August 2010 Monitor  
With European debt concerns waning, market watchers were shifting their attention back to the United States, where media hype over the possibility of a double-dip recession has resulted in a seemingly endless parade of economists on cable television offering their opinions, further exasperating the less gloomy among us. In a July hearing before the Senate banking committee, Fed Chairman Bernanke said that employment growth will be weaker than expected and that “the economic outlook remains unusually uncertain.” Thanks for the insights, Ben. The August 2010 Federal Open Market Committee statement reiterated those comments, saying, “The pace of economic recovery is likely to be more modest in the near term than had been anticipated.” The FOMC further indicated that there would be little change to the Fed’s balance sheet as long as the uncertainty remained.
 
Widely followed macroeconomic indicators that support the Fed’s stance include The Institute for Supply Management’s (ISM) monthly manufacturing index and The Conference Board’s consumer confidence index. The ISM’s monthly manufacturing index fell from 56.2 in June to 55.5 in July, indicative of slowing, albeit continuing, growth (any number above 50 indicates economic expansion). New orders slowed more dramatically, down five points from June’s reading to 53.5 in July, indicating that companies are forecasting lower demand for their products moving forward. These indicators are in step with the latest consumer confidence number, which fell to 50.4 in July, the lowest level since February. 
 
Plummeting interest rates have some corporations racing to issue new debt or roll over existing debt while financing is cheap. IBM sold $1.5 billion in three-year notes at a record-low 1% interest rate during the first week in August.  Gregory Zuckerman of The Wall Street Journal noted that, “IBM has an uncanny ability to sell bonds at a low coupon, just before rates climb,” in 1979, 1989, 1993, 1995, 1996, and 2002. Some veteran investors are convinced that IBM’s bond issuance signals a top to the recent run up in bond prices. 
From the Mirus Blog www.FindCapital.org: Lending conditions for commercial and industrial loans began to ease in the second quarter, according to the Federal Reserve’s survey of U.S. lenders, which was published on Monday. Survey respondents also reported having eased covenants, rate spreads and other terms on C&I loans to firms of all sizes, continuing to unwind the widespread tightening that occurred over the past few years. This was the first time since the end of 2006 that the quarterly Senior Loan Officer Survey indicated an easing of credit standards on C&I loans to smaller firms.  (Learn more by visiting our Blog: http://findcapital.org/2010/08/17/fedsurveyjuly2010/)
 
 
 
The S&P 500 rallied in July, up 7.2% for the month. The tech-heavy NASDAQ showed even stronger gains, up over 10% for the month. Volume was light, leading some investors to question the sustainability of these recent gains. 
 
 
Source:  CapitalIQ (closing values on July 31, 2010)
M&A has taken something of a summer vacation, continuing to languish through July after June’s decline. Middle-market transactions fell across the industrial, services and distribution sectors. Technology was the only category that saw an increase in volume with 55 deals being announced, up from 53 in June. Deals in the sector included Juniper’s acquisition of mobile security software provider, SMobile Systems, Inc. for $70 million and Dell’s purchase of Scalent Systems, Inc. for $35 million. Dell also purchased Ocarina Networks, a venture-backed provider of online storage optimization solutions. Adobe announced its plans to snap up Day Software Holdings AG for $203 million, roughly 44 times EBITDA, and by far one of the richest deals of the month.
 
In the services sector, AECOM Technical Services, Inc. announced its acquisition of Tishman Construction Corporation, one of the nation’s leading construction management firms, for $234 million. AECOM Technology Corporation, the parent company, is taking over private equity-backed, McNeil Technologies, Inc., an IT and logistics provider to the federal government, for $355 million. 
 
The distribution category remained fairly quiet with the most notable announcement being Cerberus’s bid to take building products distributor Bluelinx Holdings private for just under $50 million.  In the industrials space, Ball Corporation announced the acquisition of Neuman USA, manufacturer of aluminum slugs and impact extrustions, for $60 million, and PerkinElmer closed on its $30 million acquisition of VisEn Medical, Inc.
 
 
 
Source:  CapitalIQ (Middle-Market M&A transactions with a transaction value of $10 to $250 million for the tweleve months ending July 31, 2010)
 
Founded in 1987, Mirus Capital Advisors is a middle-market investment bank that specializes in merger advisory, capital-raising services, fairness opinions and valuations to entrepreneurs, corporations and professional investors. By combining a proven process, industry and transactional expertise, and personalized service, Mirus has completed hundreds of transactions for both public and private companies. 
 
Our affiliate Mirus Securities, Inc. is a registered broker-dealer and FINRA/SIPC member.
 
Take a moment and check out our new Blog, www.FindCapital.org, a resource for business owners and executives who are looking for capital to fund the growth and expansion of their business, or to provide liquidity upon retirement.
 
For any questions about the Middle Market Monitor or Mirus Capital Advisors, please contact Mirus Capital Advisors at 781-418-5900 or visit www.merger.com. You can also contact our senior bankers directly at:
 
Sources: CapitalIQ, Bloomberg and Mirus analysis. Copyright 2010, Mirus Capital Advisors, Inc. All rights reserved. Mirus Capital Advisors does not assume any liability for errors or omissions.
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