The music publishing sector is ready to do more than just sing about hooking up, but banks are likely to remain lonely for now.
New data from research firm IBISWorld Inc. found that ideal conditions for mergers and acquisitions exist in 10 industries, including music publishing and soap making. However, the banking industry did not make the list.
The 10 industries "have revenue growth while the industry locations are decreasing," said senior IBISWorld analyst Justin Molavi, who helped prepare the data. "Those are ripe conditions for acquisitions."
The term "locations" refers to franchises, stores or offices. A loss of locations suggests less profitability and need for more efficiencies, Molavi said.
The data included the average revenue growth and average industry location growth from 2006 to 2011 for music publishers; manufacturers of cleaning compounds, fertilizer and space vehicles and missiles; snack food producers; and apartment rental businesses.
Music publishing, for example, had average revenue growth of 2.4% from 2006 to 2011, while its number of locations fell 2.3%.
The problem for banking, IBISWorld explained, is that commercial banks' revenue fell at annual rate of 2.3%, to $570.9 billion, in addition to their 3.3% decline in locations. Bank revenue struggles are expected to persist indefinitely.
"It will take some time before you see [bank M&A] activity pick up," Molavi said.
Still, conditions in the financial sector may be feeding M&A in these other areas. Small businesses within these fields are struggling to obtain credit, while at the same time, their overall markets are expanding, Molavi said.
"Given that these types of industries are growing despite the recession, that is something to note," Molavi said. "Credit is hard to acquire right now. If you are a smaller business, if you can't get access to credit, you might want to be sold."
Additionally, these smaller companies have been weakened by the overall economic downturn, making the conditions right for larger players to snatch them up at discounted prices.
Molavi noted that, unlike in these other industries, growth is lacking in banking right now. As an example, he pointed to Bank of America, which is still struggling under subprime mortgage exposure and looking to cut 30,000 jobs.
"It seems like all of the banking acquisitions happened before the recession," he added.
