A crop of opportunity: Utah's economic climate ripe for mergers and acquisitions.

• Author: Haraldsen, Tom
• Position: Business Trends

It wasn't long ago that two of Utah's greatest business resources--its workforce and the material supplies to keep that workforce busy--were more in demand than in supply. Construction was at an all-time high, particularly residential construction, and contractors struggled to find the experienced and qualified labor force to keep projects moving forward. Ditto for light industry and professional services.

Not anymore. The economic downturn has led to decreasing demands, a glut of talent and raw materials and a financial obstacle with another rippling effect: large companies aren't acquiring smaller ones, even those struggling businesses considered "bottom basement" bargains.

It's a cyclical pattern that repeats itself in almost all economies, particularly those in recession. As financial crises arise, consumer confidence weakens. Spending decreases, which in turn means businesses have to charge more for their goods and services. That often leads to a further decrease in sales. And so on and so on. It affects a lot more than just retail sales. It also affects the sales of businesses.

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"I'd say on the merger side of the equation, activity is at least 50 percent lower than it's been over the past few years," says Dean Dinas, economist for United Mergers and Acquisitions in Salt Lake City. "American-based companies are less able to finance these kinds of deals, bank credit is harder and harder to get and even those businesses with longstanding relationships with their lenders are finding things tight."

Dinas says Utah has always been a prime candidate for merging businesses, a state where 98 percent of companies have 50 or fewer employees. With a strong entrepreneurial spirit, it's been a common practice for two businesses to pool their resources and efforts, until recently.

"I believe there are fewer deals because of the economic slowdown," says Devon Thorpe, chief financial officer for Mona Vie, a South Jordan-based network marketing company, and chairman of the Mountain West Capital Network.

"What drives all of this is the credit market," Thorpe says. "What it really means is that if you want to borrow more than $1 million, you have to look hard. Some banks just aren't lending the way they were in, say, last July."

Thorpe sees one silver lining: Utah is traditionally one of the last states affected by an economic downturn and usually one of the first to emerge when things change.

"Our state is less likely to milk...