Financial Update: Where Are the Dealmakers?

Last year at this time Craig Battle, managing director of investment bank Tucker Alexander, described the level of first-quarter industry mergers and acquisitions activity as “anemic.” If 11 deals in three months was deemed anemic a year ago, how would you describe the first quarter of 2007, in which a scant seven deals occurred?

“The deal market has been very spotty for the last several years,” says Battle, whose Princeton, NJ-based firm tracks transactions for Multichannel Merchant. “It just hasn’t been happening. The deal market is very different than it was in the ’90s, much more disciplined. Most transactions now are driven by private equity guys looking for bigger companies.”

In a sense, private equity firms are like kids in a toy store: “The more they buy, the more they want,” Battle says, “and that’s going to be a trend that continues. Whether freestanding catalog companies will get involved remains to be seen.”

At the same time, he continues, not many catalogers are making strategic acquisitions and buying other catalog businesses. “That’s a sign of the times. It’s tougher now to make money in your core business, and the postal increase will make that even tougher on catalogers.”

Universal Screen Arts gets Bleu

When: January The facts: Hudson, OH-based Universal Screen Arts, the parent company of the Art & Artifact, Signals, What on Earth, and Wireless gifts and decor catalogs, acquired books cataloger Bas Bleu on Jan. 2. Founded 12 years ago by Eleanor Edmondson, Atlanta-based Bas Bleu mails about 5 million catalogs spread over five drops each year. “This fits,” Battle says of the deal. “Nothing earth-shattering. It’s a good acquisition.” According to its data card, Bas Bleu has nearly 113,000 12-month buyers, 80% of whom are women, with an average age of 45 and an average household income of $65,000. Art & Artifact, which sells European and historically influenced decor and gifts, has nearly 43,000 12-month buyers, 80% of whom are women, with an average age of 46 and an average household income of $75,000. Signals, which sells a broader array of gifts, has nearly 434,000 12-month buyers, 72% of whom are women, with an average age of 46 and an average income of $62,000. The skinny: While Bas Bleu’s growth has been respectable, it was limited by facility constraints, such as its 10,000-sq.-ft. warehouse. Now Bas Bleu makes use of Universal’s two-building shipping facility, which encompasses 160,000 sq. ft.

Berkshire Hathaway nabs Mouser

When: January The facts: Berkshire Hathaway, the Omaha, NE-based holding company owned by billionaire Warren Buffett, acquired electronics components distributor TTI. The deal includes TTI’s catalog business, Mouser Electronics. Fort Worth, TX-based TTI, which employs more than 1,700 people at more than 50 locations in North America, Europe, and Asia, reported sales of $835 million in 2005 and projected revenue of about $1.2 billion for 2006. According to TTI’s chief marketing officer Craig Conrad, the resistors, capacitors, and other parts TTI distributes represent about 85% of the parts on any circuit board inside a computer or other electronic device. TTI will continue to operate independently; its current management, including CEO Paul Andrews, will remain in place. Mouser Electronics ships globally to more than 280,000 customers in 170 countries from its 432,000-sq.-ft. facility in Mansfield, TX. The skinny: “This is a classic Berkshire kind of deal,” Battle says. “What [Buffett] looks for are companies well managed in basic industries with a strong market position that aren’t going away.”

Tafford buys Tafford

When: January The facts: The assets of Tafford Manufacturing, a North Wales, PA-based manufacturer/marketer of medical scrubs, shoes, and accessories, were acquired by Tafford Uniforms, a company formed specifically for the purchase. The new company has no liability for Tafford Manufacturing’s debts, which had led to product shortages and customer service issues. In addition to the Tafford brand, the company owns the Cotton Scrubs & Co. and Best of Scrubs brands, which sell online. The skinny: Tafford Manufacturing’s undisclosed former lender had foreclosed on its assets and subsequently sold the assets to the new Tafford Uniforms.

1Q 2007 CATALOG INDUSTRY TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price (in millions)
JAN. Bas Bleu Specialty books Universal Screen Arts Acq. of assets N/A
Blair Corp. Apparel and home decor Appleseed’s Topco Stock purchase $173.6
Mouser Electronics Electronics components Berkshire Hathaway Acq. of assets N/A
Tafford Manufacturing Medical apparel Tafford Uniforms Acq. of assets N/A
FEB. The Woodwind & the Brasswind Music instruments Guitar Center Acq. of assets $29.5
Clement Communications Safety-related signage Brady Corp. Acq. of assets N/A
Great Companions Pet supplies Revival Animal Health Acq. of assets N/A
Source: Tucker Alexander, compiled from public information and other nonconfidential sources

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