Seeking to utilize excess cash, dealmakers were busy in May.

The pace of L.A. dealmaking surged ahead in May as companies and private equity firms looking to put excess cash to use snapped up other companies.

A total of 88 deals involving parties located in L.A. County took place in May--the highest monthly total so far this year--according to Goldsmith Agio Helms, a Minneapolis-based investment banking firm that compiles monthly mergers and acquisitions data for the Business Journal.

The total dollar value of the deals in which transaction prices were disclosed reached $11 billion, including one health care property deal valued at $5.2 billion. The total is about average for this year, especially considering the high level of volatility in deal values.

However, with monthly deal values fluctuating so wildly depending on how many "mega-deals" take place, the number of deals is considered a more reliable indicator of the state of the mergers and acquisition market.

"There is lots of private equity and corporate capital out there right now and there aren't too many other places to put that capital, so they are on the hunt for strategic acquisitions," said Dave McGovern, managing partner at El Segundo-based Marlin Equity Partners.

In addition, McGovern said the recent choppiness in the stock markets has shrunk the market for initial public or secondary offerings. At the same time, steadily rising interest rates have raised borrowing costs, though not enough to discourage companies from making acquisitions.

"Borrowing costs are still fairly low historically and lenders are being quite aggressive," McGovern said.

Last month saw large numbers of deals in consumer products, technology and real estate.

The largest deal of all was the May 8 announcement from Long Beach-based Health Care Property Investors Inc. that it would pay $3.5 billion in cash and stock for Orlando, Fla.-based CNL Retirement Properties Inc., another health care real estate investment trust. Health Care Property Investors said it would also assume $1.6 billion of CNL debt, bringing the total value of the deal to nearly $5.2 billion.

The combined REIT would be the largest in the nation specializing in health care. It comes at time when baby boomers are expected in the coming decade to start filling up long term care facilities. That has driven up the values of health care REITs with holdings in such facilities.

"Given the current conditions in the healthcare real estate market, we believe that it is an excellent time for the company to be acquired," said CNL Retirement Properties Inc.'s founder and chairman James Seneff Jr.

Health Care Property Investors chairman and chief executive James Flaherty also referenced the size of the transaction, saying it "dramatically alters the healthcare real estate industry landscape."

In another big deal, Paramount-based Paramount Petroleum Corp. agreed in May to be acquired by Alon USA Energy, a subsidiary of Israel-based Alon Israel Oil Co. Ltd. for $407 million ($307 million in cash and $100 million in debt). Paramount has oil refineries in Paramount and Portland, Ore. and several asphalt and rubber terminals.

Skyrocketing gas and materials prices have brought record profits to the refining and materials industries, making this an ideal time to sell out.

Another large deal at the end of May was Beverly Hills-based Platinum Equity Corp.'s $670 million purchase of Providence, R.I.-based Textron Inc.'s fastening systems division, which is based in Troy, Mich.

Textron has been systematically divesting business units to focus more sharply on its core aircraft, industrial and finance business lines. Platinum agreed to pay $630 million in cash and assume $40 million in Textron Fastening liabilities.

M&A Update

Mergers and acquisitions in L.A. County.

Month          Number of Deals      Deal Value

August '05           75           $4.7 billion
September            77            2.4 billion
October              72            6.5 billion
November             66            9.2 billion
December             73           19.6 billion
January '06          60           16.0 billion
February             64            4.0 billion
March                67           12.2 billion
April                65            5.9 billion
May                  88           10.9 billion

Source: Goldsmith Agio Helms