Dealmaking back in fashion, as CEOs buy growth

Mon Feb 1, 2010 2:26pm EST
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By Martin Howell and Ben Hirschler

DAVOS, Switzerland (Reuters) - The manic dealmaking of the years before the financial crisis may be some way off, but acquisitions were certainly back on the agenda for the CEOs of many companies attending the World Economic Forum in Davos over the past week.

Savage cost cutting, capital raising and debt refinancing mean that a lot of the more profitable companies now have strong enough balance sheets to be opportunistic if a deal is presented. The debt markets are also open again to help finance deals, and market gains mean their shares can be used as currency in transactions.

Buying growth through purchases may also be more attractive than trying to expand current businesses organically, given concerns about how fast the economies of Europe and the United States will recover this year.

But the CEOs are generally looking for bolt-on acquisitions, not massive deals that transform their businesses.

Take Mike Fries, for example. As chief executive of pay-TV company Liberty Global (LBTYA.O: Quote) he is eager to expand beyond the 15 million subscribers Liberty has across 10 countries in Europe.

"We are opportunistic on the M&A front," Fries said. "If something came up that fits us perfectly we would have to look at it."

He said that the strength of high-yield debt markets was fueling such activity. It took less than two days for the company to raise enough money for the $3 billion acquisition of Germany's Unitymedia at the end of last year.

Also in the media sector, Thomson Reuters Corp (TRI.TO: Quote)(TRI.N: Quote) CEO Thomas Glocer said the company was in a strong position to make acquisitions, thanks in part to its opportunistic refinancing of debt over last summer. Glocer said there was "a ton" of good businesses coming onto the market.   Continued...

<p>Attendees are reflected behind a logo at the congress centre of the Alpine resort of Davos, the venue of the World Economic Forum (WEF), January 31, 2010. REUTERS/Christian Hartmann (SWITZERLAND - Tags: POLITICS BUSINESS)</p>