June 27, 2006 12:33 PM Eastern Time 

ACG/Thomson Mid-Year 2006 DealMaker's Survey Records High Confidence Level by M&A Professionals; 2006 on Track for Record M&A Year

As worldwide mergers and acquisitions are on pace to break the year 2000 record, dealmakers are again expressing great optimism with 94% of Minnesota dealmakers saying the current M&A environment is good or excellent. The ACG/Thomson DealMaker's Survey polled 1,201 investment bankers, private equity professionals, corporate executives, as well as lawyers, accountants and other service providers involved in the deal economy in May and June of 2006.

"Minnesota as well as other national and international based dealmakers have cash they want to want to put to work," said Peter Rasmussen, president of ACG Minnesota, and a managing director of Transactional Support Services at RSM McGladrey. "As companies see they can increase profitability by buying versus building, they become acquirers. Bankers are presenting compelling investment opportunities, and owners are getting good valuations for their businesses."

According to Thomson Financial, the total value of global M&A has reached $1.613 trillion so far in 2006 (as of June 13). That sum represents a 41% increase versus the corresponding period a year ago, when $1.143 trillion worth of deals were completed. The 2006 number is also on pace to surpass 2005's global M&A total of $2.769 trillion.

In addition, private equity firms, which have been busy investing existing funds and raising new ones, are chasing larger deals, often teaming up in "club deals" to challenge corporate "strategic" buyers.

The survey, conducted in May 2006, was completed by 34 ACG Minnesota members and Thomson Financial customers. Respondents were comprised of private equity, venture capital and buyout firm members (26%); investment bankers, intermediaries, brokers (29%); lenders, finance providers (6%); corporate professionals, entrepreneurs (15%); and service providers, such as lawyers, workout specialists, accountants and consultants (24%).

M&A Objectives

Survey respondents say the primary objective of mergers and acquisitions is to:

1. Increase revenues and profitability (45%)

2. Grow market share (30%)

3. Acquire competitor (6%)

The company attribute that matters most to an acquirer today is:

1. Sales and revenue growth (38%)

2. Management strength (24%)

3. Attractive business sector (18%)

4. Profitability (9%)

"Dealmakers are working at full throttle to take advantage of this market before inevitable volatility cuts into momentum. Buyers are well aware that there is little margin for error at today's prices and sellers know this is a great time to get out," said Patrick Hurley, ACG Chairman and Managing Director of MidMarket Capital Advisors.

Hot M&A Sectors

Dealmakers see the following sectors experiencing the most merger activity in the second half of 2006:

1. Technology (28%)

2. Healthcare and life sciences (22%)

3. Manufacturing and distribution (19%)

4. Financial Services (16%)

Cross-Border M&A

Half (50%) of dealmakers polled expect to be involved in an international cross-border deal during the second half of 2006, and 42% say cross-border deals are becoming more important to their firms. Geographically, they anticipate these deals will be with:

1. Western Europe (46%)

2. China (38%)

3. Canada (38%)

Bad Deals

The primary reason mergers fail, according to respondents is:

1. Poor post-merger integration follow-through (35%)

2. Poor pre-merger integration planning (29%)

3. Overpaying (15%)

Organic Growth

Survey respondents say the sectors that will experience the most organic growth are:

1. Healthcare, life sciences (32%)

2. Business Services (19%)

3. Consumer Products and Services (16%)

Executives are also bullish on organic growth based on these elements serving as primary factors fueling organic growth in 2006:

1. An improved domestic economy (61%)

2. Ability to charge higher prices (15%)

3. Historically low interest rates (6%)

Executives caution, however, that energy costs (36%) and rising interest rates (27%) are potential impediments to further organic growth.

Private Equity

Private equity professionals say the deal size and type that hold the most promise are:

1. Small buyouts (50%)

2. Middle market buyouts (36%)

3. Later stage venture capital (7%)

4. Early stage venture capital (7%)

Geographically, the areas with the greatest potential for private equity investments are:

1. United States (77%)

2. Latin America (7%)

3. India (7%)

4. China (7%)

In addition to looking for new investments and exits for their portfolio companies, 46% of private equity professionals say they are more focused on growing the top-lines of those companies. The ways they plan to increase top-line growth are:

1. Add to senior management team (54%)

2. Enter into new strategic partnerships (23%)

3. Add to sales team (15%)

4. Add new distribution channels (8%)

In an increasingly competitive environment, the primary reason private equity professionals won their most recent deals is:

1. Industry sector knowledge (38%)

2. Lack of competition (38%)

3. Pre-existing relationship with company management (23%)

4. Reputation or brand of their firm (15%)

5. Paid highest price (8%)

According to Buyouts Magazine, there were 223 LBO and mezzanine funds raising capital in the first quarter, which together amassed $34.75 billion in new commitments. The robust figures are coming on top of a record breaking year, as U.S. buyout shops closed on a total of $173.5 billion in 2005.

Meanwhile, venture firms are also returning to the market. Thomson Venture Economics and the National Venture Capital Association (NVCA) reported that there were 51 venture funds raising capital in the first quarter that collectively accumulated $6.5 billion.

The record fundraising has translated into a record amount of deals. U.S. firms completed roughly $42 billion worth of disclosed transactions in the first quarter, following 2005's total of $197.75 billion, according to Buyouts' data.

The deal sizes also appear to be growing. There's currently a roughly $22 billion bid on the table to take energy company Kinder Morgan private. While the deal, if completed, wouldn't unseat RJR Nabisco as the largest buyout of all time, it is clear RJR's $25 billion mark is within reach.

"The record amount of funds being raised hasn't shown any signs of letting up," said Buyouts Managing Editor Ken MacFadyen. "And as long as the debt markets remain accommodating and there are no hiccups in the economy, private equity deal volume can only be expected to continue its ascent as well."

About ACG Minnesota

The Association for Corporate Growth provides members with practical information to develop sound corporate growth decisions. ACG emphasizes top-quality performance, high earnings and well-founded corporate value. Diverse business professionals formed the Minnesota chapter 35 years ago and membership now exceeds 280 executives. Members count on an extensive peer network where they can test and exchange ideas. All meetings feature speakers who offer provocative perspectives and prompt creative thought about daily challenges in the business world. Members' skills are advanced and they typically come from these backgrounds:

-- Top executives in their operating company divisions of administration, finance, development and planning

-- Principals in professional service firms such as attorneys, accountants and deal makers all specializing in mergers and acquisitions

-- Financiers including venture capitalists, bankers and equity investors

Visit http://www.acg.org/minnesota/ for more information on ACG Minnesota.

About Thomson Financial

Thomson Financial is a US$1.73 billion provider of information and technology solutions to the worldwide financial community. Through the widest range of products and services in the industry, Thomson Financial helps clients in more than 70 countries make better decisions, be more productive and achieve superior results. Thomson Financial is part of The Thomson Corporation (www.thomson.com), a global leader in providing integrated information solutions to more than 20 million business and professional customers in the fields of law, tax, accounting, financial services, higher education, reference information, corporate e-learning and assessment, scientific research and healthcare. With revenues of US$8.10 billion, The Thomson Corporation lists its common shares on the New York and Toronto stock exchanges (NYSE:TOC)(TSX:TOC).