Mergers, acquisitions soar 42 percent

Merger mania has arrived.
Mergers and acquisitions involving firms along the Northern Front Range soared 41.7 percent in number last year, with 17 transactions occurring vs. 12 in 1996.
Nationally, 7,772 transactions valued at $653.5 billion occurred in 1997, compared with 5,836 deals valued at $466.6 billion in 1996. The numbers come from Houlihan Lokey˜s Mergerstat, a division of Houlihan Lokey Howard & Zukin in Los Angeles. Mergerstat tracks publicly announced transactions using Securities & Exchange Commission filings, news releases and other sources.
The total value of the Northern Front Range deals could not be accurately determined, because so many took place without purchase prices being revealed.
Analysts cite advantageous public stock offerings, a buoyant stock market, strong earnings and corporations˜ desire to increase efficiencies as the impetus behind the surge.
"Nationwide, it˜s strong," said Eugenia Shepard, director of research for Mergerstat. "1996 was a really strong year. It was a record year. 1997 proved to be a very solid year, a strong year."
That˜s somewhat of an understatement. Transactions nationwide surged last year 33.2 percent in number and almost 39 percent in dollar volume, helped substantially by such mergers as LDDS WorldCom˜s $35.3 billion bid for MCI Corp., the largest deal in U.S. history.
Locally, the biggest deal of 1997 — so far as we know — was Loveland-based Hach Co.˜s $60.8 million purchase of Hach stock held by Lawter International Inc. of Northbrook, Ill. The repurchase of 3,157,220 shares ended a several-year odyssey during which Lawter more than once attempted to purchase Hach.
Other significant deals included multiple purchases by Advanced Energy Industries Inc., EFTC Corp., Heska Corp. and Hach. Each of those companies has enjoyed surging profits or have reaped the benefits of public stock offerings that have funded acquisitions.
"The heated market is certainly forcing people in board rooms across the country É to look at mergers and acquisitions as a really strong option for them," Shepard said.
Many deals involving local firms in the past two years also involved international companies either acquiring or being acquired by local companies.
"It˜s an international marketplace that they˜re operating in," Shepard said, noting that high-tech companies in particular seek to acquire technology that˜s already developed, rather than spending even more money and time in developing it themselves.
In a couple of cases recently, Lucas Industries PLC of England acquired Data Entry Products Inc. of Loveland, and Aspen Tree Software of Laramie was purchased by a British firm.
"England and Canada are perennial leaders in terms of acquiring U.S.-based companies," Shepard said.
Reasons for that include a common language and longtime business relationships among the countries. Additionally, England˜s economy has improved markedly recently, prompting many firms to invest overseas.
Northern Front Range deals didn˜t fall only in the high-tech arena, however. Community First Bankshares Inc. of Fargo, N.D., announced in November plans to buy Pioneer Bank of Longmont, which has branches in Berthoud, Lyons and Niwot. And Blue Cross Blue Shield of Colorado added a deal in the health-care industry with its purchase of HSI Health Plans Inc. of Fort Collins.
Other deals occurred in the hotel and service industries, leaving the Northern Front Range as a microcosm of merger-and-acquisition activity nationwide.
"It˜s not dissimilar from the national norm," Shepard said.
What˜s the outlook for 1998? Mergerstat doesn˜t predict such things, but Shepard noted that Houlihan Lokey Howard & Zukin has a backlog of deals on the table.
"This is a stronger year than last year for us," she said.
But, she noted, companies that haven˜t merged or acquired yet will find slimmer pickings in the months ahead. That likely will mean higher prices for companies — and possibly more merger-and-acquisition records — to come.