Consolidation--The Ties That Bind?

Feinstein believes consolidation affects the landscape of the industry in a number of ways, including the focus they place on profitability and shareholder returns in a more sophisticated way than was the case in the past.

"Up to a few years ago, we were surprised by the number of owners who made significant capital expenditures without a detailed analysis of whether it was generating value for their shareholders," Feinstein recalls. "Since selling is now such an accessible alternative, owners must do a more complete job of analyzing the return on expansion plans in order to judge whether they are being adequately compensated on a risk-adjusted basis, given the additional investment they must make or debt they must incur. This kind of analysis should, ultimately, help correct the seemingly constant overcapacity present in many segments of the business."