A barren playing field: mergers and acquisitions still suffer downturn.

• Author: Haraldsen, Tom
• Position: Business Trends

Last spring, the effects of the nation's financial woes were already taking their toll on Utah's economy, as well as on the rest of the world. As Utah Business magazine reported in April 2009, mergers and acquisitions (M&A) in Utah were down at least 50 percent from those in the previous year.

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So what's changed since then? Not much. Across the board, experts who handle M&As are telling similar stories-- the playing field is not just level, it's somewhat barren.

"In years past, we've seen a lot of venture capital activity," says Scott Loveless, partner with the Salt Lake City firm Parr Brown Gee and Loveless. "We were used to seeing an enormous number of smaller companies in particular that were building up their revenues over time and eventually being acquired or merged. But last year, there was virtually none of that. It's really hard to compare the past 12 months with any other period before it. Nothing is similar."

"Significantly less" is how Bud Headman, partner at Cohne, Rappaport and Segal in Salt Lake City, calls the state's M&A activity. "In the past year, we've done maybe three or four deals. Many years, we've had four to five times that many. I'm not really seeing a 'pulling out' of the downturn yet."

Financing Remains Key

The main reasons cited for the slowdown are credit, lack of financing and small businesses reluctant to sell when prices are low. But essentially, lack of financing is the main culprit.

"The credit markets have been frozen," says Ron Moffitt, partner at Stoel Rives in Salt Lake City. "Without bank leverage, it's all slowed dramatically. The banks haven't opened up the credit spigot."

There seems to be few common threads among the deals that did go through the past year. Headman says his firm worked with companies valued from $800,000 to more than $400 million. In every case, "people have much sharper pencils" in dealing with mergers or acquisitions, he says.

In spite of the slowdown, Loveless' firm has remained "incredibly busy, but mostly with mining deals," he says. Chinese investors are particularly active all around the world, wanting acquisitions or business deals that help them control critical raw materials needed for that nation's infrastructure. Mining in Utah is a large part of that.

"They are very aggressive and have lots of money, and the good news is they need local help to complete these deals," he says.

Having equity financing is the key, say the three M&A experts.

"Mergers...