M&A Activity Grinds to a Halt

Sep 01, 2010 9:30 PM  By

Just Three Catalog-Related Deals were reported in the second quarter — a far cry from the 10 we reported in the second quarter last year.

While the quarter was deathly quiet on the mergers and acquisitions front for catalogers, activity is expected to pick up in the second half of 2010.

“I know of several transactions that are in process and whose trade is pending in the third quarter of 2010,” says Lee Helman, managing director for investment firm Financo. “Many entrepreneurial owners are also giving consideration to the anticipated tax rate changes in 2011 and beyond, and they’re having quiet conversations as well.”

And as channels continue to converge, he notes, the catalog businesses that succeed “clearly have data mining and data segmentation skills that e-commerce retailers could benefit from having themselves.”

One company — Sport Supply Group — was involved in two of the quarter’s acquisitions: Sport Supply Group bought Coaches Sports Corner and Greg Larson Sports. Also, roofing supplies merchant ABC Supply acquired competitor Bradco Supply.

All three transactions were “strategic tuck-ins,” Helman says. The buyers were acquiring companies that are complementary to their core business, “with a good brand following and strong customer base in a niche market.”

Helman says that, coming out of 2009, many catalogers clamped down on their marketing and advertising spending. This drove sales volumes down, but in many cases took profits higher as merchants focused on their most profitable customers to maximize the return on marketing spend. “This clearly is a theme for 2010 thus far,” he says.

Why haven’t we seen more deals to date this year? The actionable assets are limited in supply, Helman says, “and there continues to be a value gap between what owners feel they deserve and what buyers are prepared to pay in many cases.”

Company Market segment Buyer/investor Investment form Est. price (in millions)
APR Coaches Sports Corner Sports Equipment Sport Supply Group Acquisition NA
Greg Larson Sports Team sports distributor Sport Supply Group
Acquisition NA
MAY Bradco Supply Roofing supplies ABC Supply Acquisition NA
Source: MCM