US MEGAMERGERS ON THE WANE When the management of Alamito corp announced its decision to take the company private last autumn via a leveraged buyout (LBO) at $125 a share, few could have anticipated the bidding war that would ensue. At one point, remembered Daniel Good, head of the mergers and acquisitions department at EF Hutton, Alamito's investment bank, "we literally received a bid an hour and in totoal there were 14 separate bids". Eventually, the competition narrowed to four bidders and the victor was Osceola Energy Inc, which agreed to pay $165 a share, a whopping premium over management's original price.
An LBO bid from management often acts as a catalyst for higher offers by outsiders, and Alamito, an electric utility with a stable cash flow business, represented an attractive acquisition candidate. But the number and intensity of bids for this particular corporate property, Good believes, is a symptom of how expensive the market for companies has become in the past few months. "For a deal that was only $400 million and that a year ago wouldn't have received any attention," said Good, "Alamito turned into a major event."
Given the approximately 50% rise in stock prices during the last 12 months, the acquisitions business clearly has become a seller's market.