M&A’s Up in 2007 Despite Trailing Off in Second Half

Nashville Business Journal – by Cynthia Yeldell

Despite a slowdown in the second half of the year, Tennessee’s merger and acquisition activity in 2007 slightly increased compared to the previous year.

Last year, there were 287 transactions valued at $34.5 billion, compared to 272 in 2006.

Six of the deals or about 2 percent were valued at more than $1 billion, while an additional 6 percent were valued between $500 million and $1 billion, according to research from Harpeth Capital Investment Bankers.

The value of more than half of the transactions was undisclosed, the data shows.

Most of the Middle Tennessee deals were in the areas of health care, media and finance/insurance.

Of the 287 deals in 2007, at least 59 were in Nashville, 27 involved Brentwood companies and 28 were in Franklin.

Chuck Byrge, president of Harpeth Capital, says deals are still occurring in the first half of 2008, though they have slowed.

“We continue to see M&A activity even in a restrictive credit environment,” Byrge says.

He says larger deals came to a halt in the second half of 2007, but activity in the middle market remained strong because they require less capital.

Adam Landa, director at Harpeth Capital, says a lot of the aggressive lenders and hedge funds that were in the market last year are either quiet or have shut their doors.

Credit continues to be tight and commercial banks are restrictive in their lending.

“Terms and pricing have changed quite a bit from a year ago,” Landa says. “It is much more restrictive. Last year pricing was aggressive, today it is based more in reality.”

Byrge says though the market has slowed, it’s still a good time for companies in the right circumstances.

“The perception is the M&A market is down and this is a terrible time, but transactions are getting done,” Byrge says. “For the right company there is still an opportunity to get value.”

Mike Togneri, managing partner of Atlanta-based VR Mergers and Acquisitions, says Nashville is one of the best markets in the country to sell a company.

His company represented Baker Glass earlier this year in its sale to a Philadelphia-based private equity firm in a deal estimated to be about $10 million.

Togneri says Nashville’s economic outlook is incredible compared to other parts of the country.

He says Nashville has a diverse economy, consistent job growth and heavy investment from outside of the market. Its central location also makes it a desirable location for companies that want to enter the market.

“The best thing that ever happened to Nashville is where God placed it on the map,” Togneri says.

VR Mergers is representing two Middle Tennessee companies that are looking for buyers. Togneri says they both are profitable and have a backlog of business, and he has no doubt he will find buyers.

“We find that the best people that want to buy are people who are outside of the market,” he says. “We call them strategic buyers and they will usually pay more.” | 615-846-4250