Will recession’s end bring on merger mania?

One more sign the recession is ending: you’re hearing more and more buzz about mergers & acquisitions (M&A).

A number of reports suggest that companies have been stockpiling cash throughout the last two years’ credit crisis and low interest-rate environment that’s negated the impetus to invest. With an economic rebound in sight, they’ll be ready to bargain-hunt as the crunch eases and bank financing becomes more readily available.

As is usual of late, the IT industry is leading the way.

Just last week, Dell Inc. snapped up Perot Systems Corp. for $3.9 billion in what many think is a bid to even the playing field after Hewlett-Packard’s 2008 acquisition of EDS for nearly $14 billion.

Meanwhile, Adobe Systems has made a $1.8 billion bid for software maker Omniture.
Consumable-makers also are hot. Kraft Foods is generating headlines as it tries to woo the reluctant British sweets-maker Cadbury. Household goods giant Sara Lee is selling some personal care brands to Europe’s Unilever for nearly $2 billion.
Financial journalists are abuzz with M&A speculation. Here’s last Friday’s Reuters piece about investment banks competing for the new M&A business.

And Business Times says that US firms posted annualized cash flow of more than $1.5 trillion in each of the last three quarters, the most on record according to Commerce Department statistics dating back to 1947.

Not sure what’s all involved when one company devours another? Take some time to read Investopedia’s multi-chapter M&A primer.

Tapping in is difficult; obviously these deals are conducted on the QT due to Securities and Exchange Commission rules about disclosure and insider trading. One Perot Systems worker is in hot water as we speak for profiting from stock trades ahead of the Dell announcement last week.

An informational sit-down with a local or regional banker to discuss cash-rich firms and possible merger targets in your area is one approach; he or she likely will be circumspect to the point of paranoia but you might get a few leads. Industry-watchers at local business schools might be more candid.
Subscribe to feeds from TheDeal.com, particularly its M&A channel, to stay abreast of the landscape.

Note that the Reuters article mentions the M&A Research Centre at Cass Business School in London. It’s a newly formed program following the M&A business globally; its faculty includes bankers and others with real-life experience supervising corporate deals. Sign up for reports and follow the center on Facebook.

And don’t think mergers by far-flung companies are irrelevant to your readers. Investors – including individuals with 401(k)s and IRAs – want to know what they stand to gain or lose from corporate weddings.

And keep in mind that acquisitions typically lead to consolidation and economies of scale – not the cheeriest terms for workers, who rely on you to ferret out the implications.

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