With the market plunging, the bust of Internet companies and an economic slowdown, investment bankers found deal-making in the first quarter a harder proposition than selling ice to an Eskimo.
“The M & A; activity is down, there is no question about that,” said Andreas Graham, senior vice president of the Newport Beach office of Barrington Associates.
Only 17 merger and acquisition deals took place in OC in the first quarter, compared with 27 for the year-ago period. And the total volume declined 36% to $1.58 billion.
The M & A; data was compiled by New York-based Broadview International LLC.
The decline was steeper on a sequential basis. In the fourth quarter, OC saw 32 M & A; transactions valued at $4.17 billion.
In the first quarter, Irvine-based Broadcom Corp. accounted for 85% of the total M & A; dollar volume with one deal: its January acquisition of Silverworks Corp. for $1.35 billion. The rest of the OC deals were relatively small.
“We are feeling the same sort of things that the market is feeling. We are feeling the down volume,” Graham said.
“The currencies (stock price) that people have been using have been devalued significantly,” said Charles Ruck, an M & A; attorney in the Costa Mesa office of law firm Latham & Watkins.
Also, the market declines have made acquirers less willing to pay lofty valuations for buyout targets. Thus, a fall in stock prices is having a cascade effect on the valuations of private companies.
But while volume was down, there still were companies acquiring to strengthen their product portfolios or simply because other companies were available on the cheap.
“I have had in the last month three different deals where investors are looking at acquisitions out of bankruptcies,” said Ruck, noting that bankruptcy filings have risen as the economy and investment have slowed.
He added that in bankruptcy proceedings “you can take the good asset and leave the bad ones.”
“There are also private equity funds that are looking at buying companies,” Ruck said.
“We are seeing some activity in the technology area,” Graham said. “There are clearly people who are looking for partners in the technology realm.”
He said that while the general M & A; activity is down, Barrington’s industrial restructuring group has seen a significant pickup in activity over the past six months.
In 2000, the M & A; activity on a nationwide basis declined for the first time in nine years. The total value of M & A; deals declined by 7% to $1.325 trillion according to data complied by Los Angeles-based Mergerstat. n
