Middle market M&A looks bullish in 2012

The fourth quarter report on U.S. merger and acquisition activity released by Hyde Park Capital Partners LLC shows a 33% decrease in volume and a 31% decrease in value of transactions over the same period in 2010.

Mike Mariani, an associate with Tampa-based Hyde Park Capital Advisors, tells Coffee Talk that although the fourth quarter looked dismal in terms of mergers and acquisitions, he thinks 2012 will be a bigger year. Also, the data may be misleading.

Mariani says fourth quarter numbers for 2011 may look low because during the same period in 2010 many firms fast-tracked plans to acquire other companies in anticipation of a new and uncertain tax structure. Volume fell in every sector in quarter four of 2011.

But 2012 looks to be a bullish year for these transactions. Mariani says firms had to strengthen their balance sheets during the recession. Now with more available cash, there is potential for increasing acquisition activity.

Also, as the Baby Boomer generation drifts into retirement age, the companies they own are prime acquisition targets. “That generation wants to create some liquidity out of the businesses they built,” Mariani says. This indicates an increase in activity in the lower middle market.

Because health care legislation will force companies to become more efficient, the health care sector will see plenty of merger activity in 2012, Mariani explains. “And the technology sector is always popular.”