Positive M&A trend gaining momentum for midsized private companies 

A recent survey by the Brunswick Group gives further support to what we are seeing for M&A Activity in the Midwest. The positive start for Oklahoma and Midwest mergers and acquisitions activity in 2011 is gaining strength and momentum.

Here are some standouts from this survey:

– 92% of survey participants believe that 2011 deal activity will continue to increase through the remainder of 2011. There have already been $302 billion in deals announced so far this year.

– Biggest drivers to this increase in M&A volumes: i) the confidence of CEOs and board members, ii) an improving economy, and iii) cash on balance sheets.

– 57% expect transaction to be financed with all cash, compared to only 28% in last year’s survey.

ClearRidge observation: We have seen higher valuations than last year and two of our current M&A deals are looking like they’re going to be all cash at closing.

Across the board, we are seeing the same trend. All cash at closing is being used as a significant differentiator when multiple buyers are competing to acquire a company. When a client is choosing between multiple purchase offers, we would have previously seen a preference for the highest absolute price, but recently business owners have been more inclined to pick the all-cash deal that is not contingent on the buyer securing financing for the acquisition or the seller financing the transaction. Agreeing to a Letter of Intent that offers all cash i) increases the likelihood of a successful closing, ii) reduces due diligence time and other time-intensive requirements (no third-party lenders to satisfy), and iii) the buyer already has a solid understanding and motivation to acquire the company without needing to convince third-party lenders and investors.

In uncertain times, many business sellers are inclined to select the most secure and stable buyer that offers the smoothest run to the finish line of the deal. It also makes it an easier call when valuations are exceeding seller expectations.

– 14% of survey participants expect foreign acquisitions of US companies to drive the US M&A market higher in 2011.

ClearRidge observation: We see the same thing. Around half our live deals have significant interest from one or more major international corporations from S.E. Asia, Middle East, S. America and Europe. It’s a good time to be selling a midsized private company.