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Insurance industry

M&A Activity Gains Momentum, Leaving Executives On Edge

Strategic Insights

— 2 min read

As the pace of mergers and acquisitions in Northeast Ohio accelerates, public company executives are feeling increasing unease about their stock prices and the likelihood of being acquired. According to Ellen Batkie, director of investor relations at Charter One Financial Inc., no one can afford to relax in this market. "Just when you think your stock price is up to the point where you think you're untouchable, then you find out about someone else with a stronger stock (price) who is out there buying banks," she said. Institutional investors are pouring money into large cap stocks, making smaller companies with strong earnings vulnerable to takeover.

Key Takeaways:

  • Executives at public companies in Northeast Ohio are feeling increasingly insecure due to the rapid pace of mergers and acquisitions in the region.
  • Institutional investors are pouring money into large cap stocks, making smaller companies with strong earnings more vulnerable to takeover.
  • Even companies with strong earnings, such as NCS HealthCare Inc. of Beachwood, have seen their stock prices languish.
  • Companies like Charter One Financial Inc. have seen their stock prices remain stagnant, making them potential targets for acquisition.
  • Local companies have been both buyers and sellers in recent M&A deals, with Cleveland-area companies like TRW Inc. and Ceres Group Inc. making significant acquisitions.
  • The M&A market is affecting companies of all sizes, with Parker Hannifin Corp.'s Treasurer Timothy Pistell estimating that many small companies in the aerospace industry have already been bought.
  • Even companies that have recently completed acquisitions fear becoming takeover targets, such as Charter One, which agreed to pay $1.2 billion to buy St. Paul Bancorp Inc. of Minneapolis.
  • The M&A market is creating opportunities for companies like NatCity Investments Inc. to broker deals, with an average transaction value of $40 million so far this year compared to $20 million in 1998.

Statistics:

  • Charter One Financial Inc. paid $1.2 billion in stock and cash to buy St. Paul Bancorp Inc. of Minneapolis.
  • The deal gave Charter One $30.5 billion in assets.
  • Institutional investors have poured money into large cap stocks, making smaller companies more vulnerable to takeover.
  • Parker Hannifin Corp. has made 40 acquisitions over the past six years.
  • The M&A market is creating opportunities for companies to form new partnerships, with Parker Hannifin's Treasurer Timothy Pistell estimating that more large-size companies will talk about coming together.
  • NatCity Investments Inc. has brokered six acquisition deals so far this year, with an average transaction value of $40 million.

Sources:

  • Charter One Financial Inc.
  • LJR Great Lakes Review
  • Parker Hannifin Corp.
  • NatCity Investments Inc.
  • PricewaterhouseCoopers LLP
  • Cleveland Plain Dealer

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