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Foreign Investors Nibbling at Mid-Market Companies

By: Ed Duggan - Date: 09/12/2008

Investment banking firm Farlie Turner & Co. has closed a more than $50 million deal involving a German buyer, an example of how the fallen dollar and slowing U.S. economy are attracting foreign investors.

Fort Lauderdale-based Farlie Turner was the investment adviser to Utica Alloys in its sale to Duisburg, Germany-based ELG Haniel GmbH. Partner Craig Farlie said he is seeing increased European interest in mid-market companies in the $50 million to $200 million range.The company couldn’t give an exact price on the Utica deal because of a confidentiality agreement, but it was between $50 million and $100 million, partner Mike Turner said.

Utica is a processor of super alloy scrap materials – nickel, stainless steel and titanium bearing scrap – primarily for the global aerospace engine manufacturing industry.The company was a niche fit for the German buyer, a metals company that has now expanded its international footprint and established client portfolio.
The scrap suppliers frequently have contracts to buy back the scarce reprocessed specialty metals.

“The infrastructure-related companies are in demand and, because of the currency situation, many of them are bargain-priced for foreign buyers,” Farlie said.
His firm recently closed one foreign buyer deal, and has several others in the works.

Other areas sparking interest include gas- and oil-related companies, engineering, general manufacturing and business services firms. Foreign interest has not trickled down to investing in the emerging company level yet, according to attorney Andrew Billig, of Edwards Angell Palmer & Dodge in West Palm Beach.

“I have five emerging market company investment deals on my desk right now, ranging from $5 million to $20 million, but it’s all domestic players,” he said. “The market is still strong for companies with sound technologies and business plans, a good management team – and those even with a short operating history.”

A few things have changed, though, he said. Valuations are less than they were just 18 months ago, down to five to six to times EDITDA for operating companies.
“Preferred stock is still the prevailing vehicle,” Billig said, “sometimes combined with a balance of debt.” Financing is tighter – but still available – a fallout from the credit squeeze.“The market is not as robust as it was two years ago, but deals are still getting done, especially in the medical device, software and technology fields,” Billig said.American companies are not out of the acquisition game. A down economy means less competition for deals.

The Farlie Turner team advised Boyle Engineering in its sale to Los Angeles-based AECOM Technology Corp. (NYSE: ACM) for more than $100 million.


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