With tech firms setting the pace, M & A; activity in OC surged to new heights in the past year as OC firms were involved in 307 announced deals, up from 257 in the prior 12 months.
“It’s been busy,” said Bill Gay, an M & A; attorney with the Irvine office of Snell & Wilmer.
Peter Dolbee of Ernst & Young’s Irvine office said he’s seeing increased activity “across the board, but there’s a high percentage that is tech-driven.”
The OC numbers, compiled for the 12 months ended March 31 from Mergerstat data and from the Business Journal archives, mirror the national trend.
According to Mergerstat, there were 9,192 M & A; transactions in the U.S. in 1999, a 17.7% jump from 1998, and announced valuations totaled $1.4 trillion, up 19% year-to-year.
In OC, computer-related firms,including everything from chip makers to dot-coms,were involved in 113 of the deals, 80 of them as buyers. Active acquirers included chip makers Broadcom Corp. and Conexant Systems Inc. (see story on page 30), application service providers FutureLink Corp. and TriZetto Group, and Quest Software Inc.
Gay attributes the activity in the tech sector to the current nature of the beast.
“A lot of companies have a lot of cash,” Gay said. “They will acquire new technology instead of trying to have everything occur to them internally. … In the software industry in particular, you often have a whole company built around one application, and they want to diversify.”
Meanwhile, he said, “an industry buzzword is ‘strategic alliances,’ and a lot of these have led to M & As.; … As long as you have these relationships, you’re going to have opportunities.”
The largest OC deal in past 12 months,and the largest ever in the county,was also one of the more problematic. In March, Newport Beach-based TriZetto announced it would buy Westport, Conn.-based IMS Health Inc. in a stock deal that would leave IMS management in charge and IMS shareholders with 88% of the combined firm, though it would retain the TriZetto name and OC headquarters. When announced, the deal was valued at $8.1 billion, but the next day the Street, seeing it as a poor fit, hammered both stocks and drove that valuation down to about $4.6 billion. The companies said they would proceed with the merger nonetheless.
The finance sector continued to be a hotbed of M & A;, as Irvine-based Fidelity National and Santa Ana-based First American Financial Corp. vied with each other for national dominance in title insurance.
Fidelity took the “one fell swoop” approach with the Chicago Title deal, while First American pursued a strategy of buying up more-digestible local and regional firms, posting 17 deals in the 12-month period.
Other busy OC financial-services buyers included American National Financial, with three pickups, and the budding e-Net Financial Corp., with six.
Meanwhile, a couple of OC firms in niche sectors were making news. Irvine-based Caliber Collision Centers continued its effort to consolidate the auto-body industry in Southern California and Texas. And building-supplies outlet chain White Cap Industries Inc., whose own industry-consolidation effort stalled about a year ago, was itself bought,taken private by a management group.
The high level of activity is expected to continue, rising interest rates and market volatility notwithstanding.
“People have made so much money in the past several years,” said Ernst & Young’s Dolbee. “Investment funds are just bloated and looking for good opportunities to invest. … It’s an upward spiral.”
Joe Carruth, head of the corporate practice at Rutan & Tucker in Costa Mesa, agreed.
“We’re running at maximum capacity, looking for lawyers and turning away work,” Carruth said. But, he said, the firm is not turning down M & A; jobs.
“That’s what we like to do,” he said.n
