The pace of U.S. mergers and acquisitions in 1997 appears to be off to a fast start, reports Houston's Randall & Dewey Inc., acquisition and divestiture (A&D) consultants.
Randall & Dewey expects about $2 billion in A&D announcements during first quarter 1997.
Fourth quarter 1996 reported activity totaled $1.5 billion, down more than $2 billion from the preceding quarter; however, A&D activity totaling $6.8 billion for all of 1996 placed the year near the top of the $5-7 billion expected reported transaction volume range-only slightly less than the $7.1 billion high recorded in 1995.
Randall & Dewey said U.S. independents led announced activity during 1996.
Independents accounted for 61% of property acquisitions and 39% of property divestitures, yielding a net volume of $1.559 billion, while the non-U.S. company segment had minimal reported activity in both acquisitions and divestitures (see charts, this page).
Outlook
Good acquisition targets may be in short supply during 1997, according to Randall & Dewey predictions.
"Continued strength in product prices, as well as the improved financial performance of companies throughout the industry, have created concern about a relative scarcity of acquisition opportunities in 1997," the consultant said.
"The current emphasis on growth and profitability, fueled by increasing product demand and higher prices, is seen by many industry observers as a potential damper on divestment activities by traditional sellers, at a time when boom-type activity throughout the industry spurs demand for acquisitions."
The early 1990s was a period of selling to survive, the consultant said.
The mid-to-late 1990s, by contrast, is a period of high-grading of properties and opportunistic selling by active companies seeking to improve investment yields and better manage their portfolios as a hedge against possibly lower product prices in the future.
Randall & Dewey maintains transaction volumes likely will remain in "traditional ranges as the A&D marketplace draws out additional supply or restricts demand to eliminate imbalances."
