LBO Sponsors Mine the Basic Industries to Stress Quality

As with all segments of M & A, financial buyers have been restrained in the last two years but they haven't stopped doing deals. The buy- ing strategy/or key shops that have honed their experiences through good times and bad is not to push the envelope at a time of tight credit and drooping prices. It's a clear case of chasing opportunities in a back-to-basics mode.

M&A: The deals market is very tough now, but what kinds of companies and markets are you interested in? Are these going to be the preserve of the private equity firms as opposed to the strategic buyers once activity starts to get stronger?

Rehnert: It is hard to predict where the economy is going. I don't think that anyone has a clear perspective on what is going to happen until the current interna- tional situation, with the risk of war and terrorism, reaches some perceived point of stability. A prevailing uncertainty still lingers.

The deals we are looking at now are relatively recession-proof companies not dependent on rapid growth in unproven markets. Typically, these are com- panies that we can add value to through the strategic, operating, and financial capabilities of our team. Often, companies we evaluate have been under-man- aged or face a variety of untapped opportunities.

Schaye: A common theme is that a lot of firms are going to back to basics. There were some missteps in the recent past because people stepped away from their core competencies. Now some firms are going back to their core competencies and what I call "dot-rust" companies those with assets that are stabilized despite the recession and are managing those assets and driving them forward.