Monday, November 21, 2011

Merger Reviews by DOJ and FTC on the Rise

From the Blog of the Legal Times, Posted by Jenna Greene on November 18, 2011:

In a sign that antitrust work is rebounding, the number of mergers reviewed by the U.S. Department of Justice and Federal Trade Commission increased for the second year in a row after bottoming out in 2009.
In fiscal year 2011, companies submitted 1,450 Hart-Scott-Rodino Act filings to the antitrust agencies, up from 1,166 filings in 2010 — and a mere 716 in 2009. Under the act, companies are currently required to obtain pre-merger review for deals worth more than $66 million.
In a Nov. 17 speech at the American Bar Association’s fall antitrust forum, acting Antitrust Division head Sharis Pozen said DOJ ”allowed 98 percent of the transactions it reviewed to clear its process without requesting any further information from the parties.”
As for the other 2 percent where there’s a second request for information? “In many of these matters, the parties proposed remedies that the division agreed would solve the competitive problem it had identified,” she said. In other cases, DOJ lawyers went to court, recently blocking the merger of H&R Block and TaxACT. A challenge to AT&T's acquisition of T-Mobile USA is still pending.
As for the Federal Trade Commission, which released its annual report this week, it had less to brag about.
The FTC reported that it missed one key antitrust goal in fiscal year 2011. The agency’s target was to “obtain a positive result” 40 to 60 percent of the time when bringing antitrust actions, whether via wins in court, consent decrees, abandoned transactions or restructured transaction remedies.
In 2011, the FTC came out on top in only 14 of 44 “significant merger and non-merger investigations” — or 32 percent of the time. (In 2010, the FTC succeeded in 23 out of 58 cases, or 40 percent of the time).
Of the 14 wins, nine involved consent decrees, four were merger transactions that were abandoned, and one matter was won on appeal.
Among the losses: a bid to block the merger of clinical laboratory testing companies and an appeal in the U.S. Court of Appeals for the 8th Circuit involving a drug for premature babies with heart defects
The FTC did note that although it missed its target, the tally doesn’t count one additional merger investigation and one restructured transaction. According to the report, these were excluded because ”they did not involve the use of compulsory process. (Compulsory Process refers to a resolution, or vote, adopted by the Commission that authorizes staff to issue subpoenas and civil investigative demands (CIDs); it is the adoption of a Compulsory Process resolution that would have made these cases fall under the definition of substantial as specified by this measure.)”

Thursday, April 21, 2011

Private Equity Poised for Pickup

By Adley Bowden, Managing Editor, PitchBook
U.S. private equity firms as recently as 2007 were closing almost 700+ deals a quarter with over $200 billion of total capital invested. Then in 2008 the bubble burst with the financial crisis shutting down the debt markets and bringing PE activity to an almost complete stop. Since the middle of 2009 PE activity has ever so slowly been improving, to the point where this past quarter PE firms closed a total of 377 U.S. investments totaling $28 billion of capital.

So when will PE activity again resemble 2007? It will be a while, but there is a combination of trends emerging today that might push PE back to pre-crises levels before many would have thought possible. These trends include the returning availability of financing for PE buyouts, $490 billion of PE capital ready for investment, attractive valuation multiples, a continued narrowing of the buyer/seller gap, increasing competition for deals and a business cycle in the early phases of expansion. These trends have all been steadily improving/growing over the last year (think about how you felt about any of these in April last year), however private equity activity has largely remained flat. Something will have to change soon and given private equity's need to put capital to work and the increasing ability for investors to do so, look for deal flow to increase through 2011, with it perhaps approaching pre-crisis levels as soon as 2012 or 2013.

Wednesday, March 30, 2011

More Good Times Ahead for M.&A., Survey Finds

By MICHAEL J. DE LA MERCED, NYT DealBook blog: Deal-makers are by their very nature an optimistic lot. And as many of the top legal specialists in the field head down to the annual Tulane Corporate Law Institute in New Orleans on Wednesday, it appears that their confidence is rising. Of the roughly 40 top M.&A. bankers and lawyers surveyed by the Brunswick Group, a public relations firm, about 92 percent said they believed the rest of this year would bring continued strong growth in mergers and acquisitions. Much of that was driven by a strong first quarter for deal-making, capped last week by AT&T’s blockbuster $39 billion deal for T-Mobile USA. M.&A. volume rose 58 percent for the quarter from the period a year earlier, in the best start since 2007, according to preliminary data from Thomson Reuters. Roughly half of the deal-makers surveyed by Brunswick said they believe that the biggest contributor to rising M.&A. was greater confidence among management teams and company boards. (Other factors include the improving economy and more buying firepower in the form of cash on corporate balance sheets and the availability of cheap credit.) That confidence could be seen in part through hostile deals, including an unsolicited $5.7 billion bid for Cephalon by Valeant Pharmaceuticals International announced on Tuesday. According to those surveyed, the majority of deals seen this year will continue primarily to be domestic ones by emboldened strategic buyers. Still, Asia is considered to be the most fertile source of international buyers of American assets — so long as those would-be bidders are not stymied by regulatory hurdles, which 40 percent of respondents identified as the most likely obstacles to deals. Much of the rest of this year’s survey mirrored the results of last year’s, including the most likely active sectors for deals (health care and energy) and the most likely problems for hostile bidders (overpaying and staggered boards, in which only a portion of directors are up for election in any given year). But 57 percent of respondents said that they expected more deals to be done using just cash, more than double from last year. Part of that is likely a reflection of the tremendous stores of cash companies have built up, as well as the willingness of banks to lend. Part of it may also be some lingering uncertainty over the potential vicissitudes of the markets. Yet it may also reflect even more bullishness, suggesting that the shares of potential acquirers still have some room to grow and therefore are not worth using as currency — at least not right now. In other words, the good times may continue to roll. 2011 Brunswick Group M&A Survey

Friday, March 04, 2011

Deal Making Gets Off to a Strong Start in 2011

By Stephen Grocer, WSJ DealJournal, March 3, 2011:
Two months into the year, M&A is off to its best start since Lehman failed and the flow of deals slowed to a trickle.
Global M&A volume this year stands at $435 billion, a 9% increase from 2010. The biggest jumps in deal activity came in the U.S. and Asia, where deal volume was up 34% and 42% respectively. Europe saw a 9% fall in deal volume.
M&A activity did slow in February. Volume world-wide slipped 7% to $210 billion in February from January. U.S. volume last month was essentially flat from January.
Below are some more tidbits from Dealogic.
– Oil and gas has been the busiest industry for deal making, with $65.8 billion in announced transactions. Real estate and finance follow with $9.4 billion and $45.1 billion, respectively.
–The biggest deals in the oil-and-gas sector? BP’s announced $9 billion acquisition of a 30% stake in 23 of Reliance Industries’ oil and gas blocks and Ensco’s $7.5 billion acquisition of Pride International.
–Deutsche Borse’s $10.5 billion deal for NYSE Euronext ranks as the largest deal in February.
–J.P. Morgan Chase still tops the globally and U.S. league tables. Goldman is No. 2 globally, while Morgan is No. 2 in the U.S.
–Through the same period last year, J.P. Morgan ranked eighth global and didn’t crack the top 10 in the U.S.

Friday, January 21, 2011

Securities class actions inched up in 2010; those targeting M&As surged

Karen Sloan, The National Law Journal, January 19, 2011:
2010 was a relatively slow year for federal securities class action filings, according to the latest research from the Securities Class Action Clearinghouse — a partnership between Stanford Law School and Cornerstone Research. There were 176 filings throughout the year, a slight increase from the 168 filings in 2009 but nearly 10% below the average from the previous 13 years. Filings were significantly slower in the first half of the 2010 but picked up later in the year. The past year saw a surge in the number of class action filings resulting from alleged disclosure violations in mergers and acquisitions. That number rose from seven in 2009 to 40 in 2010. The report points out that the 20% increase in merger activity last year does not alone explain the much larger increase in M&A securities class action filings. "The sharp increase in federal litigation alleging disclosure violations in M&A transactions suggests that plaintiff lawyers are scrambling for new business as traditional fraud cases seem to be on the decline," said Joseph Grundfest, the director of the Stanford Law School Securities Class Action Clearinghouse. "There is little reason to believe that this trend will reverse or slow down; if anything, plaintiff lawyers may well bring an increasing percentage of these claims in federal court in an effort to control the litigation and share in any fees that may result." Continuing with a trend from 2009, filings related to the credit crisis waned last year, making up slightly more than 7% of filings — down from nearly 33% last year. Settlement rates for those filings tend to be lower compared with other types of filings, though there is no difference in dismissal rates, the study found. The research shows that firms with recent initial public offerings are most at risk to be targeted by securities class actions, said John Gould, senior vice president of Cornerstone Research. In fact, companies are most likely to be sued in their second year of public trading, when they have a 4% chance of being targeted. Exposure to litigation typically decreases over time, though a newly public company has a nearly 34% chance of being sued in its first 11 years. Among those newly public companies targeted by suits last year were 12 Chinese entities, a trend that appears to be emerging, Gould said. Foreign companies were targets in nearly 16% of the filings in 2010, a record high. "These are companies that just became public in the U.S. in the past year or two," Gould said. One out of every 19 companies on the Standard & Poor's 500 index was a defendant in a class action filing in the past year, which is down from the average one in 15 during the previous decade. Filings against companies in the financial sector declined, while filings against health care companies rose. "With the wave of credit-crisis filings behind us, the industry focus for class action filings shifted to health care, where more than one out of every seven S&P 500 companies was involved in a class action," Gould said. For-profit colleges were also the target of 10 securities class action filings, which came on the heels of several government reports that alleged that prospective students were provided with fraudulent information and had low loan-repayment rates. Karen Sloan can be contacted at

Wednesday, January 19, 2011

Dealmaker Confidence High as M&A Starts Off New Year with a Bang

Posted by Tom Huddleston Jr., The AmLaw Daily, January 19, 2011:
Shortly after the champagne corks stopped popping, the M&A market started to take off, with a blast of new large deals announced globally.
The Financial Times reported on Monday that, during the first ten days of 2011, combined deal volume totaled $83 billion, up from $67 billion last year. Deal lawyers see this as an example of rising confidence among companies representing a wide array of industry sectors, as well as a reflection of a surplus of cash on the balance sheet.
"[Everyone] looks and says that the improved financing markets and the large accumulation of cash by the large strategics is certainly a factor," says Allison Schneirov, an M&A partner at Skadden, Arps, Slate, Meagher & Flom.
U.S. companies are reported to have roughly $1 trillion in cash on their balance sheets; many are expected to face shareholder pressure to put that cash to use. All that, say deals lawyers and analysts, adds up to what could be the biggest year for M&A since 2007.
Link to article:

Tuesday, January 18, 2011

Pepperdine Private Capital 2011 Economic Forecast

2011 Economic Forecast Report: Complimentary Download
Some highlights:
1. GDP seen at 1.98% with probability of recession at 28.43%.
2. Housing expected to decline 1.76% while S&P seen increasing by 6.46%.
3. ‘Increased access to capital’ seen as policy that would help spur job creation the most
4. Most participants ‘somewhat more confident’ in U.S. economic growth in 2011
5. Likewise, most participants ‘somewhat more confident’ in growth prospects of privately held businesses
6. Most participants more incentivized to innovate today
7. 80% of business owners feel economic stimulus measures distributed unfairly
8. Business owners believe a stronger dollar would be more beneficial than weaker dollar
9. Compared to one year ago, respondents more likely to invest in US, Brazil, India, Canada, Australia, and China. Less likely to invest or expand in Japan, EU, Mexico, and Russia.
10. Most respondents believe raising the $14.3 trillion US debt ceiling would be detrimental to US businesses.
A link to download the complimentary Pepperdine Private Capital Markets 2011 economic forecast report can be accessed here: