The abrupt slowdown in merger-and-acquisition activity shouldn't be confused with a poor economy, say some Indiana professionals who specialize in the work.
Aside from a few hard-hit industries such as housing and retail, most sectors of the economy are fairly healthy, the observers say. And many think the low point of the economic downturn might already have arrived.
"I don't think it's going to get much worse," said David Hamernik, who has advised companies and been a turnaround specialist for 35 years. "I think we're at the bottom."
Not everyone agrees.
David Millard, charged with strategy for Indianapolis-based law firm of Barnes & Thornburg, said the economy is likely to deteriorate for a short while longer before mending, though the trough might be shallow.
"The bottom's in front of us," Millard said.
The national economy began to cool last summer, and Indiana with it, after the subprime mortgage crisis emerged.
As large banks turned off spigots for acquisitions, the ripple effect abruptly slowed merger-and-acquisition activity across most industry sectors and buyout sizes.
Among the casualties was the proposed $1.5 billion acquisition by Indianapolis-based Finish Line of Tennessee-based mall retailer Genesco Co. Finish Line paid $81.5 million to escape the deal after Finish Line and its bank, Swiss giant UBS, got cold feet.
Big mergers are still difficult to accomplish because large banks are gun shy or struggling to rebalance their books.
But that doesn't mean businesses, themselves, are in bad condition, the observers say.
Small- and medium-sized companies coming through the offices of Indianapolis investment bank Periculum Capital Co. are in reasonably good shape, said President Bob Shortle.
"I don't see a big downturn," Shortle said. "I don't see it nearly as bad as it's portrayed in the press."
Indiana figures won't be updated for months, but the national economy expanded at a sluggish 0.6 percent in the first quarter.
Employment figures paint a mixed picture.
The Indianapolis area gained 7,000 jobs in March from the same month in 2007, according to the U.S. Department of Labor. In fact, the last year-over-year decline for the region came in September 2002.
Indiana isn't faring as well, having drifted sideways for a year. The state had 2,966,500 on payrolls in March, a slight improvement over a year ago, but short of record employment of 3 million in early 2000.
Shortle and others who deal in transactions say tightened credit has driven down values of even small companies. A business that sold last summer for 7 times earnings before interest, taxes, depreciation and amortization would bring 6 to 6.5 times EBITDA now, the observers say.
Would-be buyers resumed scouting for targets early this year, Millard said.
This time, though, strategic buyers-companies looking to buy other companies that fit into growth plans-aren't being outbid by private equity funds that dominated in prior years.
Because private equity funds can't easily obtain the credit they were accustomed to using, strategic buyers think they can compete for acquisition targets, Millard said.
Meanwhile, buyers interested in buying at bottom dollar are starting to look for opportunities, too.
The activity is early, Millard emphasized. And potential buyers aren't in a hurry to buy.
Despite the rekindled interest in acquisitions, Millard thinks the bottom of the economic cycle is yet to come.
If the economy continues to wither, as Millard expects, strategic buyers will spook and pull back, resulting in the acquisition market virtually drying up. That pullback is likely to happen within 18 months, but could come much sooner, he said.
It's too early to tell if a downturn would be weak or deep, Millard added. Still, he thinks the bottom will pass quickly.
"I can't see or feel the next bottom, but it's gotta be right through the next door," Millard said.
A wild card is the future of capital gains taxes. Many business owners expect the tax, now at 15 percent, to be increased after the presidential election. So they're motivated to find a buyer before the tax rises.