Deal or no deal? Private equity funds and strategic buyers keep Indiana's M&A market hot.

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

THE NAMES AND DETAILS may change, but the pace of mergers and acquisitions in Indiana continues unabated. Those who follow and participate in M&As say there's plenty of money still out there waiting to be spent. "The M&A climate in Indiana is 'frothy,'" says David Millard, chair of the business department at Barnes & Thornburg.

The market in Indiana is "being driven by historically high amounts of capital for acquisitions held by private equity groups as well as operating companies," says Steve Blumreich, president of BKD Corporate Finance. "Commercial banks have been aggressive with the amounts they are willing to loan on acquisitions, and interest rates are still reasonable. These factors combined with a robust economy are all contributing to the strong activity."

Who's buying? Without question, private equity firms are playing a larger role in acquisitions, according to Chris Hirschfeld, managing director at Goelzer Investment Banking.

"I think the strategic buyers are active, but they are being pushed by the equity funds," agrees Scott A. Read, partner with Katz Sapper & Miller. "These funds are attracting a great deal of money as 'alternative investments' right now. They provide high fees to their promoters with high returns promised to their investors. They need to get deals done in order to have a chance at accomplishing these promises."

Some 3,500 private equity groups are active in the United States today, and collectively they have raised and invested about $180 billion in 2005 and $200 billion in 2006, according to Blumreich.

"There is a big boatload of private equity money out there chasing deals in Indiana," notes Jeff Brown, who leads the private capital group at Baker & Daniels. It's a trend he expects to continue in 2007. "If anything, we are seeing more and more private equity funds prospecting harder for middle-market deals in Indiana because they've already picked a lot of the low-hanging fruit here and everywhere else."

Five years ago, deals done by private equity and hedge funds were definitely in the minority, says Steve Humke, partner at Ice Miller, "but now I think they are the majority"

A related twist is the recent flurry of public company sales to private equity funds, he says--including two of Indiana's biggest 2006 deals. "We haven't seen a lot of that type of activity since the corporate 'raiders' of the early 1980s, and frankly a lot of those deals involved public companies that were in trouble, whereas many...