HP acquired Palm at the end of April, while airlines United and Continental merged as of May 3, signaling an increase in M&A activity with big names attached. And, just as banks and law firms see a bump in activity when the market opens up again, PR firms specializing in M&A are also adjusting to a more robust climate.
M&A activity was up worldwide by 15% year on year in the first quarter, according to Mergermarket's League Tables of PR Advisors to Global M&A Q1 2010. While in the US there was a 23% drop in deal value year over year, deal volume actually rose 22%. Tech, energy and financial services are widely viewed as the sectors to watch for M&A work.
Tony Cervone, SVP and CCO for United, says the airline industry is ripe for consolidation and, along with increased competition, is always looking for ways to enhance its offerings.
"You have to go industry by industry and find out what's appropriate for the communications and M&A work," he says. "In this industry, there is a ton of new competition that is redefining the business model."
United works with Kekst & Co, while Continental has Sard Verbinnen, and APCO Worldwide is also assisting with the merger, Cervone adds.
"The tech industry is certainly going through a period of consolidation," says Jim Dever, head of media relations in the Americas for SAP, which acquired fellow tech company Sybase in May. For SAP, he says, the timing was right, as new co-CEOs wanted to show "their ambitions for SAP to be a bolder, more innovative growth company."
Jeffrey Taufield, senior partner at Kekst & Co, says companies are looking to M&A activity because several key factors are in place.
"A lot of companies did a lot of work to preserve cash during the economic crisis, so corporations and private equity firms are sitting on a treasure chest of cash," he notes. "With the improvement in the economy and confidence growing, now is the time to look for external expansion."
Meanwhile, PR and strategic communications firms that work on these accounts have noticed their work change, most notably from handling reputation and bank- ruptcy work during the recession, back to M&A in the upturn.
Jason Schechter, chair of the US corporate practice for Burson-Marsteller, global AOR for SAP, says M&A activity has definitely risen, particularly in the past two quarters. Additionally, messaging and communications strategies have changed post-recession.
"It was our objective to help our clients communicate to the marketplace why activity had slowed and why companies were taking the positions they were," he says. "As activity resumed over the past months, messages have shifted to optimism about the marketplace, growth, and expanding."Expanding practices
Burson, notes Schechter, is expanding its M&A practice. Kekst is also staffing up, says Thomas Davies, a senior partner, who adds that the agency relies on experienced staffers to handle M&A activity across multiple industries, such as tech, energy, airlines, and financial services.
"Because they're not just M&A experts, they switch from restructuring into M&A and vice versa," he explains.
Steve Lipin, senior partner for the US at Brunswick Group, agrees: "It's not just about more business or recruiting additional people. It's ensuring we have expertise in areas our clients need."
Lipin and Schechter both noted cross-border acquisitions as a growth area as well, leading firms to gain expertise in global financial and political issues.
"That requires companies to really take a holistic approach in considering their strategic communications approach to M&A," says Schechter.
Recent M&A transactions
SAP acquires Sybase
May 12, 2010 PR firms: Burson-Marsteller (SAP AOR) and Bite Communications (Sybase AOR) Value: $5.8 billion
United and Continental merge
May 3, 2010 PR firms: Sard Verbinnen, Kekst & Co, and APCO Worldwide Value: The combined company would have annual revenues of approximately $29 billion based on 2009 financial results
HP acquires Palm
April 28, 2010 PR firms: Abernathy MacGregor (HP) Value: $1.2 billion
IBM buys Sterling Commerce from AT&T
May 25, 2010 Value: $1.4 billion
Yahoo acquires Associated Content
May 18, 2010 Value: $100 million