BANGOR, Maine – About a decade ago, Prentiss & Carlisle took a strategic look at its business model and realized it needed to both grow and diversify geographically to survive.
The 86-year-old forest management company had grown over the years and could continue to grow organically. Or it could pursue strategic acquisitions.
Five years ago, the Bangor-based firm acquired a Michigan competitor. That deal expanded Prentiss & Carlisle’s reach beyond Maine and also added a new business line in the form of a new employee who was a nationally renowned licensed general appraiser who specialized in timberland, according to Don White, the company’s president.
Then, late last month, Prentiss & Carlisle made a second strategic acquisition, picking up Upland Forestry, a timberland management firm with offices in New York, Vermont and New Hampshire.
“We didn’t grow for the sake of growing,” said White. “What’s the motivation? Client services: How can you serve your client better, give them a better product at an economical price, and how can you be a player on the national stage.”
The Upland acquisition is part of a recent flurry of merger and acquisition activity by Maine companies that experts say reflect national trends.
Earlier in November, Cianbro Corp. announced the acquisition of Illinois-based Starcon International Inc. That deal gave Cianbro, an East Coast construction powerhouse, market share in 25 additional states across the Midwest, in California and along the Gulf Coast. It also further propelled Cianbro into the petrochemical business where Starcon focused and the Maine company had recently been probing.
And in late November, Viking Lumber Inc. and Rhoades Building Products Inc. announced the two companies would merge. In a true business merger, leadership of the two companies will control the new company, which will operate under the Viking name and operate at 10 locations in the midcoast, Down East and Bangor areas.
Merger and acquisition activity started off slow in 2010, but has picked up nationally in the second half, said Ken MacFadyen, editor of Mergers & Acquisitions Journal.
“There’s a lot more clarity in the markets. People have been sitting on their hands for probably two years, putting off M&A decisions, putting off deals until there’s more clarity in the economic environment, the financing environment,” said MacFadyen.
Companies looking to be sold are trying to do so ahead of a Dec. 31 deadline, suggested MacFadyen, because there’s uncertainty around the extension of the Bush-era tax cuts, and they want to make gains before taxes on dividends and capital gains potentially increase.
Companies looking to acquire have cash to do so, said Ron Nykiel, dean of the school of business at Husson University. In the recession and its hangover period, they haven’t reinvested cash in the company, have put off hiring and they see the market coming back. A strategic acquisition to grow market share and ride that wave makes sense to some companies, and they have the cash on hand to leverage bank loans — which still boast low interest rates, he said.
Matthew Caras, founder and principal of Leaders LLC, a Portland-based M&A advising firm, said each of the recent Maine deals involve businesses that have a long-term view of the acquisition and of the return they expect from it.
“If you look behind all of those transactions, you would find a company that believes it can do more with the business it has acquired than the business can do on its own,” said Caras.
In addition to the Bangor-area deals, he noted an acquisition of a product line that his firm worked on for Berwick-based Hussey Seating Co. Hussey acquired Perma-Cap and Perma-Plank, a line of vinyl bleacher covers.
Caras agreed that the companies will have their own free cash and the ability to leverage. Importantly, the prices for companies are more realistic these days, down from the boom times of the middle of the decade, he said. Buyers in the past included private equity firms and others willing to use as much bank debt as possible to fund deals. But that cash source is now tight.
“Notwithstanding what you may read, the credit is still difficult to obtain,” said Caras. “The amount of leverage is not available.”
So the “crazy debt to equity ratios” that drive valuations higher aren’t as prevalent, he said, and the more conservative corporate shoppers are able to actually find realistic deals — not quite rock-bottom, Caras said.
Caras suggested there may be a time in the somewhat-near future where M&A activity picks up significantly.
“I think there’s going to be a flood of companies wishing to sell when there’s a perception the time is good,” said Caras.
White, of Prentiss & Carlisle, suggested that corporate culture was the biggest factor to consider when looking at a possible acquisition. The people your company are acquiring have to be a good fit for your own business. If you have to change people to fit your business, it will be much more difficult, White said.
“You get good people, you’re going to get a good deal,” said Cook.
White said Prentiss & Carlisle now has 96 employees, the majority full-time. The company remains acquisitive, he said, if the right deal comes along.
“We’ve got big eyes – but we’ve got to chew what we have,” said Cook.