(M&A deal story updated with further commentary.)NEW YORK ( TheStreet) -- In the business of M&A, it's a seller's market. The pace of dealmaking in the United States has accelerated over the last 12 months -- including a flurry of activity just announced on Monday.
Another factor driving M&A among strategic buyers: Companies have amassed enormous war chests. More than $1.1 trillion in cash now sits on the balance sheets of S&P 500 companies, according to Factset, which PwC cited in a report on 2011 M&A released last week. The reasons are well-known. After the crisis hit, companies heavily cut costs. As the global economy bottomed out and began its tentative recovery, profits surged as corporations continued to refrain from rebuilding their cost structures. At the same time, the economic recovery has proved slow, patchy and prone to setbacks -- or fears of a setback. It's been tough, in other words, for companies to achieve revenue growth. One way to solve top-line stagnation: acquiring other companies. "Inorganic growth is growth nonetheless," says Hartnett. Take, for example, International Paper's ( IP) recent $3.8 billion bid for Temple-Inland> ( TIN). IP's top line has moved between $5 billion and $7 billion per quarter for more than a decade. Now, after buying an Indian paper company for $420 million in March, IP is looking to add Temple-Inland's corrugated cardboard boxes to its lineup. Though IP's romance with its latest target quickly turned hostile after a few days of flirtation, the paper giant said it was able to secure financing from UBS, which is also serving as its adviser on the matter. Analysts say that the interest rate scored by IP will likely be low enough for an acquisition of Temple-Inland (should it succeed) to be immediately accretive to earnings. The growing intensity of the bidding has driven asset values higher, creating what PwC called in its report last week a "sellers' market." Targets are "in the driver's seat and are demanding a swift diligence process with more certainty around the outcome," said PwC's deal chief, Martyn Curragh, in the report. According to the firm, several sectors are riper than others for deals; those include tech, financials, energy, health care, media and industrial products. The metric for judging buyout prices is the multiple paid on earnings before interest, taxes, depreciation and amortization. By that measure, International Paper is looking to pay 8 times Temple-Inland's EBITDA. Six months earlier, Rock-Tenn ( RKT) bought Smurfit-Stone for an EBIDTA multiple of 6. Similarly, VF Corp. is paying about 12 times Timberland's EBITDA, according to Bloomberg. Since 2006, the newswire's data shows that six deals in the apparel sector had average multiple of 9.7. Meanwhile, the value of the average deal so far in 2011 (involving U.S. publicly traded targets) has risen to more than $1.8 billion, according to data compiled by Dealogic. That's the highest figure since 2006, when the average deal value was $2.1 billion. -- Written by Scott Eden in New York >To contact the writer of this article, click here: Scott Eden. >To follow the writer on Twitter, go to http://twitter.com/ScottEden. >To submit a news tip, send an email to: email@example.com.