Mid-Sized Firms Cautious on Deals

Despite their perceptions that m&a market pricing is favorable to buying, few mid-sized manufacturers are planning to go after acquisitions through 2004, according to a survey by Fleet Capital Corp.’s corporate finance unit. In fact, acquisition interest is down from even the low levels of late 2002, the credit-granting firm reported after completing its annual survey of CFOs at middle-market industrial companies. The findings suggest that at the time of the survey – results of which were released in mid-November – mid-sized companies remained reluctant to bite for deals largely because of economic uncertainties. But more than half of the respondents suggested that price tags could tempt a buyer, with 53% projecting that prices in their industries, based on multiples of EBITDA, would hold steady into 2004. Only 26% said they expected multiples to widen. In Fleet’s 2002 survey, 39% projected no change in EBITDA multiples through this year and a slightly larger proportion – 43% – forecast an uptick in pricing. Yet, only 14% of CFOs responding to the latest survey expected to be involved in m&a next year – down from an already depressed 18% a year earlier. More than nine out of 10 – or 91% of those planning to be in the market – expected to be on the buy side, with about one in six – or 16% – likely to be selling. In the 2002 survey, more than four out of five – or 83% with m&a intentions – looked to buy and more than two-thirds – or 68% of the group – were sell-oriented. The late 2003 responses surfaced something of a split viewpoint on the overall market environment despite the favorable prognosis on pricing. For example, 38% of respondents said more businesses at lower prices were available to be bought than a year earlier but 39% answered in the negative. The number sighting more good, value-priced targets was the same in the late 2002 survey when 43% said there weren’t more businesses for sale at lower prices.