Big deals: yes, deals are still being done in Indiana.

• Author: Kaelble, Steve
• Position: MERGERS & ACQUISITIONS

SEEMS LIKE YOU CAN'T pick up a paper these days without reading about how the credit crunch is spreadINg far beyond subprime mortgages, slowing all kinds of economic activity including corporate mergers and acquisitions. When it comes to Indiana M&As, though, it's not necessarily true.

This turns out to be a time when being a smaller player isn't such a bad thing. Yes, tight credit markets have slowed the pace of many deals, Indiana experts observe--but those tend mostly to be the really big M&As, not the small- to mid-size deals that are the routine here in Indiana. Despite the glum headlines from elsewhere, around here it's nearly business as usual.

One of the most important things, observers say, is that private equity capital is still out there waiting to be spent. "There was a lot of equity capital available before, and there still is," says Glenn Scolnik, president and CEO of Hammond Kennedy Whitney & Co., an Indianapolis private capital firm.

The availability of that capital is not affected by the woes in the credit market, which means that there are still lots of opportunities to do the kinds of deals that have plenty of equity in the mix.

Deals that rely on large amounts of credit, on the other hand, are feeling some of the heat. "It's more difficult to put together a credit facility," Scolnik says, "and the bigger the deal, the more difficult it is. YOU just can't borrow as much on the same company with the same numbers as you could less than a year ago."

Acquisitions worth in excess of $100 million are the ones that are having the most trouble, says Jeff Brown, head of the private capital group at Baker & Daniels. "But that doesn't affect us as much in Indiana. The sweet spot in Indiana is $25 million to $50 million."

Steven Humke, a founding partner of the Ice Miller private equity and venture services group, agrees. "You started to see toward the end of 2007 a significant pullback on the financial side of the larger deals, but that really didn't hurt the lower-and middle-market deals."

The year in review. The M&A climate at the beginning of 2007 was a lot like it had been in the previous few years, observers say. "You were seeing significant amounts of capital held by private equity funds eager to deploy that capital, and you had really available credit," Humke says. "And you also had Baby Boomers looking to create exits from the companies they founded."

"In 2007 in Indiana, we saw a pretty heavy deal flow in the first quarter...