Noncommittal Strategics

We just put our first issue of the newly redesigned Mergers & Acquisitions to bed, and the cover story I wrote for it is still on my mind. It’s based on the hunch that despite doing the lion’s share of M&A transactions, strategic buyers are holding back a bit on making deal commitments. They’re not on the M&A sidelines by any means, but I have a sneaking suspicion that they could be doing even more — not only in terms of deal volume but also in creative deal structuring and innovation. Deal numbers don’t necessarily support my gut feeling, so I felt like I was out on a limb when I started working on my article. But what I soon discovered, in my talks with a variety of deal pros, is that many M&A pros share this opinion. Understandably, some of the strategic acquirors we contacted for the article did not wish to be quoted. But Leggett & Platt M&A chief Russell Iorio provided some interesting insights when he acknowledged that he and many of his strategic-buyer brethren feel as though the dealmaking deck is stacked against them right now. Iorio added that the “steady stream of negative corporate news,” from the past demise of Enron to the current stock-options backdating scandal, has spooked management teams to the point where they’re reluctant to pull the trigger on some deals, fearing a big blow-up. Nonetheless, the diversified manufacturer, which has done more than 200 acquisitions since 1990, plods on and cements deal pacts, although its buying spree did ease up a bit year. There’s no question that corporate buyers face distinct disadvantages in today’s M&A environment, in which financial buyers now complete almost 30% of all deals — way up from 7% or 8% not too long ago. But Leggett & Platt has honed a capability that my sources insist will be essential in helping strategics compete more effectively against financial buyers going forward: It has assembled a dedicated deal team that matches the agility and creativity of a PE firm, and can bid smart and close deals fast. If, after reading my story in the January issue, you have some thoughts on this topic, feel free to let me know. I enjoy getting feedback, even if you have a different point of view. You can reach me at [email protected]. Editor’s Note: Merger Mogul will not publish for the next two weeks. We will resume on January 9, 2007. Happy Holidays.