Buyouts rule
IPOs are nowhere to be seen in a fast-paced year of financings,
mergers and acquisitions.
By Oakley Brooks
All that cash floating around in the American economy is
working its way into corporate dealmaking. In 2005, mergers,
acquisitions and financings in Oregon offered just a taste of
what’s to come as private investors and corporations
search for places to plant their cash, while growing companies
gussy themselves up for buyouts as an alternative to public
offerings.
|
THE 2005 BIG DEAL$
LIST
Researched by
Perkins Coie LLP
|
Oregon did not see a single initial public offering in 2005,
after just two in 2004, as the cost of compliance with
Sarbanes-Oxley regulations put an IPO out of reach for many
companies. Accent Optical of Bend served as a prime example.
CEO Bruce Rhine told Oregon
Business readers in January that his company ditched a
2005 plan to go public because compliance costs were estimated
at $2.5 million, or about 5% of Accent’s annual revenue.
A few weeks later, Accent sold to Milpitas, Calif.-based
Nanometrics.
“The IPO is no longer the holy grail,” says Brent
Bullock, a partner with Perkins Coie, which researched the Big
Deals list. “IPOs are back up nationally, but nowhere
near what they were before the tech bubble burst.”
Three of the largest buyouts last year involved privately held
tech companies cashing out via a merger. In late November,
Eugene bar-code scanning company PSC, owned by investment group
Littlejohn, sold to Datalogic of Bologna, Italy, for $195
million. Early in the year, Beaverton on-demand media firm
NCube, with Larry Ellison in its equity group, sold to
Pennsylvania-based C-Cor for $90 million. And this past
summer, privately held SRC Software, a Portland financial
planning outfit, sold to Paris-based Business Objects for $100
million.
The lack of public offerings means that there will be fewer
huge deals — in the $1 billion range — involving
public companies that grow and merge in the future. There were
just two truly big deals this year: KinderCare’s January
merger with Knowledge Learning, another Larry Ellison venture
headquartered in Colorado, and Hollywood Entertainment’s
sale for $1.25 billion to Alabama-based Movie Gallery in
April.
KinderCare execs did put a twist on the traditional private
buyout by convincing their Knowledge Learning counterparts to
move that company’s headquarters in with KinderCare.
Even if there are few whopper deals, private equity firms and
public companies continue to be on the hunt in Oregon for
bargain companies that have growth and market share potential.
A year after Wasserstein & Co. swooped in and bought Bear
Creek Corp., Menlo Park-based Francisco Partners picked up
Portland’s Web-Trends for a cool $94 million.
Riverlake Partners, an equity buyout group started in Portland
in 2002 by former Pacific Crest Securities founder Erik
Krieger, made a splash by purchasing three companies last year,
including Portland-based chemical firm Fluid Logic.
“There’s an astronomical amount of cash flowing to
these private equity firms,” says D.A. Davidson
investment banker Norm Duffett, noting that state retirement
funds as well as large university endowments are increasingly
funneling money to equity firms. He pointed no farther than the
Oregon Investment Council’s continued investments with
the Texas Pacific Group.
A few Oregon stalwarts added strength when Pixelworks bought
streaming media specialists Equator Technologies of California
for $109 million and Schnitzer Steel picked up Regional
Recycling in Alabama for $65 million.
As part of a gathering trend, foreign-based companies also got
in on the buying act, including Datalogic’s purchase of
PSC and Business Object’s SRC Software acquisition.
Rapala, the Finnish fishing equipment maker, also bought most
of Hood River-based Luhr Jensen. Duffett, who negotiated the
purchase of Jana’s Classics and Oregon Chai in 2004 by
Irish acquirer The Kerry Group, says he will soon close another
deal between a European buyer and an Oregon firm.
Duffett says the private equity market is hot enough right now
that he’s even fielding calls from hedge funds managers,
traditionally operators only on the public markets but now
looking to get into private deals.
All of this activity, like the flurry in the housing market,
has probably bid up company prices to the point where returns
are narrowing, Duffett says. But that won’t likely slow
down private equity deals in the coming year. “People
want to put that money to work,” Duffett says.
In Oregon, look for more plays in the energy sector in 2006.
Portland’s Microfield Group acquired two energy services
and automation companies in 2005, while PPM Energy bought wind
power developer Atlantic Renewable Energy of Richmond, Va.
“Energy technology, renewable energy, alternative fuels
— those are all growing rapidly in the Northwest and will
drive deals in the future,” says Todd Bauman, head
of Stoel Rives’ technology ventures
group. All that cash floating around in the
American economy is working its way into corporate dealmaking.
In 2005, mergers, acquisitions and financings in Oregon offered
just a taste of what’s to come as private investors and
corporations search for places to plant their cash, while
growing companies gussy themselves up for buyouts as an
alternative to public offerings.
Oregon did not see a single initial public offering in 2005,
after just two in 2004, as the cost of compliance with
Sarbanes-Oxley regulations put an IPO out of reach for many
companies. Accent Optical of Bend served as a prime example.
CEO Bruce Rhine told Oregon Business readers in January that
his company ditched a 2005 plan to go public because compliance
costs were estimated at $2.5 million, or about 5% of
Accent’s annual revenue. A few weeks later, Accent sold
to Milpitas, Calif.-based Nanometrics.
“The IPO is no longer the holy grail,” says Brent
Bullock, a partner with Perkins Coie, which researched the Big
Deals list. “IPOs are back up nationally, but nowhere
near what they were before the tech bubble burst.”
Three of the largest buyouts last year involved privately held
tech companies cashing out via a merger. In late November,
Eugene bar-code scanning company PSC, owned by investment group
Littlejohn, sold to Datalogic of Bologna, Italy, for $195
million. Early in the year, Beaverton on-demand media firm
NCube, with Larry Ellison in its equity group, sold to
Pennsylvania-based C-Cor for $90 million. And this past
summer, privately held SRC Software, a Portland financial
planning outfit, sold to Paris-based Business Objects for $100
million.
The lack of public offerings means that there will be fewer
huge deals — in the $1 billion range — involving
public companies that grow and merge in the future. There were
just two truly big deals this year: KinderCare’s January
merger with Knowledge Learning, another Larry Ellison venture
headquartered in Colorado, and Hollywood Entertainment’s
sale for $1.25 billion to Alabama-based Movie Gallery in
April.
KinderCare execs did put a twist on the traditional private
buyout by convincing their Knowledge Learning counterparts to
move that company’s headquarters in with KinderCare.
Even if there are few whopper deals, private equity firms and
public companies continue to be on the hunt in Oregon for
bargain companies that have growth and market share potential.
A year after Wasserstein & Co. swooped in and bought Bear
Creek Corp., Menlo Park-based Francisco Partners picked up
Portland’s Web-Trends for a cool $94 million.
Riverlake Partners, an equity buyout group started in Portland
in 2002 by former Pacific Crest Securities founder Erik
Krieger, made a splash by purchasing three companies last year,
including Portland-based chemical firm Fluid Logic.
“There’s an astronomical amount of cash flowing to
these private equity firms,” says D.A. Davidson
investment banker Norm Duffett, noting that state retirement
funds as well as large university endowments are increasingly
funneling money to equity firms. He pointed no farther than the
Oregon Investment Council’s continued investments with
the Texas Pacific Group.
A few Oregon stalwarts added strength when Pixelworks bought
streaming media specialists Equator Technologies of California
for $109 million and Schnitzer Steel picked up Regional
Recycling in Alabama for $65 million.
As part of a gathering trend, foreign-based companies also got
in on the buying act, including Datalogic’s purchase of
PSC and Business Object’s SRC Software acquisition.
Rapala, the Finnish fishing equipment maker, also bought most
of Hood River-based Luhr Jensen. Duffett, who negotiated the
purchase of Jana’s Classics and Oregon Chai in 2004 by
Irish acquirer The Kerry Group, says he will soon close another
deal between a European buyer and an Oregon firm.
Duffett says the private equity market is hot enough right now
that he’s even fielding calls from hedge funds managers,
traditionally operators only on the public markets but now
looking to get into private deals.
All of this activity, like the flurry in the housing market,
has probably bid up company prices to the point where returns
are narrowing, Duffett says. But that won’t likely slow
down private equity deals in the coming year. “People
want to put that money to work,” Duffett says.
In Oregon, look for more plays in the energy sector in 2006.
Portland’s Microfield Group acquired two energy services
and automation companies in 2005, while PPM Energy bought wind
power developer Atlantic Renewable Energy of Richmond, Va.
“Energy technology, renewable energy, alternative fuels
— those are all growing rapidly in the Northwest and will
drive deals in the future,” says Todd Bauman, head
of Stoel Rives’ technology ventures group.
