M&A Market Warms Up, but Companies Cautious

Published: Friday, May 28, 2004

Catapult Advisors among mergers and acquisition consulting firms seeing an uptick in business


More companies are taking a renewed interest in mergers and acquisitions to grow their business, but they’re proceeding cautiously, experts say.

Investment banking firm Catapult Advisors LLC is seeing more business than ever before.

The San Francisco firm, which advises in mergers and acquisitions (M&As) and helps private companies raise capital, has completed three deals in the past three months. Two of those involved one company acquiring the other.

It’s a sign that companies are tired of waiting out the downturn and are taking a renewed interest in M&As as a means of growing their business, says Ron Lissak, managing partner of Catapult. The firm, which was launched in late 2001 and has fewer than 10 employees, only completed one deal for the first six months of last year, Lissak says.

“It’s more business than we’ve done in the history of our firm, and we’ve got a huge backlog going into the second half of this year,” Lissak says.

And while the economy is still showing pockets of weakness, technology companies are ready to start spending again, Lissak says. More spending means more profit, which will allow companies to grow, he adds.

“[Companies are] buying new PCs, they’re investing in capital equipment, they’re buying companies — all the kinds of things that in the valley feed the food chain,” Lissak says.
There’s definitely been an increase in the number of M&A deals completed in the first quarter of this year compared to the same time a year ago, says Diane Frankle, attorney and co-chair of Palo Alto-based law firm Gray Cary Ware & Freidenrich LLP’s M&A group. She was unable to provide actual numbers.
But when it comes to acquiring companies, executives are being cautious and are taking longer to conduct their due diligence, Catapult’s Lissak says.

This is partly because companies are no longer under the pressure that existed prior to the burst of the Internet bubble, says Kevin Akioka, credit analyst with Los Angeles-based investment firm Payden & Rygel. In the past, companies felt as though they needed to “get on the boat” and acquire another company to show top-line growth, Akioka says.

“That pressure isn’t there right now and I think it’s easier for top-level management to stand back and say lets look at this from all angles,” he says.

Another factor affecting how companies are proceeding through the M&A process is that many recent deals didn’t work out, leaving executives leery about mega-mergers.

“I think the way people are looking at it now is the right way to go, they’re not looking for that blockbuster acquisition,” Akioka says.

But the companies doing the acquiring say they have always been careful.

San Jose-based software company Intellisync Corp. recently acquired Old Greenwich, Conn.-based Search Software America, and also was one of Catapult’s clients. Intellisync was working on the deal for the better part of a year, says Intellisync CEO Woodson Hobbs.

“We always do a reasonable amount of due diligence,” Hobbs says.

Thomas Zizzo is a Biz Ink reporter. You can reach him at: