July 29, 2014

Sales slump hits the area corporate world

This year has been the slowest for mergers involving Kansas City area companies in seven years, a report from CC Capital Advisors says. Buyers are eager, prices are high and sellers are reluctant.

Russell Stover’s pending sale aside, the wheeling and dealing among Kansas City businesses has slowed this year, according to the count John Hense keeps.

Hense is a managing director at CC Capital Advisors, which is an affiliate of Country Club Bank and helps clients with deals.

A total of 59 companies based in the Kansas City area bought another company or were sold through June, the lowest first-half total in seven years by CC Capital’s tally.

“I was really surprised by these numbers,” Hense said. “We’re just not seeing the middle market deals in Kansas City, the companies that are 50 to 250 million dollars in revenue.”

The total includes only publicly disclosed deals, so it misses any that remain private. And it excludes Switzerland-based Lindt & Sprüngli AG’s deal to buy Kansas City-based Russell Stover Inc., which was announced earlier this month after the count cutoff date.

Local deals this year include the sale of Cereal Food Processors Inc. to a Tennessee-based mill, which Hense valued as the largest in the area at $500 million, and Euronet Worldwide Inc.’s $242 million deal to buy a British company.

Mergers understandably took a hit during the Great Recession amid a financial crisis. Only 60 Kansas City area deals showed up in the first half of 2009, according to Hense’s totals.

And that makes the 59 for the first half of this year look all the more pale.

Still, there are lots of reasons to shop for a deal. It’s a slow-growth economy, so mergers help boost company size. Businesses generally are flush with cash. Interest rates are at rock bottom, making debt financing cheap.

CC Capital’s reports include Kansas City companies involved as buyer or seller. Hense said buyers are out in force and they’re bidding handsomely when they see a target.

Sellers are reluctant, he said, as they see few options to reinvest the money they get from a sale.

To reach Mark Davis, call 816-234-4372 or send email to Follow him on Facebook and Twitter at mdkcstar.

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