Tuesday, January 30, 2007

Techtronic to complete Hoover deal

The Hong Kong company that makes Dirt Devil vacuum cleaners said it’s about to complete its acquisition of Whirlpool Corp.’s Hoover floor care business, and it will move that business to Glenwillow from its longtime home in North Canton.
Techtronic Industries Co. said the $107 million cash acquisition of the Hoover business is expected to close tomorrow, Jan. 31, after passing federal and state antitrust reviews. Techtronic said it then will combine Hoover with its existing Dirt Devil and Royal operations in Glenwillow to create TTI Floor Care, North America, billed as the largest floor care business in this continent.
Whirlpool acquired Hoover in its $1.8 billion purchase last year of Maytag, which was Hoover's parent company. Hoover has been headquartered in North Canton since its founding in 1907.
Under the deal, TTI Floor Care said it will “assume in full the existing union contract that covers approximately 800 hourly workers at Hoover's North Canton manufacturing facility and nearby distribution center.” The contract runs through June 2008. Hoover also employs about 200 salaried workers in North Canton.

Is Wall Street Really Losing Its Edge?

The people who are warning that New York is losing its dominance as a global financial center because of overregulation make up “a chorus of Cassandras,” James Surowiecki writes in the latest issue of The New Yorker. The article’s skeptical stance echoes Jenny Anderson’s “Insider” column in last week’s New York Times, in which she suggested there was some “undue panic” over the flight of companies to overseas markets.
What rekindled this debate? A study released this month by New York Mayor Michael R. Bloomberg and Senator Charles E. Schumer, which concluded that “the most dramatic illustration” of New York’s decline is the fact that foreign companies are increasingly choosing to go public in exchanges other than those in New York.
That, Mr. Surowiecki writes, is a “radically oversimplified explanation of what’s happening.” For starters, he writes, many of the biggest I.P.O’s in recent years have been privatizations of state-owned companies — most often, those are going to happen in their home countries. Also, since stocks trading on foreign exchanges are lately doing better than those trading on New York’s exchanges, companies are more apt to choose them in hopes of getting a good price for their shares. Fees and commissions are generally lower overseas, too.
And, he writes:
More broadly, globalization — a force that Wall Streeters applaud when it comes to textile plants and call centers — has increased competition. Many foreign exchanges, like Hong Kong’s, are now far more liquid and open, and they also have much tougher regulations (often modelled, ironically enough, on those of the U.S.) than they once did. All this has made investors more willing to invest in them.
The Sarbanes-Oxley Act of 2002, which is most often cited as the cause of Wall Street’s supposed decline, “is an imperfect piece of legislation,” he writes, “but it is not a harbinger of doom for America’s capital markets, and we should be skeptical of any analysis that says it is.”

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Monday, January 29, 2007

A Growing Aversion to Ticker Symbols

Now that the big private equity firms have hundreds of billions of dollars to spend, many more public companies -- perhaps even $100 billion companies -- may soon lose their ticker symbols, writes Andrew Ross Sorkin in his DealBook column.

Go to Article from The New York Times>>

The Hard Rain That’s Falling on Capitalism

Bad corporate behavior, including avaricious management-led buyouts and options backdating, is undermining the trust that is the bedrock of capitalism, Ben Stein writes in The New York Times. What once appeared to be a sterling system whereby people have worked hard and succeeded has since been tarnished by scandal and self-dealing. And among the offenses that Mr. Stein sees being perpetrated are backdating and management buyouts, both of which he says fleece shareholders.
These misdeeds and many, many more are hammer blows at the granite foundation of trust we built in the 1940s and ’50s. How long democratic capitalism can survive these blows before it gives in and gives birth to revolution or to an out-and-out aristocracy, I am not sure.
Each day’s newspaper, it seems, brings more tidings of unrestrained selfishness and self-dealing and rafts of powerful people saying it’s good for us to be robbed if only we truly understood the system.
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Private Equity Stirs Canada’s Record Mergers Boom

Foreign buyers have stoked Canada’s biggest global mergers-and-acquisition boom in history, snaring once untouchable trophy Canadian companies such as Inco, Dofasco, Fairmont Hotels & Resorts and Four Seasons Hotels. According to Thomson Financial, the value of mergers and acquisitions involving Canadian companies soared to $230 billion, nearly doubling the action a year earlier. The biggest player: private equity firms.
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Friday, January 26, 2007

NYSE Chief Says Tide Will Turn on Private Equity

John Thain, chief executive of the NYSE Group, offered up some sobering words Friday about the explosive rise of private equity, which has swept many publicly traded companies off of the world’s major exchanges. He said, in effect: They’ll come back to us.
Half of last year’s initial public offerings on the New York Stock Exchange, which the NYSE operates, represented private equity firms exiting their investments, making buyout shops “our biggest customers,” Mr. Thain said from the World Economic Forum in Davos, Switzerland.
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Wednesday, January 24, 2007

ValleyWag: ‘Steve Jobs Is in Jeopardy’

Steve Jobs may have briefly distracted everyone from the options-backdating scandal at Apple by waving the iPhone around at MacWorld, but ValleyWag is offering what it calls a “reality check,” in which it lists five reasons it thinks that Mr. Jobs “is in jeopardy, more serious than has been acknowledged.” Others have made similar warnings, but ValleyWag’s comes one day after Bloomberg News reported that investigators from both the Securities and Exchange Commission and the Justice Department questioned Mr. Jobs last week.
Although an internal Apple investigation appeared to clear Mr. Jobs of any wrongdoing in the backdating affair, it is “after all the S.E.C.’s view on his culpability that matters,” Nell Minow, an editor at the corporate-governance research firm Corporate Library, told Bloomberg.
Apple’s internal inquiry concluded that Mr. Jobs did not personally benefit from backdating.But ValleyWag calls that conclusion “bogus, and likely to insult investigators rather than assuage them.” Further, it said, the minutes of the board meeting at which Mr. Jobs was granted his options have been altered, which also spells trouble for him, even if he was not aware of it at the time, ValleyWag says. Investigators will want to know when he learned of it and what action, if any, he took in response.
Apple has “dragged its heels throughout this investigation,” ValleyWag contends. “And Steve Jobs has still expressed no contrition.” The longer this goes on, “the more exacting the likely penalty.”
On the other hand, as reported by the San Jose Mercury News on Wednesday, the recent shakeup in the San Francisco office of the U.S. Attorney’s office may be good news for Apple and Mr. Jobs. The personnel shift is likely to cause some delay in backdating probes in the region, including the Apple investigation, sources told the newspaper. “All delay is good delay” for subjects of the inquiry, one defense lawyer said.
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Law-Firm Salary Watch: Who Else Will Go Higher?

Once again, the top New York law firms are leapfrogging each other to recruit talent by raising salary offers for first-year associates. The latest bump-up has attracted a lot of attention in legal circles, and raised some questions as well. For example: Will California firms follow? And what about the New York offices of California-based firms? Some of them are expected to come up with the extra cash — particularly the ones that consider themselves competitors with top firms either nationally or in New York.
After Simpson Thacher & Bartlett raised salaries for first-years to $160,000, with corresponding raises for other associates, “the lemmings have emerged from their burrows,” as the Wall Street Journal’s Law Blog put it. Sullivan & Cromwell, Paul Weiss Rifkind Wharton & Garrison, Cleary Gottlieb and Cadwalader, Wickersham & Taft all announced Tuesday that they would match Simpson Thacher. The Above the Law blog has published a memo from Cleary Gottlieb showing salaries that range up to $280,000 for “class of 1999″ associates.
According to The Recorder, many observers expect California firms to follow suit — quickly. The better-performing ones will have little choice, said Peter Zeughauser, a Newport Beach, Calif.-based consultant. But, “some of the underperforming firms won’t be able to match because they can’t do that and be competitive with profits per partner at the same time,” he told The Recorder.
In some previous rounds of salary competition, California firms have gone with a two-tiered system, paying associates more in New York than in California. But most observers seem to think that will not happen this time, as the competition is just too fierce.

Tuesday, January 23, 2007

To Defend Wall Street’s Ranking, Spitzer Supports Lighter Regulation

As New York’s attorney general, he was one of the most ardent defenders of heightened securities regulation. As the state’s new governor, however, Eliot Spitzer has changed his mind, according to The New York Post. Joining Sen. Chuck Schumer and New York City Mayor Michael R. Bloomberg on Monday as they presented a new plan to streamline regulations, Mr. Spitzer said that he will do what it takes to keep Wall Street at the top of global finance.
Commenting on a report that New York could lose its share of the financial markets if it does not roll back financial regulations, Mr. Spitzer said: “We must take these recommendations seriously so as to support an economic climate ripe for financial services while continuing efforts to safeguard the market for investors.”
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S.E.C. Is Silent on H.P. Proxy Fight

The Securities and Exchange Commission declined to take a stand on Monday on a request from Hewlett-Packard to exclude from its proxy ballot a proposal from some shareholders that would give them more power to nominate directors. The decision by the S.E.C. to stay out of the conflict involving H.P. shows that, for now, regulators will have no response to a federal appeals court decision in September that raised questions about whether companies may continue to exclude certain types of shareholder proposals from proxy ballots.
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Monday, January 22, 2007

Shareholders? What Shareholders?

Caremark Rx's proposed merger with CVS, and its rejection of a higher offer from Express Scripts, is a case where a company's management has put themselves totally ahead of the stockholders, Ben Stein argues in a column in The New York Times.Others seem to agree. Last month, the Louisiana Municipal Police Employees' Retirement System sued Caremark, in Delaware, accusing its officers of favoring themselves over shareholders when considering the CVS offer.According to that suit, Caremark Rx's chief executive, Edwin M. Crawford, apparently made it clear that any company acquiring Caremark would have to indemnify him against serious backdating allegations, and a subsequent shareholder lawsuit, involving hundreds of millions of dollars of Caremark stock options for Mr. Crawford and his colleagues. Mr Crawford also made sure that as part of the deal with CVS he would be chairman of the new company, Mr. Stein writes. CVS agreed to do so.In October, Medco Health Solutions asked to talk to Mr. Crawford about a deal, according to The Wall Street Journal, citing people familiar with the situation. But the lawsuit says that when Mr. Crawford learned that he and his Caremark directors would not be part of the new company, he rebuffed Medco's overtures.Ultimately, under terms of the CVS deal, says Mr. Stein, Caremark's directors will be staying on in the new company or be handsomely paid if they are dropped. Mr. Stein also notes that while the deal involved CVS paying no premium at all to ordinary Caremark shareholders, it did call for paying Mr. Crawford more than $50 million, giving his son a major job at CVS and providing him with that indemnity he wanted in the backdating lawsuit.Shortly after the CVS deal was announced, another benefits manager, Express Scripts, offered $26 billion, compared with CVS's original offer of roughly $21 billion, which Caremark's board rejected.All this leads Mr. Stein to ask:
How can Caremark's management sign any deal-blocking clauses at all -- breakup fees or no-shop pledges -- when their duty is not to stop bidders but to encourage bidders? As I see it, this is a deal in which managers -- the hired help -- apparently put themselves totally ahead of the stockholders. Managers will come out like kings; the stockholders will come out like pound animals.
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Online Gambling Underwriters Face Subpoenas in U.S.

HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort are among the investment banks facing subpoenas from the Justice Department as part of its widening investigation into the multibillion-dollar online gambling industry, The New York Times reported. The subpoenas were apparently issued to firms that had underwritten the initial public offerings of some of the most popular online gambling sites, many of which were held in London.The subpoenas, earlier reported by The Sunday Times of London, appeared to be part of an indirect but aggressive and far-reaching attack by federal prosecutors on the Internet gambling industry just two weeks before one of its biggest days of the year, the Super Bowl.In the United Kingdom, several politicians and investment bankers had sharp criticism for the Justice Department's latest move. "I hope the department will stop and review its approach so that its behavior doesn't sour relations between us," Alan Duncan, Shadow Trade and Industry Secretary, was quoted as saying in the Times of London.
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Thursday, January 18, 2007

Dunn and Others Offered Pleas in H.P. Case

The California attorney general’s office has offered plea bargains to former Hewlett-Packard Chairwoman Patricia Dunn and four other defendants, offering them the chance to accept a misdemeanor charge each for their role in H.P.’s spying scandal, The San Jose Mercury News reported Thursday. But federal prosecutors will continue with their own case, which the Mercury News said could endanger those deals through “double jeopardy” provisions in California’s penal code. (State attorneys are discouraged from pursuing cases in which defendants have been acquitted or convicted in federal court.)
H.P. found itself in an imbroglio last year when it admitted that it had spied on board members and reporters as the company tried to find the source of a leaker. The computer maker admitted to hiring outside investigators to track individuals like Thomas Perkins through techniques like pretexting, or the obtaining of personal information under false pretenses. Ms. Dunn and other H.P. officials eventually resigned amid the growing controversy, and Congress held hearings into the matter.
Beyond Ms. Dunn and Mr. Wagner, state prosecutors have filed felony charges against H.P.’s former ethics director, Kevin Hunsaker, and two other private investigators, Ronald DeLia and Matthew DePante.
Federal prosecutors have already won a guilty plea from Bryan Wagner, a Colorado-based private investigator, who admitted to conspiracy and aggravated identity theft.
DealBook notes that the state attorney general’s aggressive pursuit of the case came under William Lockyer, who famously declared that a crime had been committed shortly after the scandal broke. Mr. Lockyer has since won election as the state’s treasurer.
Go to Article from the San Jose Mercury News »

Equity Office: Sharper Elbows in Buyout Battles

With the unprecedented amount of cash sloshing around in private equity’s pockets, it may have been inevitable, but the gloves have come off in buyouts. Late Wednesday, a group of investors offered $38 billion for the nation’s largest office landlord, setting off the biggest buyout battle since the landmark fight for RJR Nabisco nearly two decades ago. The upstart bid for Equity Office Properties, the real estate investment trust that was founded by Samuel Zell, tops a $36 billion deal that Equity Office had reached with the Blackstone Group in November. Either bid would win the crown as the largest buyout ever, surpassing last summer’s $33 billion deal for HCA.
The battle for Equity Office pits some of the most powerful and colorful financiers against each other. Blackstone is controlled by Stephen A. Schwarzman, who has created one of the largest, if not the largest, private equity firms in the nation.
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Wednesday, January 17, 2007

As Districts Turn to Exotic Finances, Banks Reap Rewards

Cash-strapped public school districts and other local governments are increasingly making bets on arcane financial derivatives, often in hopes of quickly raising needed funds. But sometimes, as Bloomberg News recounts, those bets go awry. The schools suffer, but the financial firms clean up.
Such transactions are becoming common across the country, according to Bloomberg. “Most of the $400 billion of private agreements sold to municipalities escape taxpayers’ notice and are little understood by the public officials and administrators who approve them.”

Tuesday, January 16, 2007

Regulators Open New Insider-Trading Inquiry

A growing business on Wall Street — research firms that pay employees of public companies and others to serve as consultants to investors — is coming under scrutiny. The New York AG’s office has begun examining whether employees of companies including Best Buy may have divulged material nonpublic information in consulting arrangements like these with hedge funds and other investors. Separately, the SEC is working on several investigations to see if hedge funds have received nonpublic information due to these research firms. Here’s the story from today’s WSJ.

SEC Staff Denies H-P's Request to Exclude Pill Proposal

The Securities and Exchange Commission staff has rebuffed a request by Hewlett-Packard to omit an investor proposal that seeks a bylaw or charter amendment to require a shareholder vote on any future "poison pill" takeover defense.
Four other companies have filed no-action requests to exclude 2007 bylaw proposals that are similar to the resolution at H-P, but it was not known as of press time whether the SEC staff had ruled on those requests.

How Rising C.E.O. Pay Spreads

Is Kenneth Langone “Patient Zero” — the primary carrier of a malady that makes corporate boards feverishly inflate executive pay? At the least, he is what The New Yorker’s James Surowiecki dubs a “supercarrier,” given his track record, which includes that of recently ousted Home Depot head Robert L. Nardelli. And abetting Mr. Langone is the clubby world of corporate boards, an increasingly interconnected social network where directors and executives tend to scratch each other’s back.
Mr. Langone is no stranger to showing C.E.O.’s the money. Among the outsized pay packages he played a role in approving: the golden hello that brought Mr. Nardelli to the home-improvement giant — and helped lead to his ouster; the pay package to former New York Stock Exchange Chairman Richard Grasso that is now at the center of a dispute with New York’s attorney general; and a ballyhooed golden parachute given to now-retired General Electric Chairman John F. Welch.
Yet Mr. Langone is simply representative of Home Depot’s highly connected board. Its directors sit on an average of two other boards, and the chairman of its compensation committee sits on four.
Such connections can help a company. For instance, the networking often leads to new business opportunities. But studies also seem to show that as those connections grow, so do the chances that a C.E.O.’s pay will rise above the norm. Coincidentally, so too do the odds that said company’s stock will underperform the market.
Mr. Surowiecki concludes:
In the end, the very things that make people likely to join a board—connections, business experience, sociability—are also the things that make them less effective once they do.
It’s worth noting one additional thing. Though Mr. Langone has never denied that he is an adherent to paying top C.E.O.’s top salaries, The New York Times previously reported that he broke with his old friend, Mr. Nardelli, when the executive refused to take a pay cut in light of growing shareholder agitation.
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New York, NY January 16, 2007 ---Private equity fundraising activity slowed considerably in the fourth quarter of 2006 but still broke records for the full year according to Thomson Financial and the National Venture Capital Association (NVCA). During the quarter, 37 venture capital funds raised a total of $2.83 billion and 39 Buyout and Mezzanine funds raised $17.83 billion. Despite this slower pace, venture capital saw the highest fundraising year since 2001 with 200 funds raising $28.5 billion. Buyout and Mezzanine funds recorded the highest year ever with 138 funds raising $102.9 billion.

Commentary: In Takeovers, Truth Can Be the First Casualty

When hostile takeover bids rear their heads, some chief executives declare fiercely that they’re not interested. From Gerald Grinstein of Delta Air Lines to Edwin Crawford of Caremark Rx, these C.E.O.s insist that their suitors take a hike. But the problem, writes Andrew Ross Sorkin in his Sunday DealBook column, is that they may not be telling the truth — and that they’re simply looking to up the ante. Welcome to the world of the corporate Pinocchios, he writes.
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Friday, January 12, 2007

Proxy Season Preview: Pay in the Crosshairs

Last year was a contentious one for corporate governance and shareholder proposals. What will 2007 bring? Institutional Shareholder Services, one of the main proxy advisory firms, has issued its 2007 Proxy Season Watch List, which offers some clues. One notable statistic: There are 39 shareholder proposals so far that would link executive pay more closely to a company’s performance, compared with just 17 such proposals in last year’s proxy season.

Like Them or Loathe Them, Hedge Funds Aren’t Going Away

Whether you're among those who believe that hedge funds are Satan (much of news media and the Connecticut attorney general) or savior (hedge fund employees and investors), it looks like they're here to stay, writes The New York Times' Jenny Anderson.

Thursday, January 11, 2007

A Public Pension Fund Sues Directors of Caremark Rx

A public pension fund in Louisiana has sued the directors of Caremark Rx, contending that their unanimous backing of the company's $21 billion merger with CVS over a rival $26 billion bid from Express Scripts improperly benefits Caremark executives at the expense of shareholders.

Wednesday, January 10, 2007

U.S. expands oversight of deals

A condition the U.S. government imposed on Nokia Corp.'s $20 billion joint venture with Siemens AG demonstrates that federal agencies are expanding their reach — both in terms of the types of deals that will face conditions and the requirements that will be imposed — into deals they believe carry national security risks.
Nokia and Siemens in June announced plans to combine Nokia's network infrastructure business with Siemens' communications equipment unit into a new company, Nokia Siemens Network. According to sources, the companies submitted a petition to the Committee on Foreign Investment in the United States, an interagency panel charged with examining the national security implications of cross-border deals. CFIUS has imposed a so-called mitigation agreement on the transaction, setting the terms by which foreign workers can work in the U.S.
Typically, CFIUS focuses on acquisitions of U.S.-owned companies, but Nokia and Siemens both are European based.

Antitrust woes dog Monsanto plans

Monsanto Co. Tuesday, Jan. 9, indicated it remains a long way from an agreement with the Department of Justice over antitrust conditions necessary to win federal approval for its $1.5 billion acquisition of cottonseed marketer Delta & Pine Land Co.
The merger, announced in mid-August, has generated numerous complaints from Monsanto's competitors in the cottonseed technology business, including E.I. du Pont de Nemours & Co. and Syngenta AG, as well as from growers that the merger would give Monsanto a virtual monopoly over the cottonseed business, particularly in the southeastern U.S.

Regulators quiz banks on fund risks

Financial regulators in the United States and several European Union countries have begun a joint investigation into whether banks' prime brokerages are taking too many risks as they increase lending to hedge funds.
Concern that booming lending to hedge funds may have led to a relaxation in credit standards has prompted US and European regulators to start the first joint investigation into whether banks and brokers are managing such risks appropriately.

Tuesday, January 09, 2007

DOJ’s Antitrust Chief Defends His Division’s Record

Posted by Peter Lattman
Will the Justice Department’s Antitrust Division ever meet a merger it doesn’t like? That’s the question trustbusting types are asking after a year in which the office gave its seal of approval to several controversial combinations — e.g., AT&T’s acquisition of BellSouth; the Whirlpool-Maytag combination; and Monsanto’s recent purchase of Delta & Pine Land.
Thomas Barnett, the head of the Antitrust Division, strongly disagrees with the view that his office has gone soft, reports this week’s Legal Times. He cites a settlement with a dairy company to protect competition in milk sales to a number of schools in Kentucky and Tennessee; a consent decree with Mittal Steel requiring it to sell an asset as part of its purchase of Arcelor; and another consent decree requiring the sale of assets as part of a merger between two power companies (the deal was later blocked by New Jersey officials).
Some say the DOJ’s cautious approach to merger enforcement isn’t just a function of conservative economic thinking, but the result of its losing a high-profile court challenge in 2004, when it unsuccessfully objected to a Oracle-PeopleSoft combination.
Barnett points out that last year the Justice Department initiated 16 merger-enforcement actions — more than the previous two years combined. The Legal Times points out that none of those actions resulted in the DOJ going to trial, and last year’s figures are down substantially from 2000, when the DOJ challenged 48 mergers.
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Home Depot to Review Pay

Published: January 9, 2007
ATLANTA, Jan. 8 (AP) — Home Depot, the home improvement store chain, said Monday that its board would require that two-thirds of its independent directors approve any compensation granted to Robert L. Nardelli, the former chairman and chief executive.
The decision, made last Thursday but not disclosed until Monday in a regulatory filing, follows an uproar over Mr. Nardelli’s pay.
Some shareholders have been pushing Home Depot to allow them a say in compensation matters.
Mr. Nardelli resigned last week after six years with the company, which is based in Atlanta. The company said at the time that Mr. Nardelli would receive a $210 million severance package

Monday, January 08, 2007

Private Firms Lure C.E.O.’s With Top Pay

J. Crew's Millard S. Drexler and VNU's David Calhoun are just two of the executives who are earning princely sums running companies that were acquired by by private equity firms. The New York Times reports that buyout firms are beginning to offer compensation on a previously unimaginable scale to the C.E.O.'s of their portfolio companies, even as Robert L. Nardelli's unceremonious departure from Home Depot may spell the end of the era of super-size pay packages for chief executives of public companies.
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Friday, January 05, 2007

The Year That Made Deal Makers Giddy


For deal makers, does it get any better than this?
A heady cocktail of rapidly growing emerging markets, floods of private equity and hedge fund money, buoyant chief executive confidence and a hungry debt market that seems willing to snap up nearly everything that banks can dish out has created an environment so fertile that mergers in 2006 surpassed all records.
Globally, there were $3.79 trillion worth of deals last year, up 38 percent from 2005, according to data from Thomson Financial.
Deals were even up 11 percent from the heights of 2000, the year of the AOL- Time Warner merger that has come to symbolize the dangers of a mergers and acquisitions bubble. Many of the deals of that year left a hangover of bad debt and broken companies.
Records were also broken last year for hostile deals and European deals. Dealogic, a competing statistics firm, says that 2006 deal flow was even higher, at $3.98 trillion.
Gavin MacDonald, head of European mergers and acquisitions at Morgan Stanley, acknowledged that he had “seen a few cycles” in more than 20 years as a banker, but never one like this.
“We thought in 2000 we might not see its like again, but we’ve surpassed even that,” he said.
No one can agree on what happens next.

Hedge Fund Plans to Solicit Proxies

Pirate Capital, a $1.7 billion hedge fund, plans to solicit proxies in support of its push to persuade Brink’s, the armored-truck and security provider, to hire an investment bank for a possible sale. In a regulatory filing yesterday, Pirate Capital also proposed electing its founder and another Pirate executive to Brink’s board. Pirate owns 8.5 percent of Brink’s and is its largest shareholder. Both Pirate and MMI Investments, which owns 8.3 percent of Brink’s shares, want the company to hire an investment bank for a possible sale, in the belief that it is undervalued.
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Gadflies Get Respect, and Not Just at Home Depot

For decades, activist shareholders were an entertaining, but largely ignored, Wall Street sideshow. Disgruntled investors would attend annual meetings to harangue executives, criticize strategies — and protest that their complaints were being ignored. One agitator appeared in face paint and a red nose after executives called him a clown.
Today, however, it seems that activists have captured the center ring and are directing the main event.

Thursday, January 04, 2007

Record year, record bonuses

The final tally has been completed, and 2006 has entered the M&A record books. Market researcher Dealogic says global M&A volume for the year was $4.06 trillion, up 21% over the prior record of $3.3 trillion, which was established in 2000. Last year's volume was 36% higher than the $2.99 trillion logged in 2005, Dealogic says.
Bonuses this year will be huge, industry sources say. The pool is larger than ever, and the money will be distributed deeper into the organization. Managing directors at Goldman Sachs and other big banks could take home $20 million or more in bonsues, and that doesn't include profits from their shares that they own in their firms. Since investment banking firms outperformed the S&P, bankers with big stakes in their firms will see huge returns. And the consenus is that 2007 will be another strong year.

Judge Dismisses Deferred Charge Against KPMG

Manhattan federal judge Loretta Preska agreed yesterday to dismiss a deferred criminal charge against KPMG. The move wasn’t necessarily unexpected: The charge was contained in a deferred-prosecution agreement the firm entered with the feds in August 2005. As part of that pact, KPMG admitted to a charge of conspiring to defraud the government by selling questionable tax shelters. KPMG also paid a $456 million fine and submitted to outside monitoring. The feds had promised to dismiss the deferred charge after Dec. 31, 2006, if KPMG complied with the agreement.

A Warning Shot by Investors to Boards and Chiefs

The surprising defenestration yesterday of Robert L. Nardelli, head of Home Depot and one of the nation’s most imperious and highly paid chief executives, was a victory for shareholders hoping to force corporate directors to be more accountable on the increasingly incendiary issue of executive pay.

Wednesday, January 03, 2007

Goldman, Citi Top Final M&A League Tables

After giving us a preview late last year, Thomson Financial this week sent DealBook its official tally of last year’s merger and acquisitions activity. Global M&A topped $3.8 trillion in 2006, a bump of nearly 38 percent over the previous year. Nearly 20 percent of the uear’s deals involved private-equity buyers. And large swaths of the deal-making were handled by two investment banks, Goldman Sachs and Citigroup.

SEC Blasted on New Executive Compensation Rules

The Securities and Exchange Commission's decision to tweak disclosure rules on executive compensation is already under fire from congressional critics.
Rep. Barney Frank of Massachusetts, the incoming Democratic chairman of the House Financial Services Committee, said Wednesday he is "very disappointed with both the substance and the procedure used to reach the SEC's Christmas holiday decision to loosen reporting requirements for the pay of the top executives of public corporations."
"Backtracking by the SEC on this important matter of stock options reinforces my determination that Congress must act to deal with the problem of executive compensation that is now unconstrained by anything except the self-restraint of top executives, a commodity that is apparently in insufficient supply," said Frank.

Tuesday, January 02, 2007

Securities Class Actions Are Down, But Legal Bills Are Up

Securities Class Actions Down:
The number of securities-related class-actions dropped sharply in 2006, according to a report issued jointly by Stanford Law School and Cornerstone Research. Investors filed 110 class-action lawsuits involving securities issues last year, a 38% decline from the 178 filings in 2005 and the lowest number since Congress passed securities class-action reform legislation in 1995. Twenty of those 110 lawsuits involved companies that allegedly violated securities rules by backdating stock options. Why the drop? In part, say legal experts, it’s because Sarbanes-Oxley has caused companies to exercise greater care in reporting their financial results. Here’s the story from the WSJ.

Corporate Legal Bills Up:
Corporate legal bills spiked almost 20% this year and could increase by a further 9% in 2007, according to a survey of Fortune 1000 companies by the BTI Consulting Group. Total spending on outside counsel reached $56.4 billion in 2006. The average company in the BTI survey spent $19.5 million on outside lawyers, nearly double the $10.5 million average only five years ago. And outside lawyers now account for 65 per cent of corporate legal spending by large firms, compared with 42 per cent in 2001. Here’s the story from the Financial Times.

How Private Equity Firms are Adapting to a Changing Marketplace

From Capital Eyes a Bank of America Business Capital bi-monthly e-newsletter on leveraged finance:

With massive deals continuing to make headlines and industry stalwarts claiming to have never seen so much liquidity and capital available, there is little doubt about the current strength of the private equity market. Limited partners are awash in cash to invest, and most private equity partnerships are upsizing their funds. Interest rates are holding. The overall economy is relatively stable, and the market's current appetite for leverage remains healthy. But that doesn't necessarily mean days of wine and roses for private equity firms.

Mergers and Acquisitions Continue to Dominate Exit Scene For Full Year 2006

IPO Market Showing Some Signs of Improvement reports National Venture Capital Association and Thompson Financial:

New York, NY- January 2, 2007 – Twenty-one venture-backed companies raised $1.835 billion through initial public offerings (IPOs) and 56 venture-backed M&A deals were reported in the fourth quarter of 2006 according to the Exit Poll report by Thomson Financial and the National Venture Capital Association (NVCA). The data reflect another year of heavy reliance on the M&A market for VC investment exits with a total of 58 venture-backed IPOs raising $5.3 billion in 2006 and 335 M&A transactions with a total disclosed value of $16.6 billion for the full year.

In terms of number of exits, 2006 venture-backed activity in both the IPO and acquisition markets varied only slightly from 2005 levels although these transactions realized higher valuations. The year 2006 marks the second strongest IPO year in terms of dollars raised out of the last six years and it is also the third strongest of the last six in terms of average IPO amount. The average acquisition value for a venture-backed company, for those deals where the acquisition price was disclosed, is the highest in six years at $113.8 million per deal.

Leases to Hedge Funds Raise Questions

They are known as “hedge fund hotels”: Offices that investment banks lease out to upstart hedge-fund traders, usually in hopes that the traders-in-residence will become big clients. As The New York Times’s Jenny Anderson reports, they often come with luxurious amenities, such as receptionists, espresso machines and consultants to help manage their information systems. But, Ms. Anderson wrties, they are also raising questions. William F. Galvin, the Massachusetts secretary of state, has subpoenaed UBS, the leader in this business, and is examining other banks with hedge fund hotels in Boston to determine how they are charging for their services.

Lucky 2007

By James J. Cramer in New York Magazine:

An equity shortage, a new M&A boom, a weak dollar, and lower interest rates point to another year of big winnings on Wall Street.

Companies don’t need the stock market anymore. Sure, investors love it when the market goes up, and those who own stocks make tons of money, as they did in 2006, a year that defied every skeptic in its march to record highs. But for many corporations and their managements, the stock market is just plain unnecessary, atavistic even. They don’t need the money the market can provide, and they hate the hassle of having a public stock. That’s why, in 2006, we got a record number of takeovers, mergers, and private-equity buyouts. And that’s why I think 2007 will be even bigger than 2006.

A Year of Wheeling, Dealing and Reeling

To commemorate a banner year for deals, we raised a glass to some of the notable names of 2006 in DealBook’s annual “closing dinner” column. We toasted the likes of Lloyd Blankfein, who ascended to the role of chief executive at investment banking giant Goldman Sachs, and Stephen Schwarzman, whose Blackstone Group raised record sums of money for its buyout fund. We also lobbed zingers at some of the players who failed to wow Wall Street in the past year. To them, we say better luck in 2007.

Blodget Warns on Hedge-Fund Investing

Average investors should be wary of taking the plunge into hedge funds, former Internet analyst Henry Blodget cautions in a Slate article adapted from his book, “The Wall Street Self-Defense Manual.”
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