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The business was snapped up in February by One Equity Partners of New York. Need a sleeping pill? Eli Lilly and Co.
went shopping and found a company testing a sleeping compound. It plunked down $315 million in March to acquire Hypnion of Massachusetts. Wish you had a new hat?
Apparel chain Finish Line announced in June it would shell out $1.4 billion for rival Genesco of Tennessee, parent company of the fashion-savvy Hat World and Journeys franchises. All over Indiana, it seems, companies are buying and selling in a flurry of million- and billion-dollar deals, reflecting what so far has been a record year for mergers and acquisitions worldwide.
For the first six months of this year, Indiana is on pace to match last year's record number of deals. Dealmakers racked up 122 transactions in the state from January to June, compared with 124 in the same period a year ago. The value of all the buying and selling for the first half of this year has amounted to $10.
1 billion. That's a huge sum, although less than last year's first-half record amount of $16.3 billion, fueled by an unusually high number of billion-dollar transactions.
The frenzy of dealmaking has been generated by a combination of high profits, surging cash reserves, easy credit and increased competition. "Things are very hot," said Glenn Scolnik, president and chief executive of Hammond, Kennedy, Whitney Co. in Indianapolis, which specializes in mergers and acquisitions.
"You have buyers with unbelievable amounts of money. You have banks and other lenders that are very, very aggressive. And you have very willing sellers.
" Worldwide, dealmakers racked up a record $2.5 trillion in mergers and acquisitions for the first six months of the year, up a whopping 53 percent from the same period last year, according to financial data provider Thomson Financial. And some experts say the numbers could climb higher yet.
"I do not think we have seen a peak in activity yet, although this will depend of course on the overall strength of the economy," said Idalene Kesner, professor of strategic management at Indiana University. Meanwhile, for every billion-dollar transaction that gets a huge headline, dozens of smaller deals -- involving such low-key targets as motel chains, machine shops and medical-device makers -- are closing every month. "These days, there are an awful lot of business owners who are in their prime years and are thinking of selling, and they're not interested in investing in their companies anymore," said Dennis Erwin, managing director of the Indianapolis office for Christman Group, a Chicago-based investment banking group.
There are two major types of buyers. The first is corporations making strategic purchases, such as buying rivals, assets or product-line extensions to become more competitive. The second is private-equity investment groups, flush with cash, looking for a place to invest and get a healthy return within a few years.
The flurry of deals raises questions about whether Indiana companies will emerge stronger, employ more workers and allow the state to compete better against other parts of the country. The picture is decidedly mixed. Some of the deals will bring jobs to Indiana, while others will result in cuts or little change.
Simon Property Group, for example, said it will add 75 accounting and back-office jobs to Indianapolis after buying rival mall operator Mills Corp. of Maryland in April. Allison Transmission, the third-largest industrial employer in Indianapolis with 3,400 workers, could add dozens of finance, legal, engineering and marketing jobs here after a pair of global investment companies, Carlyle Group and Onex Corp.
, announced in June they would buy the company from General Motors for $5.57 billion. It's the largest deal here this year.
"When it comes to Indiana, you'd like to see plants stay here, and you'd like to see Hoosiers continue to run and staff those plants," Scolnik said. "And in the overwhelming majority of cases, what the buyer wants is a continuation of what's occurred in the past." But other deals won't provide a big boost to the job scene.
Roche Diagnostics, a Northeastside medical-devices company, doesn't plan to bring additional jobs here after buying 454 Life Sciences, a maker of genome- sequencing equipment, for $140 million earlier this year. Instead, Roche will maintain 454's facility in Connecticut, which is home to 167 employees. And Lilly, the Indianapolis-based drug maker, said it has not brought any new employees here after acquiring Hypnion.
Nor did it add employees after acquiring Icos, its West Coast partner in developing Cialis, the blockbuster drug for erectile dysfunction, for $2.6 billion. That deal, announced last year, closed in January.
But from another perspective, the Indiana economy could profit, if the deals work out as planned. Most companies that buy a rival, a major asset or a new technology do so for specific reasons -- to enter a new market, upgrade their product lines, or combine functions, such as sales or research. That, in turn, often makes them bigger and stronger.
For example, Brightpoint, a Plainfield distributor of cell phones, will become the largest industry player after buying a European rival, Dangaard Telecom, for $608.5 million in February. Together, the two companies will have $4.
6 billion in annual sales and more than 3,100 workers. That can hurt a company if the economy weakens and the buyer is unable to service the debt. Some wonder if that could happen at Finish Line, a retailer known for its athletic shoes and apparel.
It is borrowing more than $1 billion to buy Genesco, owner of trendy franchises that sell casual shoes, hats and clothes. The huge borrowing will make Finish Line one of the most leveraged retailers in the nation. One analyst already has downgraded his recommendation on Finish Line for that reason.
Corporations are not the only ones out shopping. Around Indiana and the nation, much of the action is coming from private-equity investment firms, which are buying up dozens of blue-chip companies. Cerberus Capital Management is buying Chrysler from DaimlerChrysler for $7.
4 billion. Blackstone Group is buying Hilton Hotels for $26 billion. TPG is buying Alltel Corp.
for $25 billion. Some of the deals have been priced at huge premiums, pushing up the stock price and raising the overall stock market to record highs. In Indiana, some of the most prominent deals of the last few years have involved private-equity buyers, including: A group of firms led by Blackstone is offering to buy Warsaw-based orthopedic maker Biomet for $11.
4 billion. A group of firms led by Sun Capital acquired Indianapolis-based grocer Marsh Supermarkets for $325 million in cash and debt. Carlyle and Onex are buying Allison Transmission from GM for $5.
5 billion. A group of firms led by Kelso Co. acquired vehicle- auction company Adesa of Carmel for $3.
7 billion. As companies go from public to private, it remains to be seen whether the new owners will invest in growth and create more jobs. The last time public companies went private in such numbers was during the leveraged buyouts of the 1980s, when owners used huge amounts of debt to acquire big corporations, then often broke them up and sold off the pieces to pay off the loans.
This time around, private buyers are using equity rather than debt, and say they are interested in building the companies they buy. A recent study by consulting firm A.T.
Kearney said that private-equity investors created 600,000 jobs in the U.S. from 2000 to 2003.
"It's all about growth this time," said Erwin, of the Christman Group. Growth is what drives the economy. It creates jobs for workers, value for owners and optimism for the community.
" Call Star reporter John Russell at (317) 444-6283. Customer Service Site Index Terms of Service Send feedback about IndyStar.com Subscribe Now Jobs with us Use of this site signifies your agreement to the Terms of Service and Privacy Policy/Your California Privacy Rights, updated August, 2006.
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