Wednesday, June 30, 2010

M.&A. Activity Up Globally, but Regions Lag

NYT DealBook, June 30, 2010:
Mergermarket, an M.&A. intelligence service, reported a 2.9 percent increase to the number of deals going on globally in the first half, marking their total value at $828.9 billion, compared to $805.9 billion at the same time in 2009, The Financial Times said.
Greater increases in M.&A. activity were seen in the developing world, making a leap of 44 percent on last year’s level to $218.5 billion, The FT reported.
Mergermarket’s data offers a mixed picture of European deal-making: In the area of emerging markets, European buyers appeared in the highest volume, contributing to 61.2 percent of inbound M.&A.
However, the second quarter was noted by Mergermarket as the worst period for European M.&A. since the data firm’s records began 12 years ago, The FT said.
In the U.S., the firm’s findings were not much better, with M.&A. activity in the first two quarters dropping 18.8 percent across the region, putting the total worth of deals at $313.3 billion, the worst result since 2003, The newspaper reported.
Go to Article from The Financial Times (Subscription Requires) »

IPOs – Reason for Optimism?

From Piper Jaffray Private Equity Partners Market Update, Second Quarter 2010:
The IPO market in 2010 is off to a pretty good start. Year-to-date, there have been 53 IPOs, raising a total of $8.4 billion. This compares to 11 IPOs for $2.2 billion for the same period last year.
Early in the year, you could sense the optimism within the private equity community that the IPO window would reopen in 2010. While January and February were a little slow, March, April and May each produced a minimum of 11 IPOs and $1.3 billion raised. So far, June is slightly behind that pace (seven IPOs pricing through June 25) due to the market turmoil caused by the European debt crisis and perhaps recent post-IPO price performance. The class of 2010 IPOs is down an average of 3.5 percent versus a virtually flat year-to-date return for the S&P 500. Twenty-one of the 53 IPOs so far in 2010 are down more than 10 percent from the offer price and only 22 have traded up (as of June 25).
Regardless, the IPO backlog of companies in registration continues to grow, a sign that bankers and sponsors expect a robust IPO market in the coming months. There are currently 127 IPOs in registration, up from a low of 33 in August 2009. Most of them look viable. Less than 30 percent of the backlog is growing stale (more than four months old).
We have learned the following from recent discussions with institutional buyers of IPOs:
There is a strong demand for growth stories, which should bode well for VCs.
There appears to be less interest for LBO-backed IPOs. While institutional investors are still willing to participate in LBO-backed IPOs, they have become very price-sensitive. During the 2006–2007 boom of LBO-backed IPOs, the buyers were more apt to accept the valuation being pitched by the bankers. Today, investors are crunching the numbers themselves and telling the bankers where the deal needs to price. This is evidenced by nearly 50 percent of IPOs in 2010 pricing below their filing range, the highest percentage in years.
With few exceptions, the bar remains high for an IPO. Growth, profitability and predictability are the ingredients investors require. Median revenue for 2010 IPOs remains over $100 million while the median EBITDA is $24 million.
We anticipate the IPO market to remain choppy as investors continue to digest news of the global economy and the price performance of recent IPOs. An uptick in either category may add the necessary confidence to both issuers and investors to create a more steady flow of IPOs in the second half of the year.
Read entire article with charts at:

Thursday, June 24, 2010

On Wall Street, So Much Cash, So Little Time

By JULIE CRESWELL, New York Times, June 23, 2010:

Private equity firms, where corporate takeovers are planned and plotted, today sit atop an estimated $500 billion. But the deal makers are desperate to find deals worth doing, and the clock is ticking.
The stores of money inside the private equity industry have ramifications far beyond the bid-’em-up crowd on Wall Street. Millions of Americans — investors, employees, retirees — have a stake in the game too.
Go to article:

Wednesday, June 23, 2010

A Rise in M.&A. Activity Is Seen in the Near Future

NYT DealBook, June 23,2010:
Deal-making has been subdued in the first half of the year, partly because of the recent turbulence in the stock market. But mergers and acquisitions are likely to pick up as the year progresses, Ernst & Young forecasts.
“We’re seeing a strong deal pipeline,” Rich Jeanneret, Americas vice chairman for Ernst & Young Transaction Advisory Services, said in the firm’s midyear mergers and acquisitions report. “As we look towards the second half of 2010, we expect to see well-capitalized corporations and private equity firms continuing to put their money to work in select growth markets.”
According to a recent Ernst & Young study of more than 800 senior executives around the world, 57 percent of businesses say they are likely or highly likely to acquire other companies in the next 12 months, almost double that of the 33 percent surveyed in November 2009. The study also found that 47 percent expected to make the move in the next six months, compared with 25 percent when surveyed eight months ago
The deal market will be defined by smaller, higher-quality deals fueled by low interest rates and corporate cash stockpiles, said Steve Krouskos, Americas markets leader for E.&Y.’s Transaction Advisory Services. In addition, Mr. Krouskos believes strong growth prospects in such markets as Brazil and China will lead to a pick-up in deal volume, despite concerns over instability in other developing markets.
The first half of the year started strong but began to fade as the sovereign debt crisis in Europe put some deals on hold. Global M.&A. deal value totaled $810.3 billion so far during the first half of 2010, similar to where it was during the comparable period last year at $814.6 billion. But much of the deals done in the first half of 2009 involved government activity in the banking system. This year, the deals took place across a range of industries, as private equity firms and other companies took advantage of the thawed credit markets and strong equity markets.
Looking towards the second half of 2010, Ernst & Young believes M.&A. activity should continue to grow, as well-capitalized firms seek to expand through mergers and acquisitions and from the strengthening of the credit markets (assuming the economy stabilizes).
Fortune 1,000 companies have a combined $1.8 trillion in cash, a huge stockpile that can be used for acquisitions. Ernst & Young expects companies to seek smaller deals, but “higher quality” transactions, as well-capitalized companies hunt for acquisitions that complement their strengths.
– Cyrus Sanati

Tuesday, June 22, 2010

Google and Twitter Go to Bat for Theflyonthewall

Google and Twitter have asked an appeals court to overturn a lower court’s decision to bar from issuing immediate news on analyst research from several Wall Street banks, Reuters reported, citing court documents. posted headlines from research reports and press releases on its website, often before banks could share their recommendations with their clients.
In March, U.S. District Judge Denise Cote said engaged in “systematic misappropriation,” essentially getting a “free ride” from its quick publication of upgrades and downgrades that can move stocks higher and lower. The ruling was made in favor of Bank of America’s Merrill Lynch unit, Barclays and Morgan Stanley, which had earlier sought court intervention to ban Theflyonthewall from using their research reports.
However, in a filing with an appeals court late on Monday, Google and Twitter argued that in the age of Internet and instantaneous communication, banning of’s immediate news dissemination was “obsolete.” Google and Twitter argued that upholding the district court’s decision would give those who obtained the news first strong incentives to block others from obtaining the same information.
“News reporting always has been a complex ecosystem, where what is ‘news’ is often driven by certain influential news organizations, with others republishing or broadcasting those facts — all to the benefit of the public,” Reuters cited the companies as saying in the filing.
Go to Article from Reuters via The New York Times »

Monday, June 14, 2010

In Deal-Making, Flat Is the New Up

NYT DealBook, Monday, June 14, 2010:
Some bankers made rosy predictions for a big bounce-back in mergers and acquisitions this year. Yet deal volumes in the United States are recovering as if the recession just endured was run of the mill, Breakingviews says.
After two down years, the value of American corporate match-making is flat in 2010. That’s no boom — but if history is any guide, it’s also nothing for bankers to complain about, the publication says.
After declines of 41 percent in 2008 and 22 percent in 2009, the value of announced deals in the United States so far in 2010, at $322 billion, is just a fraction off last year’s pace. That pattern is in line with the last two recessions, according to Thomson Reuters data. The downturn of the early 1990s had three dry years, and the dot-com bust brought two.
So considering the depth of the latest recession, flat is the new up, Breakingviews argues. True, some on Wall Street had forecast a more robust rebound. Goldman Sachs predicted “a perfect storm for M.& A.” late last year, pointing to cash-stuffed corporate coffers — now at a record, according to the Federal Reserve — and benign capital markets. Greenhill & Company also predicted 2010 would be big for deal-makers.
But while last year’s fourth quarter showed a promising return of deal-making — like TPG’s buyout of IMS Health and Berkshire Hathaway’s acquisition of Burlington Northern Santa Fe — the momentum hasn’t continued, Breakingviews says.
Some may find that surprising. After all, while many companies achieved profit targets through cost-cutting during the economic downturn, the juice has probably been squeezed from that lemon. Acquiring competitors and eliminating overlap is another way to find cost reductions. For instance, while CenturyTel and Qwest have been cutting costs on their own, they now hope their merger will yield more than $600 million more in fresh savings.
The trouble is that even though the United States economy has stopped contracting, big risks still weigh on the animal spirits of executives, Breakingviews argues. Job growth is anemic and credit markets have had renewed volatility in the wake of Europe’s sovereign debt crisis. Such market turmoil may have played a role in scuttling Prudential’s bid for the American International Group’s Asian insurance business, and a $15 billion leveraged buyout of Fidelity National Information Services, the publication suggests.
Put it all together, and deal makers pining for more action should probably just consider themselves lucky to have any at all, Breakingviews says.
Go to Article from Breakingviews via The New York Times »

Friday, June 11, 2010

Private Equity’s $445 Billion Problem

NYT DealBook, Friday, June 11, 2010:
The private equity industry has $445 billion burning a hole in its pocket and it could soon turn into a problem, Investor’s Business Daily writes.
Buyout shops have raised — though are yet to deploy — that figure from institutional investors, according to the publication.
And if they can’t unload it in the near future, they may face a host a problems.
Investor’s Business Daily writes:
To realize the outsize profits investors expect, private equity firms would have to borrow two or three times that amount. But for the most part, credit spigots for such deals are still dry. At the same time, pinning down buyout targets is not that easy. Many potential sellers are balking at parting with corporate assets in the midst of a serious downturn.
Worst of all, the clock is ticking on that near-half-trillion war chest.
“Most funds legally have five or six years to invest that capital,” said Andrea Auerbach, managing director at Cambridge Associates, a consultant to institutional investors based in Boston. “It’s use it or lose it.”
If P.E. doesn’t start to spend that committed capital soon, investors may begin to pull out, the publication notes. At the same time deals that are done only to use the capital risk being ill thought through and potentially not very profitable.
Go to Article from Investor’s Business Daily »

Thursday, June 10, 2010

Business Broker Chicago: The Importance of Reasonableness When Selling Your Business

Link to excellent article posted by Dave Kauppi:

Monday, June 07, 2010

And You Thought M&A Was Slow Last Year…

By Stephen Grocer, WSJ Deal Journal, June 7, 2010:
M&A recovery? Deals just around the corner?
That may be what Wall Street wants you to believe.
But the numbers tell a different story. The volume of deal-making during 2010 has been weak. Very weak.
U.S. announced deal volume is down 14.7% from the same period last year, according to Dealogic. In Europe, it’s off 6%.
Those numbers are made only more stark given the year-over-year comparison stretches back to a period in 2009 when economy was still mired in the worse financial crisis since the Great Depression.
Perhaps more troubling is the dearth of large deals. So far only seven deals valued above $10 billion have been announced globally, the lowest total in the past five years. Seven transactions rank as the lowest total in the past five years.
With so few big deals, the average deal size both world-wide and in the U.S. has plummeted to its lowest levels since 2003. The U.S. saw the steepest decline. Last year the average deal size in the U.S. was $309 million through the first five months. This year it’s nearly half that.
The only thing keeping the M&A business going is activity in the developing world. Deal volume in Latin America is up nearly two-fold, and 175% in India (admittedly off of small bases from 2009).
Perhaps the late Bruce Wasserstein will prove prophetic. Last summer the legendary deal maker said deal activty would not return to peak levels until 2013, and that the four years in between would see only a gradual increase.
Just consider today’s unemployment figures and consider this: If companies aren’t confident enough to hire, are they confident enough to pull a trigger on a deal?