From CoxHealth and Skaggs Regional Medical Center to Burrell Behavioral Health and The School of Professional Psychology at Forest Institute, more than a dozen notable mergers and acquisitions have taken place in the last year in the Springfield area. Recent transactions, such as Executive Data Control’s acquisition of Memphis, Tenn.-based Sundial Shirt Co., reflect a national trend toward more buyouts and partnerships as the economic recovery gains traction.
BKD Corporate Finance LLC Vice President Jason Corson said M&A activity increased by more than 30 percent last year compared to 2011 for the firm that has offices in Springfield, Denver and Indianapolis. This outpaces an increase in transactions of 20 percent in 2011.
According to national M&A trackers Dealogic, the total number of transactions increased by 7.6 percent in 2012 to 11,307 deals. The total value of the transactions declined by 8 percent to $925 billion.
Corson said a fourth-quarter spike in mergers was due to looming tax changes, such as an increase in the capital gains rate.
“We had a number of clients in that same boat and really trying to get something done by the end of the year,” Corson said.
BKD Corporate Finance, a division of Springfield-based accounting firm BKD LLP, specializes in mergers valued between $5 million and $250 million, he said. One transaction that BKD Corporate assisted in locally was between McCune Brooks and Mercy in the Joplin market.
“From a buyer’s perspective, there are a lot of strategic companies or corporations that have been able to strengthen their balance sheets during the past few years and have a lot of cash available to pursue acquisitions,” Corson said, adding economic restraints have caused business owners to turn to growth through strategic purchases. “Acquisitions are a great way to supplement organic growth.”
Scott Axon, a broker with Springfield-based Kingsley Group Business Brokers, said the firm has seen a steady rise in mergers and acquisitions the last two years, but there is still plenty of room for more.
“We had the best fourth quarter that we’ve had in awhile, but the activity is still not back to where we’d like to see it,” Axon said.
During the recession, he said acquisition activity fell by 33 percent, and the company has only recovered about half the number of deals it lost through the end of 2012.
“The driving factor for high transaction volume is profitable businesses,” Axon said. “In 2008 and 2009, you could drive up and down South Campbell or Sunshine and the sense may be that things are not that different. But when you read the financial performance of Springfield companies, there was a significant difference.”
William Donoher, head of Missouri State University’s management department and an associate professor, said there are pitfalls merging companies should avoid when joining forces.
“There are scabs of historical mergers that have destroyed value instead of created value,” Donoher said, pointing to the 2000 merger between America Online and Time Warner as a classic example. The companies never worked well together to achieve common goals, Donoher said, and in 2002 the merged entity recorded a net loss of $99 billion.
In June, HomeServices of America Inc., a Minneapolis-based Berkshire Hathaway affiliate and the parent company of Carol Jones Realtors, acquired Branson-based Tri-Lakes Realtors and established CJR Tri-Lakes.
Rick Witeka, the former owner of Tri-Lakes Realtors and current general manager of CJR, said the transition has been smooth, though he acknowledged ideals have shifted among his Tri-Lakes employees from a small-business mindset to more of a corporate culture.
“I’d have to say the cultures were very similar,” said Witeka, who noted he had worked for a large real estate firm in St. Louis and many of his agents at Tri-Lakes also had experience in the corporate world. “There really was no shock value to anyone.”
CJR President Shaun Duggins said he spent a lot of time getting to know Witeka before the companies merged, which he thinks helped the transition. Duggins already had been through a merger with HomeServices, which bought his West Plains agency, Westgate Realty Inc. in January 2012 and renamed it Westgate Carol Jones Realtors.
Duggins, who began working with CJR a full year before the close of the sale of his business, said both HomeServices purchases were designed to increase CJR’s market footprint.
“We are on a growth path,” Duggins said, adding CJR would consider further acquisitions, even expanding into northern Arkansas.
Other notable local transactions in the last year include Arvest Bank’s purchase of 15 Bank of America branches in Missouri; Anderson Engineering Inc. merging with Monett-based Sprenkle & Associates Inc.; BluCurrent Credit Union joining forces with Greater Ozarks Community Credit Union; and O’Reilly Automotive’s year-end purchase of Maine-based VIP Parts to gain a presence in the Northeast.
This installment of Springfield Business Journal’s Architects & Engineers Project Report showcases 26 endeavors by area design and engineering professionals.
