|Sima Griffith Comments on M&A Activity at the Faegre & Benson M&A Conference|
On October 11th, Aethlon Capital's Sima Griffith participated in a panel discussion at Faegre & Benson's M&A Conference in Minneapolis. Some highlights of her remarks appear below:
How has recent M&A deal flow been?
M&A activity has been strong throughout 2011, because of a favorable, low-interest-rate debt market, and because both private equity funds and large companies have a lot of cash to invest.
Strategic and financial buyers have both been active this year. Private equity funds have billions of dollars that they need to put to work, and they are actively competing for deals--which often results in bidding wars pushing up valuations. Meanwhile, strategic buyers have been very active. Many companies have a surplus of cash on their balance sheets, but are finding it hard to grow organically in this anemic recovery, so they are actively looking for acquisitions.
Who is selling in 2011?
Industries that have seen lot of activity include financial services, energy, technology, manufacturing, and consumer products. Because valuations are up, many companies are selling divisions not core to their business. Unilever, for example, sold its Alberto VO5® brand to Brynwood Partners, a Connecticut-based private equity firm specializing in acquiring corporate orphans in the consumer products category.
The oil boom in North Dakota has fueled M&A activity for oil and gas companies doing business there. North Dakota was recently called the next Saudia Arabia by the Wall Street Journal because the gigantic and prolific Bakken oil fields now place the United States third among world oil producers.
How have valuations rebounded?
Valuations have rebounded from the lows of 2009 and are slightly higher than 2010. Data show that deals under of less than $50 million are back to 2007 multiples. We are, however, still seeing some pricing differentials; sellers whose companies are healthy and highly profitable want top dollar, while buyers are offering less because of the economic and financial challenges they are facing.
What industries do you see as having the brightest M&A future?
In my view, social media, data storage, consumer products, and energy—including companies that serve the oil and gas industry. A great example of deal activity in the internet media industry is Groupon, which made 13 acquisitions last year. In energy, we met last week with a private equity firm that owns a maker of x-ray products to test pipelines. They were actively looking for add-on acquisitions. Aethlon also met with an investor that is actively buying North Dakota convenience stores—places in which oil field workers are buying their breakfast, lunch and beer after work.