBM  127.42  ---  UNCH  (0)   ] and a handful of other corporate titans.

Global M&A has amounted to $342 billion this year, a significant jump from the previous year that analysts attribute as much to a basic gain in confidence as with the availability of cash.

"There are still a lot of bargains out there in terms of industries wanting to consolidate, and that is going to play out to the positive side," says Peter Cardillo, chief economist for Avalon Partners in New York. "Downsizing only comes when you have hard times. But when you're feeling confidence that times are going to get better you seek out bargains. That story will continue."

As for who will benefit, Cardillo sees a rotation among sectors through the year as evidenced in the diversity among the early players in the M&A field.

Other leaders could be technology, pharmaceuticals and energy, according to Roy Williams, CEO at Prestige Wealth Management in Flemington, N.J.

But Williams also thinks the broad stock market will be the benefit, as increased M&A activity will show higher confidence that will spread to investors across the spectrum.

"Without question it will be positive for stocks," he says. "Consumers will start feeling comfortable if they see a lot of activity."

Financial services firms involved in the M&A transactions also could stand to benefit.

An exchange-traded fund often connected with the fate of the merger market, the SPDR KBW Capital Markets [KCE  35.84  ---  UNCH  (0)   ], gained amid the deal news Monday and is up more than 5 percent in the past three weeks.

The ETF holds solely financial services firms, with its biggest concentrations in Morgan Stanley [MS  28.70  ---  UNCH  (0)   ], Goldman Sachs [GS  158.75  ---  UNCH  (0)   ] and CME Group [CME  309.46  ---  UNCH  (0)   ].

To be sure, the climate is challenging for M&A as investors look for clearer signs of economic recovery, capital-raising remains challenging and lending activity has tumbled.

But Cardillo says some of those factors that make it tough for the initial public offering, or IPO, market actually make conditions better for M&A because of the strong cash positions many big companies hold after a year of running from risk.

Read More-

Why You Need an M&A Advisor

Recently Pepperdine University Graziadio School of Business and Management released their second annual capital markets survey. To create this study, Pepperdine surveys leading and key players across the capital markets spectrum about a number of differing topics. As usual, they have done another superb job in this latest survey. A number of key pieces of data caught our eye and we will be discussing them in future postings. One of the most revealing to us was found on page 61 of the study and is entitled "Time to Close Deal after LOI Signed". LOI stands for "letter of intent". This key document is what buyers sign to essentially indicate that they are planning to move forward with an acquisition. At this point, most sellers make the assumption that the deal is done and the check will soon be arriving.

Nothing could be further from the truth. Once the LOI is signed, the negotiations really begin, as does due diligence. At this point, if you are doing the deal on your own without professional representation, you better be prepared for a time consuming, painful process. As the following chart from the Pepperdine study indicates, based on their survey of private equity groups, nearly 38% of deals take 3-4 months to close AFTER the LOI is signed:

Source: Pepperdine Private Capital Markets Project - Survey Report II - Winter/Spring 2010, page 61. Pepperdine University Graziadio School of Business and Management.

Also note that nearly 25% of deals take between 4-6 months to close again, AFTER the LOI is signed. Not only is this a long, long time so many things can happen in that time frame to kill a deal. The longer it takes to close a deal, the higher the probability that the buyer will find something of concern that may affect the final valuation, the terms, or the deal itself.

This is further proof that it is vital to have professional advisors to guide you during the M&A process. If you are attempting to sell your company on your own, you need to plan on it taking 12-18 months and require at least 1,000 hours of your time. And that assumes a smooth transaction. You will also need to literally be available around the clock once the LOI is signed to answer a myriad of questions that usually arise as your buyer begins to dig deeper and deeper into your books and operations.

An experienced M&A advisory firm, like The March Group can help you both prepare for the entire process by preparing documents that answer key questions in advance AND, most importantly, guide you through the LOI phase and help you prepare answers to detailed and difficult questions that always arise. Again, you can attempt to sell your company on your own. However, chances are good that the buyers will negotiate terms that are more beneficial to them than to you. And who has 1,000 hours to spend on a process like this?

The March Group has been aiding middle-marketing business owners through the LOI process for over 24 years now. Our experience in dealing with professional buyers will enable you to not only get a better price for your business but also more favorable deal terms. Keep in mind this old axiom in our business: 60% of all deals fall apart at least once! We have the experience to prevent that from happening and if it does happen, to get the deal back on track with either the same buyer or a new one.

If you would like to learn more about how we can help you, please contact us. We would be glad to walk you through our time tested process and show you how we can help you obtain the highest value for your company in the shortest time frame possible. And thanks once again to the Professors and students who have done such fine work as usual in the Pepperdine Capital Markets Survey for 2010.

Add-Ons: A Key Strategy for Middle-Market PEGS

Last week it was announced that FleetPride had acquired Mandal Truck and Trailer. This acquisition represents its fourteenth add-on acquisition in the past two years. Mandal Truck, like FleetPride is a distributor of aftermarket heavy-duty truck and trailer parts. The deal brings FleetPrides total locations in California to 20 and strengthens its presence in the agriculture rich San Joaquin valley. FleePride is owned by Investcorp and Banc of America Capital Investors.

The March Group is quite familiar with FleetPride and its acquisition plans. E. H. Burrell is one of the fourteen companies that FleetPride has acquired in the past two years. The March Group represented E. H. Burrell in the transaction which closed in November of 2008. E.H. Burrell is a wholesale distributor of parts and accessories for commercial trucks and heavy equipment. You can see more details on the transaction on our website at:

http://www.marchgroup.com/news/news.php?pageID=32&PressID=32

Growing and developing portfolio companies through add-on acquisitions is a core strategy for many private equity investors. According to PitchBook News, since the beginning of 2009 252 private equity investors have completed an add-on acquisition. The three most active are The Carlyle Group with twelve, and The Riverside Company and Parthenon Capital Partners with ten apiece.

Two items caught our attention in this news: First, despite all you heard last year about deal making being dead, 252 equity groups completed add-on acquisitions! This is significant. Why didn't you hear about these? Simply because most add-on acquisitions are smaller and therefore do not receive the press that larger, mega-deals do. Secondly, middle-market equity groups buy platforms with the expressed interest in adding well run add-on companies to their platform companies (just like FleetPride did in 2008 with E. H. Burrell). So although your company may not be large enough to be acquired by an equity group as a platform, chances are very good that your company may be large enough to be acquired as an add-on.

The great news for most middle-market business owners is that in many cases, the equity group takes majority ownership but current ownership remains with the company as a minority owner. Then the minority owner has the opportunity to participate in a secondary liquidity event later when the much larger platform company (plus add-ons) is either sold or taken public. So you can often recapitalize your company, taking part of your company in cash now while retaining a minority interest. This can be quite lucrative in many cases as the larger entity five years down the road usually has a much bigger valuation and hence, a greater return for you.

However, the only way you can know if your company would be a good target for an equity group (or any other buyer for that matter) is to use the services of an experienced M&A advisory firm. The March Group has been helping to unite middle-market businesses with premium buyers for over 24 years. We have the experience in negotiating deal structures that will not only give you the greatest valuation now but also potentially enable you to earn significantly more in a secondary liquidity event.

Again, the only way you can know if this would be possible for your company is to contact us so that we explain the entire process to you. We hold free informational workshops around the country that are designed to educate you, in a few short hours, on the various methods we use to optimize your value in the market. Please contact us so we can reserve a place for you in our next workshop in your area. If 252 add-ons were closed in 2009 during a recession imagine how many add-ons will be acquired in 2010 and 2011 as the economy starts to boom? Your company could be one of them!

PS - and if you are the owner of an after market commercial truck parts distributorship, you really need to call us! FleetPride is very active in this niche as we learned when we sold E. H. Burrell to them in 2008.