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 »

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

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 »

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.

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.