Local Firms Expand in Response to Bump in M&As

A couple of local firms that provide services related to mergers and acquisitions say that the market is heating up-and they're gearing up to accommodate the additional demand.

Discussions regarding an improving mergers and acquisitions market have been percolating for some time, but a couple of local firms that perform services related to the buying and selling of companies say they have tangible evidence that the market's picking up steam: They've been hiring.

Jarod Allerheiligen-managing partner of Chicago-headquartered accounting and advisory firm Grant Thornton's Minneapolis office-said that increased demand for the due diligence services his firm performs for M&A deals is causing the company to grow.

The firm recently hired a new transaction advisory services director, and it plans to add three to five new members to its team in the near future.

“And so many deals now have an international component,” including many involving Minnesota companies, Allerheiligen said. So the firm will plant Alan Thometz-a director in the firm's transaction advisory services business-in China next month to spend a year immersed in the growing market.

Allerheiligen said that he doesn't have empirical evidence to suggest that local M&A activity is heating up, but his firm's transaction advisory services division has experienced revenue growth of more than 50 percent over the first few months of last year, as well as a boost in the number of hours spent working on deals-evidence enough for him that the market is improving.

And when visiting with clients and investment bankers, “you just hear of more deals and more brisk activity,” Allerheiligen added.

Monthly data from Milwaukee, Wisconsin-based Robert W. Baird & Company indicates that there were 2,651 U.S. deals during the first three months of 2011, down 6.2 percent from the same period in 2010 but up 11.1 percent from the fourth quarter. Meanwhile, the total dollar value of deals hit $333.1 billion-the highest level since the second quarter of 2007, according to the report. A January report by the Star Tribune indicated that 2010 was the best year nationwide since 1985 for the number of M&As involving companies that received venture capital, and venture capital companies expect higher returns this year.

Justin B. Besikof, president of Minneapolis-based Lurie Besikof Lapidus Private Investment Banking, LLC, said that his firm hasn't added staff to accommodate new demand, but “activity from buyers is very strong.” Besikof, whose firm offers M&A advisory services, also said that the number of bids on each deal is on the rise.

Bruce Engler, a partner at Faegre & Benson, LLP, who leads the Minneapolis-based law firm's mergers and acquisitions practice, said that most quarterly data regarding M&A activity is retroactive-and unlike earning forecasts or other published outlooks, the industry doesn't really have a reliable projection. “When you talk about the future, it's very subjective and anecdotal,” he said.

But conversations with investment bankers and others immersed in the world of M&As have led Engler to believe that while activity during the first quarter was relatively steady, most experts are “very optimistic about the rest of the year.”

Engler said that his firm is anticipating an uptick in deals and recently hired several M&A lawyers with the intention of adding a handful more during the course of this year to keep up with demand.

“The economy is on the mend, and fear of a double-dip recession has receded,” Engler asserted. “And there's a lot of private equity and strategic money out there that will drive deals.”