By Zachary R. Mider and Rodney Yap
Nov. 7 (Bloomberg) -- The credit squeeze choked off the market for most debt-financed takeovers worth more than $5 billion last year. Now the smallest deals are getting killed too.
``There aren't people lending,'' said Paul Weisbrich, an investment banker at RSM McGladrey Inc. To even consider a loan, lenders are saying, ``Kiss my ring.''
The CHART OF THE DAY shows U.S. mergers since 2005 by dollar value and by number of transactions. They plummeted by value in 2007, when banks cut back the syndication of loans for multibillion-dollar deals. This year, the number of deals has plunged too, as banks reject financing for takeovers worth just $50 million, said Weisbrich, who is based in Costa Mesa, California.
RSM McGladrey advises on takeovers of less than $1 billion, those it calls ``middle market'' transactions. They aren't usually as dependent on market cycles as bigger deals, Weisbrich said, because they are often driven by the retirement plans of company founders, and depend on links to individual banks rather than the syndicated loan market. Now, even those bank relationships are coming under stress as banks hold onto cash.
``This thing is almost hermetically sealed,'' said Weisbrich, whose firm is a unit of H&R Block Inc. ``The joke in M&A circles is that this is the time to go to Tuscany, because there's not a lot going on.''
To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net
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