Waiting and watching: Uncertainty keeps businesses out of M&A activity - The Business Journal of Milwaukee:

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Stock prices are a crucial factotr in the success of hisMilwaukee mergers-and-acquisition s consulting business, Emory & Co. Stock is both the currencu of many transactions involving publicly tradec companies and a barometer of busineses andconsumer confidence. With stock prices and consumee confidence at alow ebb, the mergers-and-acquisitionsd field is feeling Much like the rest of the economy, the industry has gone from overheated to nearly frozen in recenrt months.
“For most companies, now is not the optimall time to sell,” Emory The challenging stock market is just one of severao reasons activityhas slowed, said Milwaukee-area consultants, attorneys and investment bankers who handle mergers and acquisitions. Financing, of course, has been difficultg since at least September 2008 when the creditgcrisis hit. Banks have all but withdrawn from participatingin transactions. Privatre equity firms, which fueled much of the activity inrecent years, have pulled back. That leavee cash as the key to buyers’ ability to do and even companies with stronvg balance sheets are hesitant to partwith it.
Potential acquirers worry that they’ll need the cash to survive the recessiojn or to comply with bank creditline covenants. “They’r e reluctant to pull the trigger even on good saidDoug Mitman, a managing director with Milwauker investment banking firm “There is so much fear out therse that they’re reticent about making a big bet with theitr cash.” Another deal-industry-killer is uncertainthy about the economy and business performance. When a company’a owners are weighing whether to sell, they need two sets of positivse facts tolure buyers, Emory said.
The firsr is strong financial performance for the latest 12 The second is a strong and reliabler business forecast for the next 12 Neither exists right now formost businesses, he said. Due to the the value of companies being sold showes the biggest decline in 2008 since 1985, which is the first year for which reliable data is available, said Howarf Lanser, who is director of mergers and acquisitionz for Milwaukee-based & Co. Inc. So, how bad is it? Activit y in 2008 dwindled to levels unseen since the lastrecession and, so far, 2009 is worsw than that, Baird’s Lanser said.
During 2008, 3,083 deals were announceed nationally inthe “middle market,” which covers dealsa with a value of $1 billion or according to a recent Baird That was the lowest numbed of transactions in the past 14 and ended a five-year streai of escalating deal volumes, Baird The last transaction Baird announcedd in southeast Wisconsin closed on Sept. 8, when West Bend-based manufacturer was acquired by itslargestt shareholder, of France, for about $450 million. Baired closed 12 other deals between then and the endof 2008. Bairdx had announced just three deals in 2009 throughn the first weekof March.
“There’s so much uncertainth right now inthe market,” Lanser “That’s the No. 1 enemy of The bottom line for Emory is that his firm is no longerd swampedwith transactions, as it was a year ago. Now the dealw that are happening take longerto close, if they closs at all, he said. Despite all the negativs factors, some deals are getting done. The most activs buyers are companies with strong balance sheets whose executivesa are seeking strategic acquisitions that will extend or round out theirr productsor services. Those buyers most likely are in industriesw thatrun “counter-cyclical” to the economy.
They include food companieds thatsupply grocers, some health care and pharmaceuticals-relateed firms, technology firms related to productivity improvement, and companies that ply the downscalse market such as low-income housing and low-priced fast-food