Investment Banks Jockey for Position

The hot mergers-and-acquisitions market surged deep into record territory during the first half of the year, according to new data released on June 30 by market researcher Dealogic. But the investment banking business isn't what it used to be: The numbers show that investment banking revenue has dropped 29% from the record level of 2000, the peak of the last boom.
RECORD DEAL VOLUME. Such deals helped hike global deal volume for the first half of the year to $1.93 trillion, up from $1.4 trillion during the first half of 2005, according to analyst Natalie Cogan of market researcher Dealogic. "Global announced M&A has reached the highest half-year volume on record," she said. At the current pace, the volume of M&A deals will approach the $4 trillion mark. That would shatter the annual record of $3.32 trillion set in 2000, the peak of the late '90s stock and tech bubble.

Investors Hesitant on Publicly Traded Venture Capital

Reductions in the size of offerings reflect a trend towards an increasingly difficult I.P.O. market for venture capital portfolio companies.
A pair of initial public offerings for venture-backed companies hit the Nasdaq Wednesday but both had to scale back in the face of weak investor demand.

In Washington, Hedge Funds Feel the Glare

There was so much buzz about hedge funds on Wednesday it was difficult to keep track of it all. Members of the Senate Judiciary Committee held a hearing that was billed as a discussion of hedge funds and their ties to independent analysts. But the issues on the floor — and the reactions off of it — spanned a wide range of controversial topics.

Hilfiger’s Private Deal With Prosecutors Irks Shareholders

The undisclosed details of a nonprosecution agreement between the Justice Department and the Tommy Hilfiger Corporation are drawing keen interest from former Hilfiger shareholders who filed a class-action lawsuit against the clothing company. Corporate Counsel magazine reports on the controversy and suggests that prosecutors’ treatment of Hilfiger, now owned by the buyout firm Apax Partners, may amount to special treatment.

Winners and Losers in the KPMG Ruling

Here are three thoughts on possible winners/losers in the wake of Judge Kaplan’s stinging ruling today that the government’s prosecutorial tactics in pressuring KPMG to limit its payment of employee legal fees to avoid indictment violated the individual KPMG defendants’ constitutional rights.

Are Share Buybacks a Shell Game?

Cisco Systems, Yahoo and Affiliated Computer Services are some of the many companies that have recently started share repurchase plans or increased the size of previous ones.
These kinds of announcements usually win gold stars from analysts and pundits, who consider them a prudent way to funnel cash back to investors. TheStreet.com puts a negative spin on the trend, however, suggesting Tuesday that share buybacks are often just a way to stanch the dilution caused by the unbridled use of stock options.

Hedge Funds in Limbo

Most hedge funds do not want someone looking over their shoulder. So it was seen as a big victory for the industry on Friday when an appeals court threw out the Securities and Exchange Commission’s rule that forced thousands of these investment pools, which cater largely to wealthy and institutional investors, to register with the agency.
The matter of hedge fund oversight is hardly settled, however.

Venture Capital’s ‘I.P.O. Problem’

The venture-capital market is doing great — if the only measure is how much money venture funds are attracting. The problem, as venture capitalist Paul Kedrosky pointed out in his blog on Monday, is that the market is “not scalable.” His takeaway from a recent panel discussion hosted by the Venture Capital Journal was that there aren’t nearly enough initial public offerings to provide a profitable exit.

Hedge Fund Registration Rule Is Overturned

The push to regulate hedge funds was dealt a major setback on Friday when a federal appeals court threw out a rule that forced thousands of United States-based funds to register with the Securities and Exchange Commission.
In its opinion published Friday, the Court of Appeals for the D.C. Circuit found fault with the commission’s decision to change its interpretation of what constitutes a hedge fund’s “client” — a change that pulled many hedge funds into the scope of the Investment Advisers Act of 1940, from which they had previously been exempt.

End of ‘Bountiful Era’ for Private Equity?

Even as private equity firms continue to enjoy “heady times,” the business is beset by a number of threats, The Economist suggests in its latest issue. There is “a growing sense among fund managers that the bountiful era is drawing to a close.”
Firms must deal with more competition, higher interest rates, troubled markets, demanding investors and hawk-eyed regulators. Further, many firms have taken on too much debt, often in the form of loans from hedge funds.

S.E.C. Is Reported to Be Examining a Big Hedge Fund

One of the nation's most prominent hedge funds, Pequot Capital Management, is under investigation by the Securities and Exchange Commission for possible insider trading, according to government officials briefed on the case.

SEC Probing Hedge Fund “Side Letters”

Side letters, commonly used by hedge funds, give certain investors preferential terms — cheaper fees, shorter lock-ups — to incent them to invest in the funds. While they’re not illegal, there is an issue whether they’re being properly disclosed to all the funds’ investors. If not, a fund could be breaching its fiduciary duty to be fair and equitable to all investors. Investor-protection laws demand that all investors be treated equally, regardless of size.

Why the World Needs Private Equity

Far from being vultures who do not care what gets destroyed in their single-minded pursuit of profits, private equity firms, rather, see their role as “empowering business leaders as they seek to make change,” wrote Marek Gumienny, managing director of Candover, in what amounted to an industry apologia published Tuesday by the Web site of BBC News. Coming one day before The Financial Times warned about the dangers of private equity on its editorial pages, Mr. Gumienny’s commentary underscores the growing attention, good and bad, these kinds of investment pools are getting.

More Tech Deals Likely in 2006, Survey Says

Technology deals and cross-border transactions are expected to make a strong showing in the back half of 2006, according to a recent poll of 1,200 deal-making professionals and corporate executives.

A Little Industry With a Lot of Sway on Proxy Votes

Few shareholders ever cast a proxy vote themselves. Moreover, according to a recent poll of mutual fund investors, proxy voting policies ranked last among the 19 issues that people consider before making a purchase. But for institutional investors — pension funds, endowments, hedge funds and the like — corporate governance is an entirely different matter. They may not care deeply about it, but they need to pay attention as a fiduciary duty, typically relying for advice on a tiny group of little-known companies.

Inquiry Into Stock Option Pricing Casts a Wide Net

What began as a creative solution among a handful of technology firms to address recruitment issues soon became common practice in Silicon Valley. It appears the practice also became a way to enrich chief executives and other top managers.
The result is a nationwide scandal with major accounting, corporate governance, tax and disclosure ramifications. Dozens, perhaps hundreds, of companies are caught up in a giant civil and criminal law enforcement sweep by the Justice Department, the I.R.S. and the Securities and Exchange Commission.

Debating the Poison Pill

A Harvard law professor and software company CA Inc. will square off in court on Friday over one of the most contentious corporate-governance issues out there — the antitakeover provision commonly known as the poison pill.

Private-equity M&A reaches record

SAN FRANCISCO (MarketWatch) -- The volume of private-equity backed mergers and acquisitions in the United States so far this year has reached record levels, research firm Dealogic said Thursday. More than 500 deals worth $157.4 billion and backed by private equity have been announced in 2006, according to data Dealogic compiled through June 14. That's a record and almost double the volume during the same period of 2005, the firm reported.

For eBay, $2.6 Billion Question Looms

The honeymoon period that followed eBay’s purchase of Skype is clearly over, and many investors want to know what is in it for them. The moment of truth is likely to come this week as eBay, the heavyweight of online auctions, is expected to explain how it will integrate Skype’s Internet phone service into its United States operations.

For eBay, $2.6 Billion Question Looms

The honeymoon period that followed eBay’s purchase of Skype is clearly over, and many investors want to know what is in it for them. The moment of truth is likely to come this week as eBay, the heavyweight of online auctions, is expected to explain how it will integrate Skype’s Internet phone service into its United States operations.

Is Backdating the New Corporate Scandal?

The newest intrigue in corporate America, the apparent backdating of stock options to boost top executives' compensation, is rapidly taking on the dimensions of a major scandal.
The number of public companies under investigation by the Securities and Exchange Commission or federal prosecutors has grown to more than 30 and executives at several companies have been fired.

In Switch, G.M. Shareholders Ask Board for Stronger Say in Elections

WILMINGTON, Del., June 6 — Shareholders of the troubled General Motors approved two proposals on Tuesday aimed at giving them more influence over the way directors are elected, the first time they have defied G.M.'s recommendations. Rick Wagoner, G.M.'s chief executive and chairman, told investors Tuesday that the company's turnaround plan was gaining momentum. For G.M., which faces an array of competitive and cost issues, the votes, which were nonbinding, were another reflection of the company's diminished fortunes and the dissatisfaction among many investors with its leadership.

Specter Proposes Jail Time for Lax Executives

Senate Judiciary Committee Chairman, Sen. Arlen Specter, just drafted legislation that may become the next battleground in the tort reform wars. The Pennsylvania Republican's bill would impose criminal penalties on employees who "knowingly and recklessly" allow defective products into the marketplace. Maximum sentences, under the proposal, would be five years for causing serious injury and 15 years for causing death.

Shareholder Suits Follow on Heels of Home Depot Meeting

The Home Depot's truncated annual meeting last week was followed by howls of criticism by corporate governance experts -- and three shareholders' suits filed in Fulton County Superior Court against chairman and CEO Robert Nardelli and the company's board of directors.
Central to the suits is what the plaintiffs call Nardelli's "unreasonable compensation" of $245 million over five years during which the company's stock price fell 12 percent.

Cleary Gottlieb: Putting Its SEC-Practice Band Back Together

Alan Beller, who left the SEC as its director of the Division of Corporation Finance earlier this year, announced today that he will rejoin his former partners at Cleary Gottlieb Steen & Hamilton, where he was a longtime partner before joining the commission. He follows in the footsteps of Giovanni Prezioso, the former Cleary partner who left in 2002 for a stint as the SEC’s general counsel and recently said he’ll rejoin the firm this summer.
Both announced plans to leave the agency around the time Bill Donaldson passed the reins to Christopher Cox, who brought in his own peeps. Beller was replaced by longtime Cravath, Swaine & Moore partner John White, who’s married to Mary Jo White of Debevoise & Plimpton, the former U.S. Attorney in Manhattan. Prezioso was replaced by Cox’s former Latham & Watkins colleague Brian Cartwright.

Verizon Delivers $49 Million in Pregnancy Discrimination Case

Verizon struck a settlement with the EEOC yesterday in which it will pay almost $49 million to more than 12,000 current and former female employees as part of a landmark class-action lawsuit alleging pregnancy discrimination.
The EEOC had reached a settlement in 2002 against Verizon’s predecessor companies, Nynex and Bell Atlantic, but the settlement amount was not made public until yesterday. It’s the largest pregnancy discrimination settlement in EEOC history.
The companies had been accused of violating federal law by denying women pensions and other benefit accruals when they spent time on pregnancy or maternity leave.

For Law Firm, Serial Plaintiff Had Golden Touch

When it came to investing, Howard J. Vogel seemed to possess a perverse kind of Midas touch.
In early October 1997, he bought 50 shares of Oxford Health Plans. Three weeks later, the stock nose-dived, and Mr. Vogel lost about $3,000 of his investment. Still, Mr. Vogel reaped $1.1 million.
How was that possible?

Poison Pills Lose Their Appeal

When Sun Microsystems announced last week that it would ditch its poison pill anti-takeover provision, it was hardly alone. Thanks in part to pressure from institutional activist shareholders, including hedge funds, the proportion of companies with active poison pills has recently declined for the first time in many years, according to Institutional Shareholder Services, a proxy advisory firm. The proportion of companies with poison pills has dropped from 55.1 percent two years ago to 51.2 percent of the 1,925 public firms included in the survey.

KPMG Settles Clients’ Suit

According to the AP, a federal judge in Newark, N.J., on Friday gave final approval to a $153.9 million settlement between KPMG and about 200 former clients who used its tax shelters. The KPMG shelters, sold from 1996 to 2002, were later found “abusive” by the Internal Revenue Service.

New York Comptroller Seeks to Remove Milberg As Pension Fund Council

The New York State comptroller, Alan G. Hevesi, the trustee of the $140 billion New York State Common Retirement Fund, has announced he will ask Judge William H. Pauley of Southern District Court to replace the indicted class action firm Milberg Weiss Bershad & Schulman as lead counsel in a shareholder suit against the German pharmaceutical giant Bayer.
Mr. Hevesi also said he was removing the firm from the pool of those eligible to serve as the retirement fund’s counsel in future securities litigation matters.

Home Depot Alters Rules for Electing Its Directors

Home Depot, in a bow to disgruntled shareholders, said yesterday that it would require a majority vote from shareholders for the election of board members.
The company also released vote tallies from last week’s annual meeting showing that a surprisingly high percentage of shareholders had withheld their support from 10 of the 11 directors, including Robert L. Nardelli, the chairman and chief executive.

A Tax Rule Could Save Treasury Nominee Millions

Henry M. Paulson Jr., the nominee for Treasury secretary, has a big reason to support tax relief. Because of a little-known provision in the federal tax code, Mr. Paulson, the departing Goldman Sachs chief executive, could receive a tax break of at least $48 million if he is confirmed.

Law Firm Testing the Waters for Vonage Suit

At least one law firm is trying to put together a class-action lawsuit for disgruntled Vonage customers who invested in the Internet telephone company’s disastrous I.P.O. Customers, who have watched Vonage’s shares tank 32 percent since their debut last week, may have a strong legal leg to stand on, I.P.O. experts said.

Wall Street’s Risky Business

Wall Street has always been about taking risk. But never has the “R” word been such an obsession for the men and women who rule the nation’s biggest investment banks. Never have they had to reconcile so many bets made on so many fronts. Ripe conditions have allowed a new type of firm to flourish, one that acts primarily as a trader and only secondarily as a traditional investment bank, underwriting securities and advising on mergers.

Lerach’s Enron Class-Action: The First $1 Billion Fee?

While his former partners deal with the fallout from the indictment of Milberg Weiss, class-action king Bill Lerach could be on the verge of winning the first billion-dollar award of attorneys’ fees in the history of American securities litigation. On Tuesday, the New York Sun reported on the possibility of the eye-popping fee in the Enron shareholders’ lawsuit, which has already won settlements of $7.2 billion from banks and investment firms accused of contributing to energy giant’s fraud.

The Year of the Mega-M.B.O.

The Wall Street Journal reported on Thursday that there have already been nearly $39 billion worth of deals either led or initiated by top executives so far this year. For all of last year, such deals amounted to just $6.5 billion. To be clear, the number of management-led buyouts is still far behind last year. This year has seen 18 such deals so far; there were 73 in 2005. But the deals of 2006 have generally been large ones.

Exxon Mobil Shareholders Reject Effort to Restrain Executive Pay

DALLAS, May 31 (AP) — Shareholders of the Exxon Mobil Corporation, whose last chief executive took home $147 million when he retired, overwhelmingly rejected resolutions to rein in compensation at the company's annual meeting on Wednesday. But the chairman and chief executive, Rex W. Tillerson, said some shareholders sent a signal by withholding votes for directors who approved the pay and pension packages of the former chief, Lee R. Raymond.