|
Smaller mergers booming in spite of credit woes
By Dan McCue
Staff Writer
The ongoing credit crunch might have put the brakes on large, high-profile mergers and acquisitions, but it’s proving to be a bonanza for deals in the $20 million to $200 million range, which is the typical range for the sale of many South Carolina companies, say attorneys involved in such deals.
“There’s no question that from a national perspective, the really big deals, those for $200 million and above, have dried up,” said Gus. M. Dixon, a partner in the Columbia law office of Nelson Mullins Riley & Scarborough LLP, whose specialties include mergers and acquisitions. “That’s largely attributable to the large leveraged-buyout firms having pulled back their financing. After all, the bigger the deal, the more debt that typically needs to be incurred.”
Dixon said that creates a situation where a lot of people with capital are making more modest corporate purchases.
“As a result, our office is handling an awful lot of that business. In fact, it’s one of the busiest periods we’ve ever seen in the mergers and acquisitions market,” he said.
Nationwide over the past year, $754 billion in acquisition offers has been withdrawn, more than in any year since 2000, according to Thomson Financial.
“Historically we’ve seen a lot more deals in the Upstate, and that trend has continued during the credit crisis,” Dixon said.
Financial industry mergers
During the fourth quarter of 2007, two mergers were between companies that started small and grew in the financial services industry.
In November, South Carolina Bank and Trust received approval for its purchase of the Scottish Bank of Charlotte, N.C. In December, First National Bancshares’ purchase of Carolina National received approval from the U.S. Comptroller of the Currency, expanding First National’s reach from the Spartanburg area to Columbia.
“In a sense, South Carolina has been blessed,” said Penny Delaney Cothran, vice president of the South Carolina Bankers Association. “Despite all the subprime hoopla that you hear so much about, bank mergers have been chugging along at about their usual pace of four or five a year.”
In both cases the moves were predicated upon strategic considerations that extend far beyond current economic conditions, Cothran said.
“It’s always strategy, moves into other markets, when it comes to banking mergers,” she said. “And I think the fact that these mergers are occurring at the same rate as the last few years speaks to another important point: People hear about the credit crunch and immediately think of banks. But it really hasn’t hit our sector directly. The people who are really being hit hard by the credit mess are those in the mortgage business.”
Bobby Pearce, a partner in Nelson Mullins’ Charleston office, said while the business mix in the Charleston region is certainly different from that in Greenville, here, too, the mergers and acquisition market, at least on relatively smaller deals, remains firm.
“It’s not booming, but I’d have to say we’re seeing a pretty good volume of merger and acquisition activity, and I think that’s definitely a result of it being easier to finance a small transaction,” he said.
Pearce said it was a great time to be the owner of a smaller company because buyers are no longer able to look at major acquisition candidates.
“If you’re the owner of a profitable, privately held business, you’re going to get more attention right now than you might have in the past,” he said. “Our 25 to 30 attorneys who handle mergers and acquisitions have never been busier.”
But that’s not to say that there aren’t concerns out there regarding even small and mid-market deals. According to Dixon, the overriding concern is that as the credit crunch grinds along, it will start taking a bigger and bigger bite out of consumer confidence.
Credit crunch chill
“Once that happens, or rather, if that happens, what you will begin to see is the chill of the credit crunch spreading beyond the source of capital side to consumer spending of all kinds,” Dixon said.
Already, some economic indicators seem to suggest that spending across the economy is tightening.
In January, the U.S. Department of Labor reported a sharp slowdown in job creation in the four weeks leading up to the Christmas and New Year’s holidays. Retailers also reported that holiday sales were a disappointment, and a widely watched index showed manufacturing
beginning to slow.
Dixon thinks the ballast against these worsening conditions is patience.
“How do you solve this thing? How do you make the credit crunch go away? The only
answer I can see is time,” he said.
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@setcommedia.com.
|
E-Mail This Article
Printer-Friendly Version