Mergers up in 2010, could soar next year

The merger and acquisition boomlet that started earlier this year waned slightly in third quarter, but dealmakers expect company-shopping to pick up in fourth quarter and beyond.

Twenty-two deals in Georgia were announced in third quarter, two fewer than in the second and far short of the acquisitions bonanza that kicked up in the first quarter, according to a report by The Mergermarket Group.

Stuart Johnson, a deals attorney at Barnes & Thornberg in Atlanta, said M&A activity should be steady in fourth quarter, with the real pickup expected to happen in 2011.

The number and size of deals remains well off the highs of the mid-2000s.

"What we’re seeing is sort of a return of normal. It’s a different normal than what it was," Johnson said.

M&A activity died with the financial freeze in 2008 and 2009 when buyers were hesitant to spend and financing dried up. Deals that were done were mostly distressed companies selling out to stronger rivals.

A lot of distressed sales activity remains, Johnson said, but there's an emerging twist: Buyers that have streamlined operations are now looking for strategic growth not from opening new operations but by buying smaller but stable competitors.

“The next logical step is acquisitions,” Johnson said.

Banks are slightly more willing to lend and buyers have more cash on hand from years of streamlining.

The 22 deals done in third quarter totaled $1.5 billion, compared to 24 deals valued at $5.3 billion in second quarter.

Sellers, Johnson said, are looking to exit companies this year while the tax structure is perceived as more favorable. But changes in Congress to Republican control of the House next year could reduce some tax fears and not force sellers' hands.

Technology, healthcare and business-to-business services remain hot sectors for M&A, Johnson said.