Fewer bankers chasing M&A.

• Author: Marshall, Jeffrey
• Position: Business Briefs

As the merger business has wound down with the struggling economy and three years of declines in the stock market, major companies can probably expect a lot fewer calls from investment bankers. One big reason: Those bankers may not be there any more.

Wall Street ratchets up and down with the economy and major deal flow, and in recent months, things have been at very low ebb. At Merrill Lynch & Co., for instance, the ranks of senior relationship bankers has been slashed dramatically, and lesser cuts have rippled through other big firms at regular intervals. Some of those senior people have ended up at smaller firms and are still eager to put deals together. Those don't have to be mergers; many will be sales, as multinationals continue to "rationalize" their businesses.

Indeed, divestiture is reasonably hot. "Large public companies are very focused on building their core businesses and divesting whatever is non-core," says Dale Dawson, head of investment banking/corporate finance at Stephens Inc. in Little Rock, Ark. While the market often realizes that the seller is strapped for cash or has other compelling reasons to spin off a unit, sellers don't always have much choice. Last year, for instance, Tyco International sold the CIT Group for considerably less than it had bought it for the previous year, in order to meet liquidity needs.

Large or small, these deals are bringing idled investment bankers running. "We're seeing bulge-bracket bankers who would compete for a $50 [million] to $100 million transaction; they had never done that before," Dawson says. "They show up when they sense an opportunity to get engaged -- it's become something of a cattle call for transactions." Coby Sonenshine, CEO of RMS EquiCo Capital Markets, an investment banking firm to the middle market, adds: "It depends on the size of the transaction. If you've got a $100 million deal, you would expect to see competition in terms of other bankers. Smaller than that, it's really quite rare."

Dawson and others see more opportunity among middle-market companies than large corporations, especially established ones that are looking for mergers to grow. "The middle market tends to be more opportunistic -- their thinking revolves around strategic M&A," Dawson says. "They will merge or liquidate...