Big Deals of the Year 2005

| Print |  Email
Saturday, April 01, 2006

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.

 

More Articles

Top stories in 2014

The Latest
Thursday, December 18, 2014
10-listthumb

2014 was a year of wild contradictions, fast-paced growth and unexpected revelations.


Read more...

The Human Factor

February 2015
Monday, January 26, 2015
BY BRIAN LIBBY

Matt French opens up South Waterfront.


Read more...

Corner Office: Steve Tatone

January-Powerbook 2015
Saturday, December 13, 2014

Seven tidbits about the president and CEO of AKT Group.


Read more...

Streetfight

News
Sunday, December 07, 2014
BY LINDA BAKER

On Friday, Uber switched on an app — and with one push of the button torpedoed Portland’s famed public process.


Read more...

5 companies react to lower fuel prices

The Latest
Thursday, January 15, 2015
thumb-shutterstock 233787049BY JACOB PALMER | OB DIGITAL NEWS EDITOR

Consumers love the savings they get from low oil prices, but how has business been affected?


Read more...

Corner Office: Marv LaPorte

January-Powerbook 2015
Saturday, December 13, 2014

The president of LaPorte & Associates lets us in on his day-to-day life.


Read more...

Raising the Stakes

February 2015
Monday, January 26, 2015
BY LINDA BAKER

The 2014 Bend Venture Conference set a record for the most cash, investments and prizes awarded at an angel conference in the Pacific Northwest. Investments in the six winning companies exceeded $1 million. The 11th annual conference was hosted by Economic Development of Central Oregon.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS