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Merger frenzy


The last several weeks have been nothing short of euphoric for those who track the multitude of economic indicators compiled by academics, pollsters and the government.  The economy continues to add jobs and manufacturing activity is picking up. Consumers are brimming with confidence, and even state and local tax revenues are rebounding, at least in aggregate across the nation.

And for anyone who doubts that confidence within the business world isn’t improving need look no further than the spate of mergers and acquisitions that have taken place over the last month.

On Nov. 11, Iowa Telecom said it had purchased Lighthouse Communications’ residential Internet service provider business. On Nov. 21, Milwaukee-based M&I Bank FSB agreed to buy AmerUs Home Lending of Urbandale, a division of Des Moines-based AmerUs Group Co. Three days later, Des Moines-based insecticide maker Chem-Tech Ltd. announced it would buy Loveland Industries’ Prozap line of insecticides for use on animals.

A.J. Allen Mechanical Contractors Inc., which is based in Des Moines, said on Nov. 25 that it bought American Air Technologies, a heating, ventilation and air conditioning service company that is also based here. On Nov. 26, Germany’s Siegwerk Group, a maker of printing ink, announced that it agreed to buy Color Converting LLC. And in the last week, Davenport-based Per Mar Security Services said it purchased Feel Safe Security Systems Inc. of West Des Moines and St. Louis-based Medicine Shoppe International Inc. agreed to buy Medicap Pharmacies Inc.

The fact that just three of the seven acquiring companies are based in Central Iowa isn’t lost on us. Only one of the Des Moines buyers, Chem-Tech, bought a company outside Iowa. Managers and their financial backers in Central Iowa need to be more aggressive, and be willing to take the financial risk necessary to stay afloat and in control.

That said, the positive story here is the acquisitions themselves, and what they say about the corporate state of mind. Just as consumers are unlikely to break out their wallets and go shopping if they think their futures are bleak, business managers don’t usually spend their cash and take on debt if they believe their future is in doubt.

But this has not been a consumer recession. Through the gloom of the last three years, consumers, buoyed by lower mortgage rates and the more recent tax cuts, has maintained their levels of spending, which accounts for about two-thirds of the economy. Instead, the economy has begun to rebound in recent months because spending by businesses has begun to rise.

As the economic picture continues to improve, we expect mergers and acquisitions to continue.

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