NEW YORK—With traditional powerhouses Abernathy MacGregor and Kekst & Company lined up on either side of Comcast’s hostile bid for The Walt Disney Co., observers of the mergers and acquisitions public relations scene could be forgiven for thinking that not a lot has changed since the deal boom of the 90s—or the M&A heyday of the late 80s for that matter.
But while the past few months have clearly seen an upswing in the volume of takeover activity, the landscape looks very different than it did even four of five years ago, with several new players vying for a role in the biggest deals.
A study of the U.S. M&A scene by British publication Mergermarket, for example, reveals that while Kekst continues to rank as the largest player in the M&A business by both number of deals and value of those deals—it handled 68 deals worth $106 billion last year—the number two spot is being contested by two British firms, both relative newcomers to the U.S. market: Brunswick is second in value of deals ($40 billion) while Financial Dynamics is second in volume (57).
Brunswick has operated in the U.S. for several years, but emerged as a major force in the “special situations” business, which includes M&As, restructurings and other corporate upheavals, in the past two or three years. Financial Dynamics is an ever more recent arrival, having transformed U.S. investor relations firm Morgen-Walke into a player. The success of both firms speaks to the increasing number of cross-border deals, requiring PR assistance in the U.S. and Europe.
Says Brunswick partner Steve Lipin, “We’re seeing three clear trends. First, there’s obviously more deal volume as companies are feeling increasingly confident about their overall health and realize that M&A is one way they can improve growth prospects.”
In fact, the deal flow in early 2004 is the second biggest ever, according to Thomson Financial, following only the $314 billion in deals announced in early 2000.
“Second,” says Lipin, “there is a significant amount of cross-border activity in and out of the U.S. and Europe where the U.S. shareholder base plays an important role. Third, given the tough reaction to some deals in the stock market and the increased regulatory scrutiny in both D.C. and Brussels, companies and their advisors are spending a lot more time on the communications aspects of transactions because message clarity is absolutely vital.”
Brunswick and Financial Dynamics are facing off in the other big deal of the moment, with Brunswick representing Sanofi in its $60 billion unsolicited offer for Aventis, and FD playing defense.
Other major activity includes the Hollinger fight, with Brunwsick representing the bidders from Press Holdings International, Kekst representing Hollinger International, and Robinson Lerer Montgomery representing Hollinger Inc.; Kekst representing both sides in the friendly JP Morgan-BankOne deal; and auction of AT&T Wirless, with Joele Frank Wilkinson Brimmer Katcher representing the seller.
For the most part, the large, multinational full-service firms are nowhere to be found amid all this activity. None of the largest PR firms make Mergermarket’s top 10, with Manning Selvage & Lee’s Capital MS&L unit ranked highest, at number 11.
Meanwhile, the recent burst of activity is good news for the specialist firm. Says Jeffrey Taufield, senior partner at Kekst & Company, “M&A activity has picked up measurably thus far this year. CEOs tell us that they are gaining increasing confidence in the economic recovery; believe it is real; and that now is the time to look externally to drive future growth and sustainable competitive advantage in their markets.
“We see three major trends shaping the early deals of 2004. First, the transactions are strategic. Second, they are taking place in industries that are experiencing accelerated consolidation such as financial services companies, pharmaceuticals, and entertainment, to name a few. And, third, companies are looking to prune existing portfolios and make bolt on acquisitions.”