Minnesota sees strongest M&A action since 2007

Roger Zbikowski wasn't positive he was going to sell until he got the offer he couldn't refuse for ToolKraft, the high-precision machine factory in Fridley that his late father started in the 1970s.

"The company was a project we built together," Zbikowski said. "After he died about 3½ years ago, I just didn't have that feeling for the business anymore. And I have no kids, no next generation to pass the business on to.

"I'm pulling out earlier than I expected. But it's a fantastic time to sell a profitable company that weathered the recession. We reduced hours, but I didn't lay off one employee or cut benefits. This is a highly trained group, and we needed to retain them. When business came back, we were ready to go."

Zbikowski, 55, accepted the offer last summer of Gary Hadley's MultiSource, the growing contract manufacturer that kept the nearly 40 ToolKraft employees. The addition expanded MultiSource's capabilities, with an eye to expanding the former ToolKraft, now known as MultiSource's Fridley division.

Zbikowski indicated that MultiSource was not the highest bidder, but came close to his price and offered the best future for employees.

That was just one of the 416 deals announced last year in which a ­Minnesota company was a buyer or seller, making 2014 the most active mergers-and-acquistions year locally and around the country since 2007, before the Great Recession.

"The trends we currently see from the Twin Cities make us optimistic for 2015," said Andy Kocemba, president of Calhoun Companies, the Edina business brokerage that represented ToolKraft. "Buyers and sellers are gaining confidence and local small businesses are performing increasingly well."

Generally, growth in the buying and selling of companies, as well as increased levels of equity capital raising, are indicators that corporate ­sellers are confident that they can get a good price. And the acquirers, either financial buyers such as private equity investors or strategic buyers seeking to expand or deepen their businesses, have ­confidence that they are buying a decent firm that can deliver improved performance in an improving economy.

Nationally, mergers and acquisitions hit the highest annual volume on record with $1.61 trillion worth of deals announced in 2014, up 42 percent from 2013 and exceeding the previous high of $1.57 trillion in 2007, according to Dealogic.

"This [2014] was the first year of four good quarters in a row since the recession," said Matthew Knopf, head of the M&A business at Dorsey & Whitney, which represents such companies as UnitedHealth Group, Mosaic and Medtronic, which have been active. "In the past, there was always fear about the economy or government shutdowns or something," that would shut down the deal pipeline for a quarter or two.

"It's hard to have four good quarters in a row," Knopf added. "I haven't worked harder in a long time, particularly in the fourth quarter. ­People wanted to get things done. If people were ­worried about the economy you wouldn't see that."

Significant fourth-quarter transactions included:

• Graco Inc. selling liquid finishing business assets to the Carlisle Companies for $590 million. Minneapolis-based Graco had acquired those assets from Illinois Tool Works in 2012, but had to sell the business after the Federal Trade Commission required Graco to divest liquid finishings over industry concentration issues. Graco used proceeds of the divestiture to make four additional acquisitions in January, including the $160 million acquisition of Pennsylvania-based High Pressure Equipment.

• Thomas McNerney Partners, a health care venture capital firm based in Minneapolis, was part of consortium of 13 investors who invested in InVitae Corp. a San Francisco genetic information company. The $120 million financing was one of the largest venture capital investments of a Minnesota firm last year.

• Olson, one of the largest advertising and marketing agencies in Minneapolis, announced it will be acquired by ICF International, a Fairfax, Va.-based professional services firm. The deal was valued at $295 million and the two firms said the 545-person Olson agency would operate as a stand-alone unit of ICF.

• UnitedHealth Group announced it would acquire Alere Health of Atlanta and closed the deal on Jan. 19. Alere provides rapid diagnostic tests for infections diseases and toxicology. Alere will become part of UnitedHealth's Optum health services arm adding to Optum's portfolio of health management services. The deal was valued at $600 million, the largest announced deal of the fourth quarter.

• The Pohlad Companies announced that it will sell Marquette Financial, the last of the banking empire founded by the late Carl Pohlad, to UMB Financial of Kansas City for about $190 million in stock. The properties are in Arizona and Texas. The Pohlads previously sold their Minneapolis-based banks to what are now U.S. Bancorp (1991) and Wells Fargo (2001).

Also in the fourth quarter, the $570 million sale price was disclosed for Henkel's acquisition of the Bergquist Co. of Chanhassen, a deal that was announced in the previous quarter. The low-profile Bergquist, a maker of thermal insulation for electronics founded by Carl Bergquist 50 years ago, had revenue of about $200 million and employs about 1,000 at several Minnesota and Wisconsin plants.

Francis Murphy, Minneapolis-based director of transaction services at KPMG, the accounting and advisory firm, said the merger-advisory business is strong.

"We're seeing an uptick in Twin Cities deal volume," Murphy said. "The sectors that have been busy nationally have been busy locally: health care, technology, industrial products. The trends in health care and pharmacy and life sciences are drivers here."

Neal St. Anthony • 612-673-7144