September 30, 2010, 12:41 pm — Updated: 1:16 pm -->
Deal Makers Cautious Despite Uptick in M.&A.
A pickup in mergers and acquisitions over the last two months has the bulls on Wall Street thinking that the deal market is back in full force. But many senior deal makers remain cautious about the increase in M.&A. activity, given the continued uncertainty in the direction of the economy.
“Basically, M.&A. is a function of a market economy, and there are so many factors that come into play that there is no way to predict what will happen in the future,” Martin Lipton, one of the founding partners of the law firm Wachtell Lipton Rosen & Katz told DealBook at the Bloomberg Dealmakers Summit on Thursday in New York. “Yes, there has been a significant increase in activity lately — sometimes that portends an increase in deals, sometimes it doesn’t.”
M.&A. activity did pump up in August, which is normally one of the slowest months for deals of the year. That enthusiasm carried over into September with a number a major transactions announced, including Southwest Airlines’ announcement on Monday that it would acquire AirTran, a rival budget airline, for nearly $1.4 billion. Global M.&A. volume totaled nearly $730 billion in the the third quarter, up 43 percent from a year earlier, according to data from Dealogic.
But this past performance is not impressing deal makers. While they are seeing more deals in the pipeline these days, they are only seeing the strongest and largest companies emerge with completed transactions.
“The system is in a state of slow recovery,” Roger C. Altman, the founder and chairman of Evercore Partners, said at the conference. “Parts of it are functioning very well in relation to where it was and other parts of it, like middle-market lending, are functioning very poorly and are a very, very long way from recovery.
“If you look at the amount of commercial investment loans outstanding, they have been relentlessly declining for almost two years, and you know you cannot have a true healthy economic recovery with bank credit lending like that.”
But Timothy Ingrassia, the head of mergers and acquisitions for Goldman Sachs in the Americas, believes that while financing may still be an obstacle in doing some deals, the main obstacle he sees has shifted from debt to the equity side of the transaction.
“If you think about a $10 billion deal that requires $4 billion of equity, you are talking about multiple private equity firms that have to get together,” Mr. Ingrassia said at the conference. “Right now, that dynamic, creating consortia and having buyers back in unity to get something done, may be the most difficult piece of the deal, while six months ago I would absolutely say that financing was the most difficult part of the deal.”
Despite the difficulties in arranging club deals, Blair Effron, a partner at Centerview Partners, believes strongly that private equity will probably be the biggest part of the deal market in the next year. Many private equity firms will need to exit their investments and so that could mean a large uptick in deal activity there.
Regulatory changes that would increase the amount of taxes that private equity firms would have to pay to exit certain deals is likely to determine whether some new deals get done. But there seems to be only modest concern from deal makers, or their clients, about the impact that the sweeping new financial regulatory law will on their business.
“I find that general legislation like Sarbanes-Oxely and Dodd-Frank does not that much of an impact,” Mr. Lipton told DealBook. “Dodd-Frank has more of an impact on financial transactions, but if there is an opportune transaction, Dodd-Frank will not interfere with them going forward.”
– Cyrus Sanati
Copyright 2010 The New York Times Company
Thursday, September 30, 2010
Monday, September 13, 2010
Middle Market M&A on the Rise
Prices are rising, and deal volume is getting closer to precrisis levels. Is this a true recovery or a blip on the M&A screen?By KEN TARBOUS, Investment Dealers' Digest
September 12, 2010
Ridgemont Equity Partners, a Charlotte, N.C., financial sponsor, has been an active buyer of companies worth $10 million to $100 million this summer and it has plenty of company.
Last month, Mill Road Capital of Greenwich, Conn., completed a $91 million acquisition of Rubio's Restaurants Inc. of Carlsbad, Calif., and Austin Ventures snapped up YRC Logistics, a Kansas unit of YRC Worldwide, for $38.7 million.
Dealmaking has picked up from a year ago and it is expected to remain lively at least for the rest of this year. Sponsors are allocating more money to lower-middle-market businesses, and improved debt markets are allowing buyers to borrow more. Also, some market players cite concerns about potential changes in federal tax policy as a reason for the pickup in the pace of transactions.
According to Thomson Reuters, there were 72 deals worth $4.8 billion in the lower middle market last month, compared with 65 deals worth $3.7 billion in August 2009. (These mergers and acquisitions generally involve companies worth $10 million to $250 million.)
Private-equity firms have $400 billion of capital on hand to invest, according to Deloitte Corporate Finance LLC, and more than 75% of the firms that have raised funds this year are targeting middle-market companies.
"We've got improved debt markets, you've got an inventory of deals that has built up during the economic downturn that people couldn't really sell, and you've got an improving economy that's incentivizing people to take that inventory out to the market," said Travis Hain, a partner at Ridgemont. "And finally, you've got potential tax incentives, depending on one's views on capital gains, and obviously there's a predominant view that capital gains is going up."
His firm, which Bank of America Corp. spun off last month, invests in basic industries, consumer and retail, energy, financial services, health care, and telecommunications, media and technology. This week, it announced it had bought a majority interest in the data network provider Unite Private Networks, and last week it said it had sold its interest in the fiber-optic broadband provider Fibertech Networks.To some degree, the pickup in activity may be exaggerated by the sharp decline in M&A transactions that took place during the credit crisis; while the debt market conditions have improved, there is a cap on how much a sponsor firm can borrow. Others say the activity is being propelled by the simple fact private-equity funds get paid to put money to work.
In the second quarter, according to Thomson Reuters, there were 257 U.S. deals worth $17.7 billion involving companies with enterprise values of between $10 million and $250 million. A year earlier there were 199 such deals worth $10.7 billion.
GF Data Resources, which collects data from more than 150 private-equity firms on transactions valued between $10 million and $250 million, reported a similar pattern among the financial sponsors it covers. In the second quarter, these sponsors closed 26 deals in the lower middle market, versus 16 in the first quarter and 15 in the second quarter of last year.
Private-equity sponsors and M&A bankers say that even though this year's volume does not match that of the heady days of 2005 to 2007 (a three-year period when, by some industry estimates, buyouts totaled more than $1.6 trillion), there are "record or near record" numbers of companies up for sale now, and those companies have a goal of closing deals this quarter or the next.
"If even a fraction of these deals get done, it will be a very interesting couple months," said Justin Abelow, a managing director of the financial sponsors coverage group in the New York office of Houlihan Lokey. "I think one of the things that's going to happen is that there'll be a tension between getting some of these deals done as M&A deals and just doing dividend recaps of one sort or another, particularly where people think they are not going to get their prices."
Hain says the backlog and the rush to market have a positive side.
"The good news for everybody is that this inventory of deals that built up over two or three years, they're all quality companies," he said. "The first companies that come out in this environment are the best companies. We're tending to see better companies, and there are some companies that, in certain circumstances, you can afford to pay higher prices for, depending on what a buyer thinks that you can add to the equation as a buyer and investor."
Valuations are returning to what dealmakers call more realistic levels. The multiples paid for companies in the lower middle market are on the rise, according to GF Data. The average multiple climbed from 5.1 times EBITDA in the third quarter of last year to 5.2 in each of the following two quarters to 5.6 in the second quarter of this year. Companies sold in the second quarter of last year fetched an average of 6.7 times EBITDA.
Hain says improved conditions in the debt markets have provided an impetus for deals this year. "The debt markets are facilitating transactions very actively, whereas the debt markets were a real impediment to deals last year."
In addition, the equity and debt structure of the deals has been stabilizing. Debt as a percentage of the average deal's capital structure increased to 42.4% in the first half of this year, versus 28.2% for all of last year, according to GF Data.
The equity percentage dropped from 59.0% last year to 53.3% in the first half of this year, but that's still "a high number by any kind of historical standard, so it shows that the overhang of equity capital that is still to be invested that has been raised by these private-equity sponsors, that there's a lot of pressure to deploy that capital," said Graeme Frazier, principal and co-founder of GF Data.
Market participants, citing proprietary data, pitch count and new assignments, say there might not be enough middle-market bankers and private-equity professionals to handle the plethora of deals in the market, and processes may be truncated as a result.
"This is as busy as that market has ever been, after a time of relative inactivity, and there may not be as many people in all parts of that market as there used to be, but there is much more activity," said one market participant, who asked not to be identified. "I think people are trying to push a lot of water through a relatively narrow pipe, and I think that pipe is near a bursting point."
September 12, 2010
Ridgemont Equity Partners, a Charlotte, N.C., financial sponsor, has been an active buyer of companies worth $10 million to $100 million this summer and it has plenty of company.
Last month, Mill Road Capital of Greenwich, Conn., completed a $91 million acquisition of Rubio's Restaurants Inc. of Carlsbad, Calif., and Austin Ventures snapped up YRC Logistics, a Kansas unit of YRC Worldwide, for $38.7 million.
Dealmaking has picked up from a year ago and it is expected to remain lively at least for the rest of this year. Sponsors are allocating more money to lower-middle-market businesses, and improved debt markets are allowing buyers to borrow more. Also, some market players cite concerns about potential changes in federal tax policy as a reason for the pickup in the pace of transactions.
According to Thomson Reuters, there were 72 deals worth $4.8 billion in the lower middle market last month, compared with 65 deals worth $3.7 billion in August 2009. (These mergers and acquisitions generally involve companies worth $10 million to $250 million.)
Private-equity firms have $400 billion of capital on hand to invest, according to Deloitte Corporate Finance LLC, and more than 75% of the firms that have raised funds this year are targeting middle-market companies.
"We've got improved debt markets, you've got an inventory of deals that has built up during the economic downturn that people couldn't really sell, and you've got an improving economy that's incentivizing people to take that inventory out to the market," said Travis Hain, a partner at Ridgemont. "And finally, you've got potential tax incentives, depending on one's views on capital gains, and obviously there's a predominant view that capital gains is going up."
His firm, which Bank of America Corp. spun off last month, invests in basic industries, consumer and retail, energy, financial services, health care, and telecommunications, media and technology. This week, it announced it had bought a majority interest in the data network provider Unite Private Networks, and last week it said it had sold its interest in the fiber-optic broadband provider Fibertech Networks.To some degree, the pickup in activity may be exaggerated by the sharp decline in M&A transactions that took place during the credit crisis; while the debt market conditions have improved, there is a cap on how much a sponsor firm can borrow. Others say the activity is being propelled by the simple fact private-equity funds get paid to put money to work.
In the second quarter, according to Thomson Reuters, there were 257 U.S. deals worth $17.7 billion involving companies with enterprise values of between $10 million and $250 million. A year earlier there were 199 such deals worth $10.7 billion.
GF Data Resources, which collects data from more than 150 private-equity firms on transactions valued between $10 million and $250 million, reported a similar pattern among the financial sponsors it covers. In the second quarter, these sponsors closed 26 deals in the lower middle market, versus 16 in the first quarter and 15 in the second quarter of last year.
Private-equity sponsors and M&A bankers say that even though this year's volume does not match that of the heady days of 2005 to 2007 (a three-year period when, by some industry estimates, buyouts totaled more than $1.6 trillion), there are "record or near record" numbers of companies up for sale now, and those companies have a goal of closing deals this quarter or the next.
"If even a fraction of these deals get done, it will be a very interesting couple months," said Justin Abelow, a managing director of the financial sponsors coverage group in the New York office of Houlihan Lokey. "I think one of the things that's going to happen is that there'll be a tension between getting some of these deals done as M&A deals and just doing dividend recaps of one sort or another, particularly where people think they are not going to get their prices."
Hain says the backlog and the rush to market have a positive side.
"The good news for everybody is that this inventory of deals that built up over two or three years, they're all quality companies," he said. "The first companies that come out in this environment are the best companies. We're tending to see better companies, and there are some companies that, in certain circumstances, you can afford to pay higher prices for, depending on what a buyer thinks that you can add to the equation as a buyer and investor."
Valuations are returning to what dealmakers call more realistic levels. The multiples paid for companies in the lower middle market are on the rise, according to GF Data. The average multiple climbed from 5.1 times EBITDA in the third quarter of last year to 5.2 in each of the following two quarters to 5.6 in the second quarter of this year. Companies sold in the second quarter of last year fetched an average of 6.7 times EBITDA.
Hain says improved conditions in the debt markets have provided an impetus for deals this year. "The debt markets are facilitating transactions very actively, whereas the debt markets were a real impediment to deals last year."
In addition, the equity and debt structure of the deals has been stabilizing. Debt as a percentage of the average deal's capital structure increased to 42.4% in the first half of this year, versus 28.2% for all of last year, according to GF Data.
The equity percentage dropped from 59.0% last year to 53.3% in the first half of this year, but that's still "a high number by any kind of historical standard, so it shows that the overhang of equity capital that is still to be invested that has been raised by these private-equity sponsors, that there's a lot of pressure to deploy that capital," said Graeme Frazier, principal and co-founder of GF Data.
Market participants, citing proprietary data, pitch count and new assignments, say there might not be enough middle-market bankers and private-equity professionals to handle the plethora of deals in the market, and processes may be truncated as a result.
"This is as busy as that market has ever been, after a time of relative inactivity, and there may not be as many people in all parts of that market as there used to be, but there is much more activity," said one market participant, who asked not to be identified. "I think people are trying to push a lot of water through a relatively narrow pipe, and I think that pipe is near a bursting point."
Thursday, September 09, 2010
Banks, Bosses Benefit from U.S. Supreme Court's Tougher Lawsuit Standards
By Thom Weidlich - Bloomberg.com, Sep 9, 2010
Two U.S. Supreme Court decisions making it tougher to pursue lawsuits may have begun to bear fruit for corporations fighting investor claims or employee litigation.
Where once it was enough to give a defendant “fair notice” of a claim and the grounds on which it rested, the high court’s 2007 holding in Bell Atlantic Corp. v. Twombly required an antitrust complaint to contain enough facts to show a claim that is “plausible on its face.” Two years later, in Ashcroft v. Iqbal, the court applied Twombly to all federal civil suits.
The Supreme court rulings mean that someone who wants to sue in federal court “should not subject a defendant to the costs and burdens of litigation when there is no plausible basis for their claims,” Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an e-mail. The Washington-based business advocacy group filed a friend-of-the- court brief in Twombly.
The rule aided financial-services companies after the February 2008 collapse of the $330 billion auction-rate securities market.
Judges cited Twombly alongside the 1995 Private Securities Litigation Reform Act, which also added hurdles to investor cases, in dismissing suits against Citigroup Inc. and Bank of America Corp.’s Merrill Lynch unit over the sale of the securities.
‘Keys to the Courthouse’
“Implausible conclusory allegations are no longer keys to the courthouse,” Scott D. Musoff, a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York and a lawyer for Merrill Lynch in the auction-rate litigation, said in an e-mail. “This is especially important in the wake of a financial crisis when people are looking for someone to blame for their losses even if they have no factual basis to support their claims.”
Musoff wouldn’t comment specifically on Merrill’s auction- rate case.
Plaintiffs’ lawyers say the justices’ new threshold unfairly closes the courthouse to their clients or increases their costs by forcing them to gather facts before suing, often before they can gain access to key information. Fred T. Isquith, a plaintiffs’ lawyer in class actions, criticized the Twombly court for trying to cut caseloads at the expense of litigants seeking redress.
“It is the most fundamental task of government to administer justice and provide judgment,” Isquith, a partner at Wolf Haldenstein Adler Freeman & Herz LLP in New York, said in an e-mail. “Dismissing cases is not the solution; the solution is more judges and more money for the court system.”
Waste Management
In tossing out James Stenger’s age-bias lawsuit against his employer, a waste management firm owned by Zurich-based Credit Suisse Group AG, U.S. District Judge Eric F. Melgren in Kansas City, Kansas, said the claim didn’t raise enough facts to cross the line “from conceivable to plausible.”
Melgren allowed Stenger, 55, a former customer-relations worker at Shawnee, Kansas-based Deffenbaugh Industries Inc., to refile his complaint with more detail. Deffenbaugh again asked the judge to dismiss. He has yet to rule.
Twombly and Iqbal supplanted the standard set by the Supreme Court in Conley v. Gibson in 1957. Under Conley, a suit could be dismissed if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.”
Federal civil cases typically proceed from the complaint to the motion to dismiss, followed by an evidence-gathering stage known as discovery, then summary judgment if there are no facts in dispute that would require a trial to resolve.
Earlier Disposal
Twombly and Iqbal are part of a trend to dispose of suits earlier in the process, said Arthur R. Miller, a professor at New York University School of Law. In 1986, the Supreme Court made it easier to decide a lawsuit between discovery and trial.
“Twombly-Iqbal now moves it to the motion to dismiss based on a single document, the complaint, with no opportunity for discovery,” said Miller, who is also special counsel to New York-based law firm Milberg LLP, which represents plaintiffs in securities litigation. “It’s becoming a big battle.”
The Chamber of Commerce says suits deserve more scrutiny in part because of the expense incurred by defendants in discovery. A report the group co-sponsored this year found that the discovery cost in 20 cases involving “major” companies averaged $621,880 in 2008, up from $488,847 for 15 cases in 2004.
Some U.S. lawmakers are seeking a return to the old, less restrictive standard. Pennsylvania Senator Arlen Specter’s bill, S. 1504, specifically mentions Conley. New York Representative Jerrold Nadler’s, H.R. 4115, refers to the “no set of facts” standard. Both Democrats’ bills are in committee.
Dollar General
In August 2009, U.S. District Judge Norman K. Moon in Lynchburg, Virginia, threw out a complaint brought by Holly Branham for injuries she allegedly sustained after slipping on liquid in a Dollar General Corp. store in Amherst, Virginia, while shopping for clothespins. Branham sought $300,000.
Citing Twombly and Iqbal, Moon said Branham “failed to allege any facts that show how the liquid came to be on the floor, whether the defendant knew or should have known of the presence of the liquid or how the plaintiff’s accident occurred.”
The judge let Branham amend the complaint to add the fact that an assistant manager had just mopped the floor. Dollar General, based in Goodlettsville, Tennessee, didn’t seek dismissal and the parties settled.
“It clearly does push forward the cost for the plaintiff side to look into a situation that might give rise to a claim, but I just have not seen that quantified,” said Richard A. Nagareda, a professor at Vanderbilt University Law School in Nashville, Tennessee, who discusses Twombly and Iqbal in an article due to be published in the DePaul Law Review next year.
Monitoring Consequences
The Advisory Committee on Civil Rules of the Judicial Conference of the U.S., the federal courts’ policy-making group, is monitoring the consequences of Twombly and Iqbal.
The effects of the decisions were debated at a May conference at Duke Law School in Durham, North Carolina, and the committee plans to present a report on the discussion to U.S. Chief Justice John Roberts before the Judicial Conference meets Sept. 14, said John Rabiej, chief of the Rules Committee Support Office.
Patricia W. Hatamyar, a professor at the St. Thomas University School of Law in Miami Gardens, Florida, analyzed a sample of federal cases and found it four times more likely for a motion to dismiss to be granted under Iqbal than under Conley.
Sample of Cases
In another sample of cases, dismissals were granted 38 percent of the time they were requested in both the four months before Twombly and the four months after Iqbal, according to an Aug. 12 report by the Administrative Office of the U.S. Courts, the support agency for the federal system.
“The case law to date does not appear to indicate that Iqbal has dramatically changed the application of the standards used to determine pleading sufficiency,” according to a July 26 Judicial Conference public memorandum.
The cases include Stenger v. Deffenbaugh Industries Inc., 09-cv-2422, U.S. District Court, District of Kansas (Kansas City); and Branham v. Dolgencorp Inc., 09-cv-00037, U.S. District Court, Western District of Virginia (Lynchburg).
To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net.
®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Two U.S. Supreme Court decisions making it tougher to pursue lawsuits may have begun to bear fruit for corporations fighting investor claims or employee litigation.
Where once it was enough to give a defendant “fair notice” of a claim and the grounds on which it rested, the high court’s 2007 holding in Bell Atlantic Corp. v. Twombly required an antitrust complaint to contain enough facts to show a claim that is “plausible on its face.” Two years later, in Ashcroft v. Iqbal, the court applied Twombly to all federal civil suits.
The Supreme court rulings mean that someone who wants to sue in federal court “should not subject a defendant to the costs and burdens of litigation when there is no plausible basis for their claims,” Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an e-mail. The Washington-based business advocacy group filed a friend-of-the- court brief in Twombly.
The rule aided financial-services companies after the February 2008 collapse of the $330 billion auction-rate securities market.
Judges cited Twombly alongside the 1995 Private Securities Litigation Reform Act, which also added hurdles to investor cases, in dismissing suits against Citigroup Inc. and Bank of America Corp.’s Merrill Lynch unit over the sale of the securities.
‘Keys to the Courthouse’
“Implausible conclusory allegations are no longer keys to the courthouse,” Scott D. Musoff, a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York and a lawyer for Merrill Lynch in the auction-rate litigation, said in an e-mail. “This is especially important in the wake of a financial crisis when people are looking for someone to blame for their losses even if they have no factual basis to support their claims.”
Musoff wouldn’t comment specifically on Merrill’s auction- rate case.
Plaintiffs’ lawyers say the justices’ new threshold unfairly closes the courthouse to their clients or increases their costs by forcing them to gather facts before suing, often before they can gain access to key information. Fred T. Isquith, a plaintiffs’ lawyer in class actions, criticized the Twombly court for trying to cut caseloads at the expense of litigants seeking redress.
“It is the most fundamental task of government to administer justice and provide judgment,” Isquith, a partner at Wolf Haldenstein Adler Freeman & Herz LLP in New York, said in an e-mail. “Dismissing cases is not the solution; the solution is more judges and more money for the court system.”
Waste Management
In tossing out James Stenger’s age-bias lawsuit against his employer, a waste management firm owned by Zurich-based Credit Suisse Group AG, U.S. District Judge Eric F. Melgren in Kansas City, Kansas, said the claim didn’t raise enough facts to cross the line “from conceivable to plausible.”
Melgren allowed Stenger, 55, a former customer-relations worker at Shawnee, Kansas-based Deffenbaugh Industries Inc., to refile his complaint with more detail. Deffenbaugh again asked the judge to dismiss. He has yet to rule.
Twombly and Iqbal supplanted the standard set by the Supreme Court in Conley v. Gibson in 1957. Under Conley, a suit could be dismissed if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief.”
Federal civil cases typically proceed from the complaint to the motion to dismiss, followed by an evidence-gathering stage known as discovery, then summary judgment if there are no facts in dispute that would require a trial to resolve.
Earlier Disposal
Twombly and Iqbal are part of a trend to dispose of suits earlier in the process, said Arthur R. Miller, a professor at New York University School of Law. In 1986, the Supreme Court made it easier to decide a lawsuit between discovery and trial.
“Twombly-Iqbal now moves it to the motion to dismiss based on a single document, the complaint, with no opportunity for discovery,” said Miller, who is also special counsel to New York-based law firm Milberg LLP, which represents plaintiffs in securities litigation. “It’s becoming a big battle.”
The Chamber of Commerce says suits deserve more scrutiny in part because of the expense incurred by defendants in discovery. A report the group co-sponsored this year found that the discovery cost in 20 cases involving “major” companies averaged $621,880 in 2008, up from $488,847 for 15 cases in 2004.
Some U.S. lawmakers are seeking a return to the old, less restrictive standard. Pennsylvania Senator Arlen Specter’s bill, S. 1504, specifically mentions Conley. New York Representative Jerrold Nadler’s, H.R. 4115, refers to the “no set of facts” standard. Both Democrats’ bills are in committee.
Dollar General
In August 2009, U.S. District Judge Norman K. Moon in Lynchburg, Virginia, threw out a complaint brought by Holly Branham for injuries she allegedly sustained after slipping on liquid in a Dollar General Corp. store in Amherst, Virginia, while shopping for clothespins. Branham sought $300,000.
Citing Twombly and Iqbal, Moon said Branham “failed to allege any facts that show how the liquid came to be on the floor, whether the defendant knew or should have known of the presence of the liquid or how the plaintiff’s accident occurred.”
The judge let Branham amend the complaint to add the fact that an assistant manager had just mopped the floor. Dollar General, based in Goodlettsville, Tennessee, didn’t seek dismissal and the parties settled.
“It clearly does push forward the cost for the plaintiff side to look into a situation that might give rise to a claim, but I just have not seen that quantified,” said Richard A. Nagareda, a professor at Vanderbilt University Law School in Nashville, Tennessee, who discusses Twombly and Iqbal in an article due to be published in the DePaul Law Review next year.
Monitoring Consequences
The Advisory Committee on Civil Rules of the Judicial Conference of the U.S., the federal courts’ policy-making group, is monitoring the consequences of Twombly and Iqbal.
The effects of the decisions were debated at a May conference at Duke Law School in Durham, North Carolina, and the committee plans to present a report on the discussion to U.S. Chief Justice John Roberts before the Judicial Conference meets Sept. 14, said John Rabiej, chief of the Rules Committee Support Office.
Patricia W. Hatamyar, a professor at the St. Thomas University School of Law in Miami Gardens, Florida, analyzed a sample of federal cases and found it four times more likely for a motion to dismiss to be granted under Iqbal than under Conley.
Sample of Cases
In another sample of cases, dismissals were granted 38 percent of the time they were requested in both the four months before Twombly and the four months after Iqbal, according to an Aug. 12 report by the Administrative Office of the U.S. Courts, the support agency for the federal system.
“The case law to date does not appear to indicate that Iqbal has dramatically changed the application of the standards used to determine pleading sufficiency,” according to a July 26 Judicial Conference public memorandum.
The cases include Stenger v. Deffenbaugh Industries Inc., 09-cv-2422, U.S. District Court, District of Kansas (Kansas City); and Branham v. Dolgencorp Inc., 09-cv-00037, U.S. District Court, Western District of Virginia (Lynchburg).
To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net.
®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, September 01, 2010
August Deal Activity
August’s unseasonable burst of dealmaking — the busiest in over a decade — could herald a wider rebound in M&A for the remainder of the year as low interest rates, record cash piles and low stock-market values encourage chief executives to strike deals, Reuters writes.
Previously deal-starved bankers and lawyers canceled holiday plans and worked through vacations in August, as companies had the gusto to launch hostile bids or fight over target companies.
Announced deals and offers during the typically slow month of August surged to $262 billion worldwide, according to Thomson Reuters data.
It is the highest value of deals and offers announced during an August since 1999 when the value reached $275 billion. Still, by number of deals, it ranks lower than last August.
The nascent mergers and acquisitions rebound, already spanning various sectors and countries, could pick up further when the traditional busy period starts, after the U.S. Labor Day holiday and the United Kingdom’s August bank holiday, bankers predict.
“What you have seen in August, that took people by surprise, is that there are some CEOs that have the confidence to pull the trigger and embark on a hostile transaction, or jump an agreed transaction,” said Chris Young, head of takeover defense at Credit Suisse in New York. “It is a bullish sign for the rest of the year.”
Go to Article from Reuters via The New York Times »
Previously deal-starved bankers and lawyers canceled holiday plans and worked through vacations in August, as companies had the gusto to launch hostile bids or fight over target companies.
Announced deals and offers during the typically slow month of August surged to $262 billion worldwide, according to Thomson Reuters data.
It is the highest value of deals and offers announced during an August since 1999 when the value reached $275 billion. Still, by number of deals, it ranks lower than last August.
The nascent mergers and acquisitions rebound, already spanning various sectors and countries, could pick up further when the traditional busy period starts, after the U.S. Labor Day holiday and the United Kingdom’s August bank holiday, bankers predict.
“What you have seen in August, that took people by surprise, is that there are some CEOs that have the confidence to pull the trigger and embark on a hostile transaction, or jump an agreed transaction,” said Chris Young, head of takeover defense at Credit Suisse in New York. “It is a bullish sign for the rest of the year.”
Go to Article from Reuters via The New York Times »
Monday, August 30, 2010
As I.P.O.’s Stall, M.&A. Thrives
Languishing stock prices have put a brake on companies’ bids to tap public markets for new capital, while sparking a whirlwind of mergers and acquisitions from firms rushing to take advantage of cheap valuations, Reuters reported.
A number of United States companies have delayed their plans for an initial public offering after recent issues suffered in a weak stock market and forced a steep I.P.O. discount, bankers said, adding that more companies are engaging in a dual-track I.P.O. and M.&A. process.
The prospect of a continued fragile economy and choppy stock market conditions is making I.P.O.’s a less attractive way to raise capital, and more companies are considering a sale instead, bankers said.
“If the I.P.O. market is choppy, that gives a leg up to M&A and more of those (deals) may end up converting to M&A opportunities,” said Richard Truesdell, co-head of the global capital markets group at law firm Davis Polk & Wardwell.
Go to Article from Reuters »
A number of United States companies have delayed their plans for an initial public offering after recent issues suffered in a weak stock market and forced a steep I.P.O. discount, bankers said, adding that more companies are engaging in a dual-track I.P.O. and M.&A. process.
The prospect of a continued fragile economy and choppy stock market conditions is making I.P.O.’s a less attractive way to raise capital, and more companies are considering a sale instead, bankers said.
“If the I.P.O. market is choppy, that gives a leg up to M&A and more of those (deals) may end up converting to M&A opportunities,” said Richard Truesdell, co-head of the global capital markets group at law firm Davis Polk & Wardwell.
Go to Article from Reuters »
Friday, August 27, 2010
For Big Firms, It’s Been Light in August
A wave of deals in what is typically a sleepy summer month is keeping bankers and analysts very busy. Yet the giants in M.&A. advisory work have seen their shares of the market slump in August, according to Thomson Reuters data.
Goldman Sachs, at the top of the league table for August with 27 global deals worth $97.7 billion, has had a decline of 6.9 percent in the dollar value of deals for the month, compared with the month a year ago, Thomson Reuters says. That came even amid a 28 percent increase in the number of deals on which Goldman advised.
Morgan Stanley — the second-leading adviser in August — has had a 17 percent drop-off from a year ago. JPMorgan Chase saw a decline of 2.2 percent, while Citigroup experienced a 16.9 percent fall .
Among the top banks, only Barclays Capital has enjoyed a pickup in deal activity, with a 3.3 percent gain from August 2009, enabling it to move up to seventh place in the league table for the month from 12th a year ago.
More but smaller deals, of course, mean more, but smaller fees for the investment banks. And the bulk of the advisory fees are typically not paid until the transaction closes, many months from now.
At that point, August will be just a fading summer memory.
Go to Related DealBook Column by Andrew Ross Sorkin »Go to Related Article from DealBook
Goldman Sachs, at the top of the league table for August with 27 global deals worth $97.7 billion, has had a decline of 6.9 percent in the dollar value of deals for the month, compared with the month a year ago, Thomson Reuters says. That came even amid a 28 percent increase in the number of deals on which Goldman advised.
Morgan Stanley — the second-leading adviser in August — has had a 17 percent drop-off from a year ago. JPMorgan Chase saw a decline of 2.2 percent, while Citigroup experienced a 16.9 percent fall .
Among the top banks, only Barclays Capital has enjoyed a pickup in deal activity, with a 3.3 percent gain from August 2009, enabling it to move up to seventh place in the league table for the month from 12th a year ago.
More but smaller deals, of course, mean more, but smaller fees for the investment banks. And the bulk of the advisory fees are typically not paid until the transaction closes, many months from now.
At that point, August will be just a fading summer memory.
Go to Related DealBook Column by Andrew Ross Sorkin »Go to Related Article from DealBook
Wednesday, August 25, 2010
Pension Funds Drawing Up List of Targets
Shareholders may soon get more power to shake up corporate boardrooms in the United States after the financial crisis exposed glaring weaknesses in how companies were managed, Reuters reports.
The Securities and Exchange Commission will meet at 10:00 a.m. eastern time on Wednesday to decide whether to adopt a rule that would give shareholders an easier way to nominate corporate board directors.
Giving shareholders the ability to place their director nominees on the corporate proxy statement has long been sought by big activist shareholders who want more say on how their companies are run.
Awaiting those new regulations, big activist pension funds are gearing up to compile a short-list of target companies in the next month, The Financial Times reported.
The move is part of a drive to shake up underperformers and will likely see the list come together after the September meeting of the Council of Institutional Investors –- a group whose pension funds have total assets of more than $3 trillion.
The proposal that would give shareholders the ability to seat their own nominees at the board of directors’ table is expected to be approved by the Securities and Exchange Commission on Wednesday.
Go to Article from Reuters via The New York Times »Go to Article from The Financial Times (Subscription Required) »Go to Article from The New York Post »
The Securities and Exchange Commission will meet at 10:00 a.m. eastern time on Wednesday to decide whether to adopt a rule that would give shareholders an easier way to nominate corporate board directors.
Giving shareholders the ability to place their director nominees on the corporate proxy statement has long been sought by big activist shareholders who want more say on how their companies are run.
Awaiting those new regulations, big activist pension funds are gearing up to compile a short-list of target companies in the next month, The Financial Times reported.
The move is part of a drive to shake up underperformers and will likely see the list come together after the September meeting of the Council of Institutional Investors –- a group whose pension funds have total assets of more than $3 trillion.
The proposal that would give shareholders the ability to seat their own nominees at the board of directors’ table is expected to be approved by the Securities and Exchange Commission on Wednesday.
Go to Article from Reuters via The New York Times »Go to Article from The Financial Times (Subscription Required) »Go to Article from The New York Post »
Tuesday, August 24, 2010
Are Mergers Back? Well, Sort Of
While this August has seen an unexpected resurgence in deals — huge deals — the banking business still hasn’t made up its mind where the trend is going, The New York Times’s Andrew Ross Sorkin writes in his latest DealBook column.
There are plenty of reasons to think that this boom can’t be sustained without a matching lift in consumer spending, but still, people are working through the night in Manhattan, their hands trembling as they tweak their final calculations over an 11th can of Red Bull.
What’s behind it? Companies chasing synergies, or locking in natural resources, or using up spare cash, Mr. Sorkin writes. But more importantly: how long can it last?
Read the column here.
There are plenty of reasons to think that this boom can’t be sustained without a matching lift in consumer spending, but still, people are working through the night in Manhattan, their hands trembling as they tweak their final calculations over an 11th can of Red Bull.
What’s behind it? Companies chasing synergies, or locking in natural resources, or using up spare cash, Mr. Sorkin writes. But more importantly: how long can it last?
Read the column here.
Wednesday, August 04, 2010
The M&A Recession: A Recovery Is Still a Ways Away
By Stephen Grocer, WSJ DealJournal, August 4, 2010:
Let us know if we have asked this before, but is the M&A market in for a recovery in second half?
A rash of deals in the last two weeks of July pushed the month’s global announced deal volume to $224.6 billion–the highest monthly total this year. As such, the data sparked a bit of optimism about the prospects for deal making for the second half.
Overall, global M&A is up 13% this year, and deal making last month was higher in every region. After two years of falling deal volume, that is welcome news to M&A professionals.
Yet hopes for a M&A recovery have been dashed before. M&A activity jumped in the fourth quarter last year. But the recovery proved fragile. What was the first half’s biggest transaction–Prudential PLC’s purchase of AIA–fell apart. Europe’s debt crisis put a frost on deal making as worries that the global economic recovery would falter grew.
While concerns about Europe have retreated somewhat thanks to the stress tests on the Continent’s banks, handwringing about the strength of any economic recovery hasn’t. A host of economic data this week has suggested that the recovery is weaker than previously forecast. On top of that, a number of well-known investors are preparing for a period of falling prices.
Also, a closer look at the M&A data provides a less-than-overwhelming picture that a robust recovery is around the corner. For example, two of the biggest deals–BP’s sale of oil and gas fields to Apache for $7 billion and Caja Madrid’s acquisition of Bancaja–were driven more by the distress of the seller was by the confidence of the buyer. And U.S. M&A activity remains sluggish, down 5% from the same period last year.
As Deal Journal has said before, until companies gain more confidence in prospects for the global economic recovery, M&A is likely to remain muted. July didn’t dissuade deal watchers of this view.
Let us know if we have asked this before, but is the M&A market in for a recovery in second half?
A rash of deals in the last two weeks of July pushed the month’s global announced deal volume to $224.6 billion–the highest monthly total this year. As such, the data sparked a bit of optimism about the prospects for deal making for the second half.
Overall, global M&A is up 13% this year, and deal making last month was higher in every region. After two years of falling deal volume, that is welcome news to M&A professionals.
Yet hopes for a M&A recovery have been dashed before. M&A activity jumped in the fourth quarter last year. But the recovery proved fragile. What was the first half’s biggest transaction–Prudential PLC’s purchase of AIA–fell apart. Europe’s debt crisis put a frost on deal making as worries that the global economic recovery would falter grew.
While concerns about Europe have retreated somewhat thanks to the stress tests on the Continent’s banks, handwringing about the strength of any economic recovery hasn’t. A host of economic data this week has suggested that the recovery is weaker than previously forecast. On top of that, a number of well-known investors are preparing for a period of falling prices.
Also, a closer look at the M&A data provides a less-than-overwhelming picture that a robust recovery is around the corner. For example, two of the biggest deals–BP’s sale of oil and gas fields to Apache for $7 billion and Caja Madrid’s acquisition of Bancaja–were driven more by the distress of the seller was by the confidence of the buyer. And U.S. M&A activity remains sluggish, down 5% from the same period last year.
As Deal Journal has said before, until companies gain more confidence in prospects for the global economic recovery, M&A is likely to remain muted. July didn’t dissuade deal watchers of this view.
Monday, July 26, 2010
New Report Asks: ‘Private Equity, Public Loss?’
NYT DealBook blog, Monday, July 26, 2010:
Just what’s going on with private equity? Activity in the industry is on the rise, so a fresh report on the industry is timely.
Enter Peter Morris’s “Private Equity, Public Loss?”, a report written for the Center for the Study of Financial Innovation, which highlights the basic misapprehensions that Mr. Morris believes many hold of the industry.
In the report, Mr. Morris says many investors are mislead to believe “interests are aligned,” a belief belied by a reality that is more complex.
The report’s chief points are these:
Realised returns are lower than advertised, even for top-quartile managers.
The quality is also lower: excluding high debt levels and general stock market performance, managerial skill accounts for only a fraction of the total return.
This calls into question fee structures, which may remove all the gains attributable toskill.
Conflicts of interest between investors and managers remain real and substantial.
Investors’ apparent failure to question the level and make-up of returns, and fees, raises questions about their collective status as “sophisticated investors”.
Perverse incentives in private equity may distort wider markets.
At the very least, private equity firms’ results should be measured more rigorouslyand made more transparent.
Go to Related Article from The Financial Times (Subscription Required) »
Go to C.S.F.I. Web site »
Just what’s going on with private equity? Activity in the industry is on the rise, so a fresh report on the industry is timely.
Enter Peter Morris’s “Private Equity, Public Loss?”, a report written for the Center for the Study of Financial Innovation, which highlights the basic misapprehensions that Mr. Morris believes many hold of the industry.
In the report, Mr. Morris says many investors are mislead to believe “interests are aligned,” a belief belied by a reality that is more complex.
The report’s chief points are these:
Realised returns are lower than advertised, even for top-quartile managers.
The quality is also lower: excluding high debt levels and general stock market performance, managerial skill accounts for only a fraction of the total return.
This calls into question fee structures, which may remove all the gains attributable toskill.
Conflicts of interest between investors and managers remain real and substantial.
Investors’ apparent failure to question the level and make-up of returns, and fees, raises questions about their collective status as “sophisticated investors”.
Perverse incentives in private equity may distort wider markets.
At the very least, private equity firms’ results should be measured more rigorouslyand made more transparent.
Go to Related Article from The Financial Times (Subscription Required) »
Go to C.S.F.I. Web site »
Wednesday, July 07, 2010
Private Equity Rides Again
NYT DealBook, Jul 07, 2010:
With an increase in secondary buyouts and a stock market more friendly toward initial public offerings, the private equity industry seems headed for something of a revival after grinding to near a stand-still during the financial crisis, The Deal Magazine writes.
As the New York Times noted in an article last month, among private equity players, competition for buyout targets has heated up and while prices are rising, from a historical standpoint, they remain attractive. Prices are well below the stratospheric levels of 2007 and 2008, according to Capital IQ.
Coupled with loosening up of credit, the industry is enjoying resuscitated dealmaking and profit taking, according to The Deal. Domestic leveraged buyout activity, which had dropped as low as $10.4 billion in the first half of 2009, passed $37 billion through June, the publication noted.
Yet, despite some pretty strong signs of recovery, private equity may not be headed to a 2007 redux, The Deal writes:
…the fact that the bidders managed to line up $10 billion in debt financing from various banks was a clear demonstration of the astonishing financial firepower that sponsors once again were able to marshal for the right deal. The debt harked back to the boom times, when $10 billion-plus LBOs proliferated. Could another era of supersized buyouts be in the offing?
The answer, all experts we spoke to agree, is no, because banks by and large remain constrained in what they can and will lend to buyouts. Nevertheless, the return of a semblance of normalcy to the business is heartening to many industry players.
Go to Article from The Deal »
With an increase in secondary buyouts and a stock market more friendly toward initial public offerings, the private equity industry seems headed for something of a revival after grinding to near a stand-still during the financial crisis, The Deal Magazine writes.
As the New York Times noted in an article last month, among private equity players, competition for buyout targets has heated up and while prices are rising, from a historical standpoint, they remain attractive. Prices are well below the stratospheric levels of 2007 and 2008, according to Capital IQ.
Coupled with loosening up of credit, the industry is enjoying resuscitated dealmaking and profit taking, according to The Deal. Domestic leveraged buyout activity, which had dropped as low as $10.4 billion in the first half of 2009, passed $37 billion through June, the publication noted.
Yet, despite some pretty strong signs of recovery, private equity may not be headed to a 2007 redux, The Deal writes:
…the fact that the bidders managed to line up $10 billion in debt financing from various banks was a clear demonstration of the astonishing financial firepower that sponsors once again were able to marshal for the right deal. The debt harked back to the boom times, when $10 billion-plus LBOs proliferated. Could another era of supersized buyouts be in the offing?
The answer, all experts we spoke to agree, is no, because banks by and large remain constrained in what they can and will lend to buyouts. Nevertheless, the return of a semblance of normalcy to the business is heartening to many industry players.
Go to Article from The Deal »
Friday, July 02, 2010
Venture-Backed I.P.O.s Show Rebound as M&A Slips
From NYT DealBook, July 2, 2010:
Venture-backed initial public offerings are the highest since before the financial crisis, even as venture-backed M&A activity is slipping, according to a survey by Thomson Reuters and the National Venture Capital Association.
I.P.O.s have always been a key exit strategy for venture capital funds, a path that was essentially closed off by the moribund stock market in much of 2008 and early 2009, Reuters reported.
The number of venture-backed I.P.O.s in the second quarter is the highest it has been since the fourth quarter of 2007, according to the survey. There were 17 venture-backed I.P.O.s worth $1.3 billion in the second quarter, which was the third consecutive quarterly increase in volume and the second in dollar amount.
Electric carmaker Tesla Motors, which raised $226 million, was the largest deal of the quarter and rose more than 40 percent in its debut.
But there are still signs of uncertainty. Only five of the 17 I.P.O.s in the second quarter were trading at or above their I.P.O. prices at the close of markets on Wednesday and the deal flow is still far below historic highs. There were 86 venture- backed I.P.O.s worth $10.33 billion in the fourth quarter of 2007, the most recent peak in the venture-backed I.P.O. market.
Go to Article from Reuters »
Venture-backed initial public offerings are the highest since before the financial crisis, even as venture-backed M&A activity is slipping, according to a survey by Thomson Reuters and the National Venture Capital Association.
I.P.O.s have always been a key exit strategy for venture capital funds, a path that was essentially closed off by the moribund stock market in much of 2008 and early 2009, Reuters reported.
The number of venture-backed I.P.O.s in the second quarter is the highest it has been since the fourth quarter of 2007, according to the survey. There were 17 venture-backed I.P.O.s worth $1.3 billion in the second quarter, which was the third consecutive quarterly increase in volume and the second in dollar amount.
Electric carmaker Tesla Motors, which raised $226 million, was the largest deal of the quarter and rose more than 40 percent in its debut.
But there are still signs of uncertainty. Only five of the 17 I.P.O.s in the second quarter were trading at or above their I.P.O. prices at the close of markets on Wednesday and the deal flow is still far below historic highs. There were 86 venture- backed I.P.O.s worth $10.33 billion in the fourth quarter of 2007, the most recent peak in the venture-backed I.P.O. market.
Go to Article from Reuters »
Thursday, July 01, 2010
The Double Dip M&A Recession
By Michael Corkery, WSJ DealJournal, June 30, 2010:
Coming on a turbulent week like this, the title of the Boston Consulting Group’s latest report seems a tad optimistic: “Accelerating out of the Great Recession: Seize Opportunities in M&A” reads the headline of the report released today.
In reality, deal activity appears to be doing anything but accelerating. If anything, it appears to be scraping along the bottom. U.S. announced deal volume is down 13% in the first six months of the year from the same period last year, according to Dealogic date released today. In Europe, deal volume is down 5%.
The numbers are even more depressing considering the year-over-year comparison stretches back to a period in 2009 when economy was reeling from the worst financial crisis since the Great Depression.
Still, BCG is optimistic that the conditions for a recovery are in place. Among them: Stable capital and debt markets (despite European problems), and an expanding global economy (though the Chinese juggernaut shows signs of slowing).
The folks at BCG aren’t alone in their optimism, though. The Organization for Economic Cooperation and Development declares in a report today that “International Investment Free Fall Comes to an End.”
OECD concludes that international M&A activity is on track to match last year’s totals:
International M&A investment in 2010 totals $300 billion, putting it on track to reach 2009 levels, ending a two year streak of steep declines in 2008 (down 21% from the previous year and 2009 (down 53%). This “could signal that the bottom on the cycle has been reached,’’ the OCED report concludes.
It was only a year ago that bankers and consultants were making similar optimistic pronouncements amid last summer’s M&A doldrums. But after a short uptick in the fourth quarter–thanks to big deals like Kraft Foods’s acquisition of Cadbury– the bulls turned out to be wrong.
There may be some debate whether the global economy is headed for a double dip recession. The picture seems much clearer in the M&A world. By most measures, it appears that M&A is mired in the second dip of a double dip hiatus.
Coming on a turbulent week like this, the title of the Boston Consulting Group’s latest report seems a tad optimistic: “Accelerating out of the Great Recession: Seize Opportunities in M&A” reads the headline of the report released today.
In reality, deal activity appears to be doing anything but accelerating. If anything, it appears to be scraping along the bottom. U.S. announced deal volume is down 13% in the first six months of the year from the same period last year, according to Dealogic date released today. In Europe, deal volume is down 5%.
The numbers are even more depressing considering the year-over-year comparison stretches back to a period in 2009 when economy was reeling from the worst financial crisis since the Great Depression.
Still, BCG is optimistic that the conditions for a recovery are in place. Among them: Stable capital and debt markets (despite European problems), and an expanding global economy (though the Chinese juggernaut shows signs of slowing).
The folks at BCG aren’t alone in their optimism, though. The Organization for Economic Cooperation and Development declares in a report today that “International Investment Free Fall Comes to an End.”
OECD concludes that international M&A activity is on track to match last year’s totals:
International M&A investment in 2010 totals $300 billion, putting it on track to reach 2009 levels, ending a two year streak of steep declines in 2008 (down 21% from the previous year and 2009 (down 53%). This “could signal that the bottom on the cycle has been reached,’’ the OCED report concludes.
It was only a year ago that bankers and consultants were making similar optimistic pronouncements amid last summer’s M&A doldrums. But after a short uptick in the fourth quarter–thanks to big deals like Kraft Foods’s acquisition of Cadbury– the bulls turned out to be wrong.
There may be some debate whether the global economy is headed for a double dip recession. The picture seems much clearer in the M&A world. By most measures, it appears that M&A is mired in the second dip of a double dip hiatus.
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) »
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: http://www.piperjaffray.com/private/pdf/MarketUpdate_Q2_2010.pdf
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: http://www.piperjaffray.com/private/pdf/MarketUpdate_Q2_2010.pdf
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: http://www.nytimes.com/2010/06/24/business/24private.html?th&emc=th
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: http://www.nytimes.com/2010/06/24/business/24private.html?th&emc=th
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
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 Theflyonthewall.com from issuing immediate news on analyst research from several Wall Street banks, Reuters reported, citing court documents.
Theflyonthewall.com 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 Theflyonthewall.com 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 Theflyonthewall.com’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 »
Theflyonthewall.com 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 Theflyonthewall.com 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 Theflyonthewall.com’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 »
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 »
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 »
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