Chicago market ready for mergers, study says
The economy may slow or even slip into a recession next year but a recent study suggests merger and acquisition experts believe 2008 will be a bumper year for deals.
Palatine-based Association of Corporate Growth's most recent survey found Chicago-area merger and acquisition professionals are more bullish than their colleagues across the country.
About 86 percent of those Chicago area experts surveyed said they are looking forward to a good or excellent 2008.
However, nationally merger and acquisition experts were more pessimistic, with 76 percent anticipating fewer buyouts in the next six months and 100 percent predicting more distressed deals.
The expectations of the Chicago-area merger professions made the region the most bullish in the country, according to the Year-End 2007 ACG/Thomson DealMakers Survey.
"We're still confident there's going to be growth here," said Craig Miller, chief executive officer of ACG Chicago, the Chicago branch of the association for corporate development, investment and merger professionals.
This year was a record year worldwide for mergers and acquisitions, valued at $4.35 trillion, or a 20 percent increase over last year, according to Thompson Financial, a provider of information and technology solutions.
One of last year's largest mergers was Bank of America's takeover of Chicago-based LaSalle Bank, in a deal valued at $21 billion.
Nevertheless, merger and acquisition activity slowed by 30 percent in the second half of this year, ending the year on a note of caution, according to some professionals quoted by the association.
The record was reached despite the subprime lending crisis and tighter credit.
However, Miller said the credit crisis is having a stronger effect on larger buyouts, which use syndicated debt for leverage.
Middle market deals depend more on "relationship banking," he said, and they are finding credit.
Lower middle market mergers would be valued at between $20 million and $200 million, Miller said. Larger middle market mergers would be closer to $500 million to a $1 billion, he said.
The weak dollar may be the reason for an uptick in cross border deals this year, the report said.
An estimated 68 percent of Chicago area experts believe they'll be involved with a cross-border deal in the next six months. Most of those deals will come from Western Europe, Canada and China, according to the Chicago-area survey.
Miller said the merger "pipeline" is filled at one large local institutional investor, whom he declined to identify. And he expects the mergers to be distributed evenly among sectors, including manufacturing, business services, technology and health care.
"We're enthused about the future here," Miller said.