Ohio M&A activity picking up after two lackluster years

RICK ADAMCZAK | Daily Reporter

Published: 12/01/2010

Following a couple of moribund years it looks like there's growing activity among buyers and sellers of companies. "In the last quarter it's come back like a banshee," said Emmet Apolinario, president of the Ohio Business Brokers Association.

That's certainly welcome news for an industry battered by the recession that started in 2007 when many investors lost money and had none left over to buy companies. Those who did have cash or credit remained quiet, wary of the economy's future.

Apolinario, in fact, said membership at the Ohio Business Brokers Association has plummeted more than 40 percent since the start of the recession.

But the mergers and acquisitions landscape has brightened in recent months as worries about the economy have calmed.

"(Next year) is looking pretty bright," said Apolinario. "It will be an improvement from 2010. Investors are coming out of the woodwork who we've never heard from before, who had their money on the sidelines."

He attributed the boost in activity, at least in some part, to the passage by Congress of the Small Business Jobs and Credit Act of 2010.

Signed into law by President Barack Obama in September, part of that law includes enhanced U.S. Small Business Administration loans that are 90 percent guaranteed by the federal government. The law gave the SBA $14 billion in additional funding for banks to loan to small business owners.

In the first week of the Jobs Act, the SBA has stated it provided nearly 2,000 loans totaling nearly $1 billion in lending support.

"The dealmakers are really taking advantage of this, especially the smaller ones since it's for (loans) of $5 million or less of value," said Apolinario. "We were cued up for it, so when it hit things were busy."

The SBA loan provisions, however, expire Dec. 31 and money available for the program could even dry up before then, he said.

The outlook for 2011 will depend somewhat on whether those loan provisions are extended beyond Dec. 31, said Apolinario.

"It depends on what the fed does. We're hoping it's renewed," he said. "If it's not renewed lending will still happen, deals will still happen, but not at the hectic pace we've seen."

He said there's a "perfect storm" that's making smaller deals very popular, with some unemployed workers or Baby Boomers who are looking to buy small businesses.

Existing and established franchises are popular targets for investors, especially those in the service industry, but not so much in the food sector. Environmentally friendly industries and technology companies should also see an increase in mergers and acquisitions activity in the coming months, Apolinario said.

Meanwhile, larger deals are happening, most notably at the local level.

Dublin-based Cardinal Health's announcement Monday that it's acquiring Chinese pharmaceuticals distributor Zuellig Pharma for $470 million. Earlier in November Cardinal Health announced it had agreed to buy Kinray Inc., a pharmaceuticals distributor based in New York, for $1.3 billion.

"They're coming into 2011 with an appetite for bigger companies," said Apolinario. "We're going to see growth among the (larger acquisitions) because there's a lot of pent-up energy."

Several national and even global predictions confirm Apolinario's assessment that mergers and acquisitions activity is picking up.

According to a survey conducted by Thomson Reuters and Freeman Consulting Services, the 150 people polled expect deals to rise by 36 percent worldwide to $3.04 trillion in 2011, the highest figure since the $4.28 trillion recorded before the credit crunch and banking crisis started in 2007.

The Ohio Business Brokers Association is a non-profit corporation founded in 1987. The group helps align prospective business buyer with businesses that are for sale.

Copyright © 2010 The Daily Reporter - All Rights Reserved


View the article on the Daily Reporter website HERE.