Strategic buyers are back, demonstrated by recent deals from players both big and small. "Right now is really the first time since the financial crisis that we're seeing the light at the end of the tunnel," says Kenneth Jacobs CEO, Lazard Ltd. (NYSE: LAZ), speaking at a recent conference . "We're seeing real seeds of an economic recovery, which will result in more confidence, and the M&A cycle will kick in."
Corporations are at the heart of the trend. "The M&A cycle that has started now is more for corporates than for private equity firms," says James Lee, vice chairman, JPMorgan Chase & Co. (NYSE: JPM), pointing to a pair of high-end deals announced in September: Verizon Communications Inc.'s (NYSE: VZ) $130 billion deal to buy Vodafone Group plc (Nasdaq: VOD) out of Verizon's U.S. wireless business and Microsoft Corp.'s (Nasdaq: MSFT) $7.2 billion purchase of Nokia Oyj's handset unit and patent licenses.
"There's a significant amount of activity in the middle market," Jacobs says.
Financing sources are robust and liquid and, at the same time, interest rates are still near historic lows, while companies have emerged leaner and more efficient from the economic downturn, explains Robert Rubino, corporate finance and capital markets head at RBS Citizens. This has helped many strategic buyers maintain an upper hand when it comes to auctions and sale processes. "The strategic buyer's ability to leverage synergies and generate accretive returns faster provides companies with a powerful advantage in bidding for attractive properties in today's M&A marketplace," Rubino said.
Here are seven strategic buyers that provide examples of smart dealmaking in their sectors: