The past year’s mergers and acquisitions brought the big guns of Corporate America to Orange County.
Several household names, including Starbucks Corp., IBM Corp., EMC Corp. and Washington Mutual Inc., snatched up local companies or units, stealing the spotlight from private equity firms.
“A lot of blue chip companies are coming and zeroing in on stable, strategic acquisitions,” said Jeanne Malmo, director of business development for RoseRyan, a consulting firm in Irvine.
OC companies were involved in 292 deals announced during the 12 months through February, according to market tracker FactSet Mergerstat LLC. That’s down from 345 a year earlier.
The M & A; count includes two types of deals: buys by OC-based companies or units and acquisitions of OC businesses or units by other companies.
The list doesn’t include deals that didn’t have values disclosed. Those with prices don’t include cashed out options or cash payments in their calculations.
The last time the number of deals declined was in 2005. Even that decline was slight, with 286 deals announced in 2005, down from 297 in 2004. The number of deals in 2004 and 2005 were up from the low point of 2003, when there were only 208 deals announced.
The most notable deals not on the list because terms weren’t disclosed were Hewlett-Packard Co.’s acquisition of Laguna Niguel-based Bitfone Corp., which it wrapped up in February; and private equity firm RedZone Capital Group LLC’s planned buy of 1940s-style burger chain Johnny Rockets Group Inc., based in Lake Forest.
Add to that set Santa Ana-based Ingram Micro Inc., the largest technology distributor. Ingram said in June it would by SymTech Nordic AS, a distributor in Norway, for undisclosed terms.
There’s some overlap with certain deals appearing on both the buyers and sellers lists. Newport Beach-based Acquicor Technology Inc.’s $260 million buy of Newport Beach-based Jazz Semiconductor Inc. appears on both.
In all, there was $14.3 billion worth of OC buys and sales during the period. That’s down almost 50% from a year earlier.
The reason: Deals a year earlier featured a number of blockbusters.
The top three deals for that period were UnitedHealth Group Inc.’s $8.1 billion buy of Cypress-based PacificCare Health Systems Inc, Wachovia Corp.’s nearly $4 billion buy of Irvine’s Westcorp Inc. and Allergan Inc.’s $3.2 billion buy of Inamed Corp.
Deals announced during this past year were nowhere near such price tags.
Following the national lead, OC has been a hotspot for M & A; activity this year.
“2006 was an exceptional year for M & A;, almost at levels of the crazy peaks of the dot-com years,” said Murray Rudin, a partner at Los Angeles-based private equity firm Riordan, Lewis & Haden Inc. and head of the OC office. “You have a lot of eager buyers and a steady amount of sellers.”
The top five buys by local companies totaled about $2 billion during the past year, down from nearly $7 billion a year ago.
“The dollar volume is a much less useful metric,” Rudin said. “It can be skewed so easily from one big transaction.”
OC companies sold at a premium.
“It’s a good time to be a seller because multiples are high,” Rudin said. “It’s a supply and demand issue, and there’s a lot of dollars out there sloshing around.”
Leading the sales group was Sybron Dental Specialties Inc. In May, Danaher Corp. bought Newport Beach-based Sybron, a maker of dental products, for nearly $2 billion.
Washington, D.C.-based Danaher is best known for its Craftsman tools sold in Sears Roebucks & Co. stores.
Coming in second was IBM’s $1.5 billion acquisition of software maker FileNet Corp.
FileNet’s Costa Mesa campus now is IBM’s headquarters for its enterprise content management software unit.
Third was the billion-dollar acquisition of Newport Beach-based homebuilder John Laing Homes by Dubai’s Emaar Properties, a developer of futuristic masterplanned cities in the Middle East and Asia.
The biggest all-local deal was Santa Ana-based Advanced Medical Optics Inc.’s $718 million pending buy of IntraLase Corp., an Irvine maker of lasers for vision correction surgery.
Private equity firms had a smaller role locally this year.
Newport Beach-based Marwit Capital LLC, a private equity firm that targets companies with revenues of $10 million to $100 million annually, was the most active with two deals, both outside OC. It bought El Monte-based Driftwood Dairy for $22 million and Promax Nutrition Corp. of Concord for $15 million.
Historically low interest rates helped fuel deals.
“We have a very generous credit environment,” Rudin said. “Banks continue to be extremely accommodating for how much they are willing to lend.”
The stock market’s strong performance during the past year and the overall healthy economy encouraged the activity, too, Rudin said.
Big public companies came calling, looking to make strategic buys.
Take Advanced Medical: Its IntraLase buy is part of the company’s push to boost its refractive eye surgical business.
Some companies were going after a particular technology, such as HP’s buy of Bitfone. The deal gave the computer maker Bitfone’s cutting edge software for updating mobile phones remotely.
Other companies looked to acquisitions as a way to further growth, such as Seattle-based WaMu’s $912 million buy of Irvine’s Commercial Capital Bancorp. WaMu gained a handful of branches through the deal.
“There’s always pressure from Wall Street to have growth,” Rudin said.
Some other notable deals during the past year:
n Santa Ana-based title insurer First American Corp. went on a buying spree this year in an effort to diversify its business. Through its publicly traded subsidiary, First Advantage Corp. of St. Petersburg, Fla., it made acquisitions on a near-monthly basis for a total of 12 deals. The biggest was First American’s $100 million buy of Sacramento-based CoreLogic Systems Inc., which provides software to mortgage lenders, investors and insurers. Terms of the other deals weren’t disclosed.
n San Clemente-based hotel operator Sunstone Hotel Investors Inc. bought about $261 million worth of hotels during the past year. Sunstone, a real estate investment trust with a recent market value of $1.6 billion, bought the Embassy Suites Hotel in La Jolla, the W in San Diego and Marriott International Inc.’s Renaissance Montura Hotel in Los Angeles. Sunstone owns some 60 hotels across the country.
n Aliso Viejo-based Smith Micro Software Inc. struck three deals this year in a bid to diversify. The company spent a total of about $35 million for PhoTags Inc. in Aliso Viejo, Ecutel Systems Inc. in Herndon, Va., and Insignia Solutions PLC of Campbell. The deals mark a turnaround for Smith Micro, which was mired in years of red ink until 2004, when it landed a big contract with New York’s Verizon Wireless, part of Verizon Communications Inc. Verizon makes up about three-fourths of Smith Micro’s sales.
The company makes the software that gets laptops, digital assistants and wireless phones linked to the Internet on citywide networks.
n And OC’s homegrown coffeehouse chain, Irvine-based Diedrich Coffee Inc., made nice with rival Starbucks. In January, Diedrich sold its coffeehouses to Starbucks for $13.5 million. Diedrich said it planned to focus on selling coffee to restaurants, specialty stores and other customers.
The shift closed a chapter for Diedrich, which tried to take on Starbucks in the 1990s and at one time was the No. 2 coffeehouse operator.
Other notable names included a deal between Irvine-based Freedom Communications Inc. and the Tribune Co., parent of Los Angeles Times. Freedom struck a $17 million pact to buy Albany’s WCWN-TV, a WB affiliate, from Chicago’s Tribune Co.
In October, Santa Ana-based circuit board maker TTM Technologies Inc. bought Tyco International Ltd.’s circuit board business for $226 million.
The move was huge for TTM. The Tyco unit did $383 million in sales last year, versus TTM’s $274 million.
