Local M&A activity swings up as confidence grows

A number North Texas-based companies have announced mergers in recent weeks and industry observers say it could get better as the economy improves.

Since April there have been several deals announced involving local companies from a broad swath of industries and sectors, including players in financial services, retail, oil and gas and technology.

A sampling:

• April – Fort Worth accounting firm Whitley Penn announced it was acquiring Houston accounting firm Null-Lairson.
• May – Hilltop Holdings Inc., a Dallas-based holding company, announces it is acquiring Dallas-based PlainsCapital Corporation, the parent company for PlainsCapital Bank.
• May – Solera Holdings Inc. of Westlake acquires Actual Systems, a global provider of parts recycling yard management systems.
• June – Dallas-based 7-Eleven buys 18 Open Pantry stores in Wisconsin, then 23 Quix stores in Texas.
• June – Fort Worth accounting firm Weaver buys Delong Consulting Services L.C. of 
Colleyville.
• July –  Ancor Capital Partners of Fort Worth and Merit Capital Partners announces the acquisition of Uplift Technologies, a provider of seat-assist and light-therapy medical products.
• July –  Solera Holdings announces one of its subsidiaries is buying the assets of PS Holdings, which owns a cloud-based service which locates used or refurbished parts for the auto repair 
industry.
• July – Global Power Equipment Group Inc. of Irving says it plans to acquire Koontz-Wagner Custom Controls Holdings, which provides solutions for the oil and gas and electrical 
industries.
• July – Independent Bank Group, the McKinney-based parent of Independent Bank, announces plans to buy United Community Bank in Dallas.

Layne Kasper, managing partner of Kasper & Associates in Fort Worth, a mergers and acquisitions firm that serves middle-market companies, said deal volume could continue to climb as confidence in the economy grows.

“2008 is the time when a lot of us in this industry saw things slowing down,” Kasper said. “We’re on the upswing of a trough – a pretty steep trough that began with the banking crisis and so much uncertainty in the economy – but now things seem to be picking up.”

Most of the transactions in North Texas involve strategic buyers as opposed to financial buyers like private equity groups.

“For the past year or two there are a lot of companies that are sitting on large amounts of cash and now they are trying to put those reserves to work,” he said. “When they see those strategic opportunities they’re pouncing on them.”

The activity here over the past few months has echoed first half trends across Texas. While M&A activity was slow out of the gate (first quarter deal volume and value were at three-year lows), things picked up considerably in the second quarter according to Mergermarket, an independent M&A intelligence service.

M&A activity in Texas in the first half of 2012 accounted for 172 deals worth $57.6 billion, which represented a 13.6 percent increase in deal value from the first half of 2011. In the second quarter 96 deals were made worth more than $37 billion, marking Texas’ highest deal count since 2010.

Deal value also jumped by more than 25 percent in the second quarter compared to the same period last year, according to 
Mergermarket.

Energy continued to dominate the Texas deal-making landscape in the first half of 2012, led locally by Dallas-based Energy Transfer Partners’ $7 billion acquisition of Sunoco in April. Transactions between private equity firms and public energy companies accounted for the remainder of the biggest energy deals in Texas this year.

“Big public energy businesses and energy focused private equity firms have been taking advantage of soft commodity prices to make buys,” said Chad Watt, Mergermarket’s Texas correspondent, in a release. “These buyers believe energy production in the U.S. will continue to grow and remain profitable despite near-term commodity price declines.”

Kasper said activity below the $100 million level is still lacking (there were 28 fewer deals valued below $500 million in the first quarter of 2012 in Texas than the same time in 2011), even though the interest is still there, particularly on the buy side.

“There are still a lot of buyers eagerly looking for companies,” he said. “The feedback we’re getting is that there is some frustration because there are buyers out there but they just can’t find good companies to acquire.”

Once the recovery gains more steam, he expects there to be more deals made, particularly from the seller side.

“An economic downturn takes its toll on the energy level of business owners who fight through it; it’s something we’ve seen in previous downturns,” he said. “People just say they’re ready to move on and sell.”

Four of the top 20 largest bank and thrift deals announced this year have happened in Texas – more than any other state, according to the latest data from SNL Financial. Two of those deals – Dallas-based Comerica’s January purchase of Sterling Bancshares in Houston and Hilltop Holdings’ announced purchase of PlainsCapital in May – involved North Texas banks.

The deals are indicative of a market in Texas that has been more robust than elsewhere in the country, according to the latest report from Samco Capital Markets in Dallas.

“Deal volume in the Southwestern U.S. continues to be dominated by Texas M&A, and deal volume in both regions remained steady during the second quarter,” Samco said.

There have been 16 acquisitions involving Texas banking institutions in 2012, including at least five local banks or holding companies.

The most recent deal was announced July 17, as Independent Bank Group, the McKinney-based holding company for Independent Bank, said that it will acquire United Community Bank, a $105 million bank with four locations in Colleyville, Coppell, Plano and Highland Village.

Coming on the heels of Independent Bank Group’s recent acquisition of I Bank Texas in the Austin area, the acquisition gives Independent Bank Group 23 locations in the Dallas area and 32 locations throughout Texas with combined assets of $1.6 billion.