SPX Corp sees ‘more realistic’ M&A environment
After a slow 2009, the pace of takeovers in the industrial sector should pick up next year as sellers rein in their once-lofty price expectations, a top executive at diversified U.S. manufacturer SPX Corp said on Wednesday.
“Price expectations have declined, particularly for smaller acquisitions, by as much as one to two turns of cash flow,” Patrick O’Leary, SPX’s chief financial officer told an investor briefing. “People’s forward models are more realistic because they’ve been through a difficult 12 months.”
Major U.S. manufacturers came into 2009 thinking that the brutal recession and credit crunch would provide them with ample opportunities to snap up companies at bargain prices. But the pace of deal-making slowed to a crawl for much of the year as sellers and buyers remained far apart on price.
That has started to change during the fourth quarter, with companies including United Technologies, Emerson Electric and Danaher all reaching deals. While investment bankers remain wary about the prospects for 2010 deal-making, O’Leary said he sees things picking up.
“You will see an elevated level of M&A across industrials for 2010 and ’11,” he predicted.