October 13, 2009, 2:57 am — Updated: 3:57 am -->
Several U.S. companies have awarded stock options to top executives while engaged in merger negotiations, The Wall Street Journal said, citing an academic research paper and its own review of company filings.
The practice of awarding options, though legal, has resulted in the target company’s executives reaping a bigger payout when the deal is closed, the paper said.
The paper said its survey of company filings found stock options had been awarded to executives in a half dozen large mergers since 2007, including Adobe Systems‘ deal to buy Web analytics firm Omniture and Walt Disney’s purchase of Marvel Entertainment.
Marvel and Omniture could not be immediately reached for comment by Reuters outside regular U.S. business hours.
Go to Article from The Wall Street Journal »
Go to Article from Reuters via The New York Times »
Tuesday, October 13, 2009
Monday, October 05, 2009
M&A Is Back! Well, Almost. Maybe
From: WSJ October 01, 2009:
By JEFFREY MCCRACKEN and DANA CIMILLUCA
Bankers and lawyers feared the third quarter would be a rough period for mergers and acquisitions. There was economic uncertainty, limited deal financing and little corporate confidence to make acquisitions.
They were right to worry.
But after a two-year decline in activity, a late spate of big-name mergers gave them hope that the deal-making drought was nearing an end.
The evidence isn't in the numbers. The dollar volume of deals world-wide fell 41% from last year's third quarter to $478.3 billion, while the 8,124 deals represented a 20% drop, according to data provider Dealogic. Compared with this year's second quarter, dollar volume slid 19% and the number of deals was off 6%.
The third quarter was the slowest period as measured by dollar value since the third quarter of 2004.
In the U.S., announced deal volume tumbled 61% to $103.9 billion from $270.2 billion a year earlier, according to Dealogic. The number of announced deals fell 30% to 1,594 deals from 2,282. It was the eighth consecutive quarter that the value of U.S. deals fell from a year-earlier period, and it was down 43% from the second quarter.In Europe, the trends mirrored the global trajectory, with the dollar volume of deals falling both year over year and quarter over quarter. There were $160 billion of acquisitions of European companies announced in the third quarter, down 17% from the second quarter and down 55% from a year earlier, according to Dealogic
The Asian-Pacific region was a relative bright spot. Excluding Japan, there were $105 billion of deals announced in the quarter, down 36% from the second quarter but up 30% from a year earlier. China's thirst for natural-resource assets kept bankers in Asia busy, on deals including Yanzhou Coal Mining Co.'s $2.76 billion deal for Australian coal miner Felix Resources Ltd.
In Japan, which Dealogic breaks out because the investment banks look at the country as if it were its own region, the dollar volume of deals was $43.4 billion, up from both the second quarter and the year-earlier period. Besides financial firms, consumer companies were among the most-active Japanese deal makers. Highlighting the trend, beverage company Suntory Holdings Ltd. agreed to pay $3.82 billion for Orangina Schweppes, the French soft-drink maker, while at the same time holding talks with Kirin Holdings Co. for a deal that would create a food and beverage giant with combined sales of $40 billion.
But unlike in recent quarters, deal makers seem more willing to declare that M&A activity is back. The standard banker line that "deals are in the pipeline" is becoming more common.
"I think we hit a bottom over the summer. Since about the third week of August, we noticed a pickup in activity," said Bruce Evans, head of M&A for the Americas at Deutsche Bank AG. "A lot is driven by companies having a view of the future....It is no longer just about fixing their balance sheets."
Kraft Foods Inc.'s proposal to acquire Cadbury PLC was the largest announced deal of the period, though Cadbury rejected the $16.66 billion bid and it is likely to be weeks before Kraft submits a formal offer. Other big deals included Abbott Laboratories' $7.05 billion purchase of a Belgian pharmaceutical business, Dell Inc.'s $3.88 billion acquisition of Perot Systems Corp. and Walt Disney Co.'s $3.92 billion deal to buy Marvel Entertainment Inc.
"With general sentiment improving, together with equity and financing markets, companies are pushing forward with deals they've been thinking about all year but were reluctant to proceed with until now," said Adrian Mee, head of European M&A at Nomura Holdings Inc. in London.
Such deals still were few and far between. Year to date, U.S. M&A volume is down 34% to $505.4 billion from $759.8 billion a year earlier.
One sector that has more than held its own is health care, which has accounted for 32% of U.S. deal volume this year, up from 16% a year earlier.
"Health care was resilient because it's not affected by the economy the way a retailer or an industrial company is," said Jeffrey Stute, co-head of North American M&A at J.P. Morgan Chase & Co. "In addition, most health-care deals were not driven by [debt financing]. So financing drying up was not as much of an issue."
Mr. Stute and other bankers said a true M&A comeback will take hold when companies in other segments, such as technology, oil and gas, and consumer products, jump into the fray.
"Every segment has some pent-up demand, especially in industrials and technology. Behind the scenes, we are seeing lots of work getting done across all sectors," said Paul Parker, head of global M&A at Barclays PLC's Barclays Capital. "As we see [gross domestic product] growth turn up, I can guarantee you will see M&A turn. Each sector will have a signature transaction and then others will respond."
Bankers in Europe also express optimism that the worst is over. Still, few predict an imminent return to the deal frenzy of before the financial crisis, and many cite the possibility that the incipient recovery could be dashed by a double-dip recession.
"I'm personally optimistic that the rebound is here to stay, but there is an acute awareness that a W-shaped recovery could be around the corner," said Carlo Calabria, head of International M&A and Financial Sponsors at Bank of America Merrill Lynch in London.
In recent weeks, a number of long-lingering European deals were announced, such as the €1.28 billion ($1.88 billion) sale of Sara Lee Corp.'s European personal-care business to Unilever, announced Sept. 25. Sara Lee put the business up for sale more than six months ago, an unusually long period for an auction. Likewise, Belgian conglomerate Solvay SA found a buyer for its pharmaceutical division six months after officially putting it up for sale, selling the division for €4.8 billion to Abbott.
Even if the M&A recovery endures, some bankers predict it will be more restrained than what followed the bursting of the technology and telecommunications bubble in 2000. Takeovers also may be more focused on cost savings than growth, a sign of conservatism among deal makers.
"If one assumes that consumer growth will be muted for the foreseeable future," said Wilhelm Schulz, the head of European M&A at Citigroup Inc., "there is an argument that future deal activity may be more focused on driving economies of scale in the core business."
In the rankings of global merger advisers, Goldman Sachs Group Inc. maintained a slight edge on Morgan Stanley. J.P. Morgan was third, followed by Citigroup and Bank of America Corp.'s Bank of America Merrill Lynch. In the U.S., the top spots were flipped, with Morgan Stanley in first, followed by Goldman and J.P. Morgan.
By JEFFREY MCCRACKEN and DANA CIMILLUCA
Bankers and lawyers feared the third quarter would be a rough period for mergers and acquisitions. There was economic uncertainty, limited deal financing and little corporate confidence to make acquisitions.
They were right to worry.
But after a two-year decline in activity, a late spate of big-name mergers gave them hope that the deal-making drought was nearing an end.
The evidence isn't in the numbers. The dollar volume of deals world-wide fell 41% from last year's third quarter to $478.3 billion, while the 8,124 deals represented a 20% drop, according to data provider Dealogic. Compared with this year's second quarter, dollar volume slid 19% and the number of deals was off 6%.
The third quarter was the slowest period as measured by dollar value since the third quarter of 2004.
In the U.S., announced deal volume tumbled 61% to $103.9 billion from $270.2 billion a year earlier, according to Dealogic. The number of announced deals fell 30% to 1,594 deals from 2,282. It was the eighth consecutive quarter that the value of U.S. deals fell from a year-earlier period, and it was down 43% from the second quarter.In Europe, the trends mirrored the global trajectory, with the dollar volume of deals falling both year over year and quarter over quarter. There were $160 billion of acquisitions of European companies announced in the third quarter, down 17% from the second quarter and down 55% from a year earlier, according to Dealogic
The Asian-Pacific region was a relative bright spot. Excluding Japan, there were $105 billion of deals announced in the quarter, down 36% from the second quarter but up 30% from a year earlier. China's thirst for natural-resource assets kept bankers in Asia busy, on deals including Yanzhou Coal Mining Co.'s $2.76 billion deal for Australian coal miner Felix Resources Ltd.
In Japan, which Dealogic breaks out because the investment banks look at the country as if it were its own region, the dollar volume of deals was $43.4 billion, up from both the second quarter and the year-earlier period. Besides financial firms, consumer companies were among the most-active Japanese deal makers. Highlighting the trend, beverage company Suntory Holdings Ltd. agreed to pay $3.82 billion for Orangina Schweppes, the French soft-drink maker, while at the same time holding talks with Kirin Holdings Co. for a deal that would create a food and beverage giant with combined sales of $40 billion.
But unlike in recent quarters, deal makers seem more willing to declare that M&A activity is back. The standard banker line that "deals are in the pipeline" is becoming more common.
"I think we hit a bottom over the summer. Since about the third week of August, we noticed a pickup in activity," said Bruce Evans, head of M&A for the Americas at Deutsche Bank AG. "A lot is driven by companies having a view of the future....It is no longer just about fixing their balance sheets."
Kraft Foods Inc.'s proposal to acquire Cadbury PLC was the largest announced deal of the period, though Cadbury rejected the $16.66 billion bid and it is likely to be weeks before Kraft submits a formal offer. Other big deals included Abbott Laboratories' $7.05 billion purchase of a Belgian pharmaceutical business, Dell Inc.'s $3.88 billion acquisition of Perot Systems Corp. and Walt Disney Co.'s $3.92 billion deal to buy Marvel Entertainment Inc.
"With general sentiment improving, together with equity and financing markets, companies are pushing forward with deals they've been thinking about all year but were reluctant to proceed with until now," said Adrian Mee, head of European M&A at Nomura Holdings Inc. in London.
Such deals still were few and far between. Year to date, U.S. M&A volume is down 34% to $505.4 billion from $759.8 billion a year earlier.
One sector that has more than held its own is health care, which has accounted for 32% of U.S. deal volume this year, up from 16% a year earlier.
"Health care was resilient because it's not affected by the economy the way a retailer or an industrial company is," said Jeffrey Stute, co-head of North American M&A at J.P. Morgan Chase & Co. "In addition, most health-care deals were not driven by [debt financing]. So financing drying up was not as much of an issue."
Mr. Stute and other bankers said a true M&A comeback will take hold when companies in other segments, such as technology, oil and gas, and consumer products, jump into the fray.
"Every segment has some pent-up demand, especially in industrials and technology. Behind the scenes, we are seeing lots of work getting done across all sectors," said Paul Parker, head of global M&A at Barclays PLC's Barclays Capital. "As we see [gross domestic product] growth turn up, I can guarantee you will see M&A turn. Each sector will have a signature transaction and then others will respond."
Bankers in Europe also express optimism that the worst is over. Still, few predict an imminent return to the deal frenzy of before the financial crisis, and many cite the possibility that the incipient recovery could be dashed by a double-dip recession.
"I'm personally optimistic that the rebound is here to stay, but there is an acute awareness that a W-shaped recovery could be around the corner," said Carlo Calabria, head of International M&A and Financial Sponsors at Bank of America Merrill Lynch in London.
In recent weeks, a number of long-lingering European deals were announced, such as the €1.28 billion ($1.88 billion) sale of Sara Lee Corp.'s European personal-care business to Unilever, announced Sept. 25. Sara Lee put the business up for sale more than six months ago, an unusually long period for an auction. Likewise, Belgian conglomerate Solvay SA found a buyer for its pharmaceutical division six months after officially putting it up for sale, selling the division for €4.8 billion to Abbott.
Even if the M&A recovery endures, some bankers predict it will be more restrained than what followed the bursting of the technology and telecommunications bubble in 2000. Takeovers also may be more focused on cost savings than growth, a sign of conservatism among deal makers.
"If one assumes that consumer growth will be muted for the foreseeable future," said Wilhelm Schulz, the head of European M&A at Citigroup Inc., "there is an argument that future deal activity may be more focused on driving economies of scale in the core business."
In the rankings of global merger advisers, Goldman Sachs Group Inc. maintained a slight edge on Morgan Stanley. J.P. Morgan was third, followed by Citigroup and Bank of America Corp.'s Bank of America Merrill Lynch. In the U.S., the top spots were flipped, with Morgan Stanley in first, followed by Goldman and J.P. Morgan.
Tuesday, September 08, 2009
Signs of an Upswing in Merger Activity
From NYT DealBook, Sept. 8, 2009:
Merger mania may not be quite in full swing, but the pace of deal-making is showing signs of coming back to life after nearly a year.
Kraft Foods‘ hostile bid for Cadbury on Monday was only the latest potential blockbuster deal in recent days. In the last week, several multibillion-dollar deals have been announced, including those involving prominent companies like Walt Disney and eBay, The New York Times’s Michael J. de la Merced writes.
Yet many of the bankers and lawyers who piece these mergers together, well versed in reading economic tea leaves for signs of an industry’s health, caution that for now, deal-making is likely to rise only in fits and starts.
“The clouds have broken a little bit, and there’s a little bit of sunshine,” Douglas L. Braunstein, the head of investment banking for JPMorgan Chase, told The Times. “But it’s too early to say the storm’s over.”
Deal activity remains far below the giddy heights of only a few years ago. About $1.32 trillion worth of deals have been announced this year through Monday, according to data from Thomson Reuters. That figure is down 37 percent from the same point last year and 56 percent from 2007. (It also includes deals that have yet to close.)
In fact, until last week, August shaped up to be the slowest month for deals since 1994, according to Thomson Reuters. Now, it is just the slowest month since last November.
Still, there was hope that Merger Monday — so called because of companies’ tendencies to announce deals at the beginning of the week — seemed to be back in full force last week. Its presence had largely disappeared since the onset of the financial crisis.
Since the beginning of the year, the conditions that foster deal-making activity have largely improved. The stock markets have rallied, helping to establish a perceived floor for share prices. The broad economic recovery has inspired confidence in corporate boards that the worst is over.
Many of the announced deals through Monday, including Kraft’s offer, Disney’s $4 billion purchase of Marvel Entertainment and eBay’s sale of a majority stake in its Skype unit, also involved different types of activity, from hostile bids to corporate mergers to private equity transactions.
“We see this as the beginning of the next upturn,” Roger C. Altman, the chairman of Evercore Partners, the boutique investment bank, told The Times. He added that in his view, upturns tended to last five to seven years, while downturns, like the one that began in the second half of 2007, last on average about two to three years.
And management teams have regained confidence in pursuing targets they have eyed for some time. That has even meant hostile bids, like PepsiCo’s pursuit of its two largest North American bottlers, which the company completed last month. For many buyers, Mr. Braunstein said, the fundamental question is not whether deal-making is possible, but this: should I be doing something in this environment?
“It was just a matter of time before buyers returned,” Boon Sim, Credit Suisse’s head of mergers and acquisitions for the Americas, told The Times. “The general thinking seems to be, if you do not do something now, prices will be higher 12 to 18 months from now. So why wait?”
Just as crucial for deal-making, banks have slowly become willing to open up their wallets to finance transactions for a broad range of companies, beyond blue-chip acquirers like Pfizer and Disney. Several merger advisers pointed to the acquisition of Skype and the sale of Procter & Gamble’s prescription drugs business to Warner Chilcott as signs that bankers and other financiers were willing to back riskier deals, involving borrowed money from companies with less-than-sterling credit ratings.
Bankers and lawyers agree that the financing markets will most likely never return to the frothy heights of the credit boom in 2007, which enabled private equity firms to borrow liberally and often outbid corporate rivals. The ensuing financial fallout has left many companies with debt they are hard-pressed to pay, forcing some to seek bankruptcy protection.
But even the troubled deals of yesterday have led to opportunities for companies and private equity firms, which are snatching up targets out of Chapter 11. The number of bankruptcy-related mergers and acquisitions has risen to 241 this year through August, a 65 percent increase over the same time in 2008, according to Thomson Reuters data.
For months, the lack of financing has hurt private equity firms’ stock-in-trade of buying companies. Even now, many of these firms have been forced to borrow less to strike their deals, cutting into their returns, according to Richard E. Climan, a partner at the law firm Dewey & LeBoeuf who worked on the Skype deal.
While merger activity has risen over the last 30 years, the path back to a healthier deal-making industry is likely to be a slow one over the next several months, advisers say. What lies in store is mostly expected to be more of what has transpired this year: opportunistic purchases by corporations with healthy credit ratings, stock values and cash.
“There will be more deals next year versus this year,” Mr. Sim, of Credit Suisse, told The Times. “But I don’t think the floodgates are going to open until the fundamentals improve materially.”
Go to Article from The New York Times »
Merger mania may not be quite in full swing, but the pace of deal-making is showing signs of coming back to life after nearly a year.
Kraft Foods‘ hostile bid for Cadbury on Monday was only the latest potential blockbuster deal in recent days. In the last week, several multibillion-dollar deals have been announced, including those involving prominent companies like Walt Disney and eBay, The New York Times’s Michael J. de la Merced writes.
Yet many of the bankers and lawyers who piece these mergers together, well versed in reading economic tea leaves for signs of an industry’s health, caution that for now, deal-making is likely to rise only in fits and starts.
“The clouds have broken a little bit, and there’s a little bit of sunshine,” Douglas L. Braunstein, the head of investment banking for JPMorgan Chase, told The Times. “But it’s too early to say the storm’s over.”
Deal activity remains far below the giddy heights of only a few years ago. About $1.32 trillion worth of deals have been announced this year through Monday, according to data from Thomson Reuters. That figure is down 37 percent from the same point last year and 56 percent from 2007. (It also includes deals that have yet to close.)
In fact, until last week, August shaped up to be the slowest month for deals since 1994, according to Thomson Reuters. Now, it is just the slowest month since last November.
Still, there was hope that Merger Monday — so called because of companies’ tendencies to announce deals at the beginning of the week — seemed to be back in full force last week. Its presence had largely disappeared since the onset of the financial crisis.
Since the beginning of the year, the conditions that foster deal-making activity have largely improved. The stock markets have rallied, helping to establish a perceived floor for share prices. The broad economic recovery has inspired confidence in corporate boards that the worst is over.
Many of the announced deals through Monday, including Kraft’s offer, Disney’s $4 billion purchase of Marvel Entertainment and eBay’s sale of a majority stake in its Skype unit, also involved different types of activity, from hostile bids to corporate mergers to private equity transactions.
“We see this as the beginning of the next upturn,” Roger C. Altman, the chairman of Evercore Partners, the boutique investment bank, told The Times. He added that in his view, upturns tended to last five to seven years, while downturns, like the one that began in the second half of 2007, last on average about two to three years.
And management teams have regained confidence in pursuing targets they have eyed for some time. That has even meant hostile bids, like PepsiCo’s pursuit of its two largest North American bottlers, which the company completed last month. For many buyers, Mr. Braunstein said, the fundamental question is not whether deal-making is possible, but this: should I be doing something in this environment?
“It was just a matter of time before buyers returned,” Boon Sim, Credit Suisse’s head of mergers and acquisitions for the Americas, told The Times. “The general thinking seems to be, if you do not do something now, prices will be higher 12 to 18 months from now. So why wait?”
Just as crucial for deal-making, banks have slowly become willing to open up their wallets to finance transactions for a broad range of companies, beyond blue-chip acquirers like Pfizer and Disney. Several merger advisers pointed to the acquisition of Skype and the sale of Procter & Gamble’s prescription drugs business to Warner Chilcott as signs that bankers and other financiers were willing to back riskier deals, involving borrowed money from companies with less-than-sterling credit ratings.
Bankers and lawyers agree that the financing markets will most likely never return to the frothy heights of the credit boom in 2007, which enabled private equity firms to borrow liberally and often outbid corporate rivals. The ensuing financial fallout has left many companies with debt they are hard-pressed to pay, forcing some to seek bankruptcy protection.
But even the troubled deals of yesterday have led to opportunities for companies and private equity firms, which are snatching up targets out of Chapter 11. The number of bankruptcy-related mergers and acquisitions has risen to 241 this year through August, a 65 percent increase over the same time in 2008, according to Thomson Reuters data.
For months, the lack of financing has hurt private equity firms’ stock-in-trade of buying companies. Even now, many of these firms have been forced to borrow less to strike their deals, cutting into their returns, according to Richard E. Climan, a partner at the law firm Dewey & LeBoeuf who worked on the Skype deal.
While merger activity has risen over the last 30 years, the path back to a healthier deal-making industry is likely to be a slow one over the next several months, advisers say. What lies in store is mostly expected to be more of what has transpired this year: opportunistic purchases by corporations with healthy credit ratings, stock values and cash.
“There will be more deals next year versus this year,” Mr. Sim, of Credit Suisse, told The Times. “But I don’t think the floodgates are going to open until the fundamentals improve materially.”
Go to Article from The New York Times »
Friday, July 31, 2009
July in M&A
From WSJ DealJournal, July 31, 2009:
By Stephen Grocer
Every time it seems the U.S. M&A market can’t go any lower, it goes lower. So when will the U.S. M&A market hit bottom?
If we have learned anything in the global financial crisis, it is that calling the market is a quick way to look foolish. Still, one thing is clear from the July data: The M&A market remains in a slump. The total value of announced mergers and acquisitions of U.S. targets was just $23 billion in July. That is off 41% from June, 85% from July 2008 and back to the lows of November and December, when the financial world seemed to be falling apart.
July’s deal volume figures highlight the shrinking role of the U.S. in the global M&A marketplace. For the second consecutive month, U.S. M&A activity was significantly lower than that of both Europe and Asia, with $56.1 billion and $42 billion, respectively. Global M&A volume fell to $137 million from $258 billion in June and $401 billion last July, according to Dealogic.
That is quite a comedown. Historically, the U.S. has been the leading M&A market. A decade ago U.S. deal volume was 16% higher than the combined volume of Europe and Asia and accounted for nearly 50% of all deal activity. But beginning in the M&A boom of 2006 and 2007, Europe began topping the U.S., while other regions began to catch up. In July, U.S. deal volume accounted for just 17% of global activity, according to Dealogic.
One interesting point of note with August marking what is widely considered the two-year anniversary of the beginning of the credit crisis: In the 24 months since, U.S. deal volume has topped $100 billion just four times, according to Dealogic. In the 19 months before that, it came in above $100 billion 11 times.
By Stephen Grocer
Every time it seems the U.S. M&A market can’t go any lower, it goes lower. So when will the U.S. M&A market hit bottom?
If we have learned anything in the global financial crisis, it is that calling the market is a quick way to look foolish. Still, one thing is clear from the July data: The M&A market remains in a slump. The total value of announced mergers and acquisitions of U.S. targets was just $23 billion in July. That is off 41% from June, 85% from July 2008 and back to the lows of November and December, when the financial world seemed to be falling apart.
July’s deal volume figures highlight the shrinking role of the U.S. in the global M&A marketplace. For the second consecutive month, U.S. M&A activity was significantly lower than that of both Europe and Asia, with $56.1 billion and $42 billion, respectively. Global M&A volume fell to $137 million from $258 billion in June and $401 billion last July, according to Dealogic.
That is quite a comedown. Historically, the U.S. has been the leading M&A market. A decade ago U.S. deal volume was 16% higher than the combined volume of Europe and Asia and accounted for nearly 50% of all deal activity. But beginning in the M&A boom of 2006 and 2007, Europe began topping the U.S., while other regions began to catch up. In July, U.S. deal volume accounted for just 17% of global activity, according to Dealogic.
One interesting point of note with August marking what is widely considered the two-year anniversary of the beginning of the credit crisis: In the 24 months since, U.S. deal volume has topped $100 billion just four times, according to Dealogic. In the 19 months before that, it came in above $100 billion 11 times.
Wednesday, July 15, 2009
The M&A Confidence Game: No Bottom In Sight Yet
WSJ Deal Journal blog, July 14, 2009, 3:30 PM ET
In a post last week, Wall Street Journal reporter Jeff McCracken put a simple question to the heads of the M&A practices at banks and law firms across New York City: Has the mergers-and-acquisitions market bottomed out?
The answer was a near-unanimous no. (Just one banker said yes.) Among the reasons given was the fact that consumer confidence remains low. Not surprising, of course. The American consumer is the backbone of the economy and with confidence low that average American is unlikely to spend money. That in turn means corporate earnings will remain strained and companies will remain less comfortable doing deals.
But there also is the confidence of another type of consumer to consider–the corporate executive. A recent study by J.P. Morgan Chase and Thomson Reuters found a strong correlation between confidence and M&A. In other words, M&A often is confidence driven rather than opportunity driven. That explains in part why M&A takes off at the same time the economy is strengthening and the equity markets begin to rise.
Those running the companies aren’t all that different from that average consumer. When someone’s 401(k) is soaring and he feels secure in his job, he is more likely to feel comfortable enough to make big-ticket purchases. The same goes for CEOs. With a soaring share price and the company’s future not in doubt, a CEO is more likely to pursue a big acquisition.
So there is a slight bit of optimistic news from a recent study by Ernst & Young. As of last month, corporate executives at more than 570 companies surveyed are feeling, if not a bit more confident at least a little less pessimistic. In January, 82% of executives said the focus of their business was on restructuring to deal with the recession and 74% were looking merely at survival of their present operations. Those figures have since declined to 74% and 65%, respectively.
Still, amid the gloom 69% of the executives surveyed said they were “taking advantage of the recession to pursue new market operations,” an increase from the previous 59%.
In fact, more than a third of executives said business conditions have become more conducive to deal-making. “We have had a lot of our clients tell us that they missed taking advantage of the 2001 downturn,” said Michael Rogers, a principal for Ernst & Young’s Transaction Advisory Services group. “And now with some of their competitors trading at lower levels, they really do need to take a look and see if they can make something happen at this time.”
This isn’t to say an uptick in M&A is around the corner. Many of the executives surveyed don’t expect to see signs of life in the global economy until the second half of 2010 and only 18% of respondents said cash isn’t an issue (down from 25% in January).
“They all say they want to do opportunistic M&A and let’s face it, who wouldn’t want to buy something at a low price or 50% off,” Rogers said. “We love to buy our own personal goods like that, but until we know that our job is safe and our employer is safe, we are not going to make those big-ticket decisions. I think that is the same way a lot of corporations are thinking, because if you do the math, it’s telling you now is the time to try and get deals done.”
So, despite the bluster, it would seem that we’re backed where we started: The M&A market is too linked to overall confidence to show much improvement. Next stop, bottom.
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
In a post last week, Wall Street Journal reporter Jeff McCracken put a simple question to the heads of the M&A practices at banks and law firms across New York City: Has the mergers-and-acquisitions market bottomed out?
The answer was a near-unanimous no. (Just one banker said yes.) Among the reasons given was the fact that consumer confidence remains low. Not surprising, of course. The American consumer is the backbone of the economy and with confidence low that average American is unlikely to spend money. That in turn means corporate earnings will remain strained and companies will remain less comfortable doing deals.
But there also is the confidence of another type of consumer to consider–the corporate executive. A recent study by J.P. Morgan Chase and Thomson Reuters found a strong correlation between confidence and M&A. In other words, M&A often is confidence driven rather than opportunity driven. That explains in part why M&A takes off at the same time the economy is strengthening and the equity markets begin to rise.
Those running the companies aren’t all that different from that average consumer. When someone’s 401(k) is soaring and he feels secure in his job, he is more likely to feel comfortable enough to make big-ticket purchases. The same goes for CEOs. With a soaring share price and the company’s future not in doubt, a CEO is more likely to pursue a big acquisition.
So there is a slight bit of optimistic news from a recent study by Ernst & Young. As of last month, corporate executives at more than 570 companies surveyed are feeling, if not a bit more confident at least a little less pessimistic. In January, 82% of executives said the focus of their business was on restructuring to deal with the recession and 74% were looking merely at survival of their present operations. Those figures have since declined to 74% and 65%, respectively.
Still, amid the gloom 69% of the executives surveyed said they were “taking advantage of the recession to pursue new market operations,” an increase from the previous 59%.
In fact, more than a third of executives said business conditions have become more conducive to deal-making. “We have had a lot of our clients tell us that they missed taking advantage of the 2001 downturn,” said Michael Rogers, a principal for Ernst & Young’s Transaction Advisory Services group. “And now with some of their competitors trading at lower levels, they really do need to take a look and see if they can make something happen at this time.”
This isn’t to say an uptick in M&A is around the corner. Many of the executives surveyed don’t expect to see signs of life in the global economy until the second half of 2010 and only 18% of respondents said cash isn’t an issue (down from 25% in January).
“They all say they want to do opportunistic M&A and let’s face it, who wouldn’t want to buy something at a low price or 50% off,” Rogers said. “We love to buy our own personal goods like that, but until we know that our job is safe and our employer is safe, we are not going to make those big-ticket decisions. I think that is the same way a lot of corporations are thinking, because if you do the math, it’s telling you now is the time to try and get deals done.”
So, despite the bluster, it would seem that we’re backed where we started: The M&A market is too linked to overall confidence to show much improvement. Next stop, bottom.
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
Monday, July 06, 2009
An End to Management Fees at Buy-Out Shops?
From TheDeal.com, July 6, 2009:
With tight debt markets putting the squeeze on the ability of private equity firms to make investments and score profitable exits, the limited partners providing the dealmaking capital have begun pushing back on the fees they've doled out to LBO shops for decades. Squarely in their sights is the 2% management fee that has acted as as an industry benchmark. (Buyouts also typically take 20% of the profits when they sell portfolio companies as well.) Three of the largest limited partners in the world -- giant pension plan the California Public Employees' Retirement System; fund-of-funds AlpInvest Partners NV, Europe's largest backer of private equity; and HarbourVest Partners LLC -- are all pressing for a reduction or end to the fee, according to Bloomberg. With performance down across the board, LPs finally have some leverage of their own when it comes to the fee structure, and the management fee was likely the first to come up because it's paid whether or not the buyout fund turns a profit for its investors. Until now LBO firms have been fairly successful at keeping their fee structures intact, instead making concessions in other areas such as capital commitments. TPG Capital, Permira Advisers LLP and Bain Capital LLC have all allowed their LPs to reduce the size of their capital commitments in megafunds. (The Deal Pipeline subscribers can read the full story here.)And with many LPs facing their own cash crunch, they are increasingly looking to reduce their allocation to private equity. Mark A. Coleman of Laurus Transaction Advisors recently wrote in The Deal magazine about the importance of communicating with LPs on the performance of portfolio companies. He writes: The troubled banking industry and pressure on limited partners to rebalance their investment portfolios, specifically their allocations to private equity, have made it critical that private equity firms be more proactive about keeping these parties informed on how portfolio companies are faring. Many firms have even added senior operating personnel and functional specialists at the fund level to more closely monitor performance and provide on-call support for portfolio company executive teams -- with an overriding objective of preserving value.Additionally, with leveraged lending still tight as drum, private equity firms are finding it very difficult to get profitable exits from portfolio companies. Even worse, the recession has sent a record number of LBO-backed companies into bankruptcy as their debt loads weigh them down and prove expensive to refinance. - George White
See Bloomberg storySeeThe Deal Pipeline story (subscription required)
See The Deal magazine story - Finger on the Pulse
See Dealwatch on PE-backed bankruptcies
See Dealwatch on PE/VC fundraising
With tight debt markets putting the squeeze on the ability of private equity firms to make investments and score profitable exits, the limited partners providing the dealmaking capital have begun pushing back on the fees they've doled out to LBO shops for decades. Squarely in their sights is the 2% management fee that has acted as as an industry benchmark. (Buyouts also typically take 20% of the profits when they sell portfolio companies as well.) Three of the largest limited partners in the world -- giant pension plan the California Public Employees' Retirement System; fund-of-funds AlpInvest Partners NV, Europe's largest backer of private equity; and HarbourVest Partners LLC -- are all pressing for a reduction or end to the fee, according to Bloomberg. With performance down across the board, LPs finally have some leverage of their own when it comes to the fee structure, and the management fee was likely the first to come up because it's paid whether or not the buyout fund turns a profit for its investors. Until now LBO firms have been fairly successful at keeping their fee structures intact, instead making concessions in other areas such as capital commitments. TPG Capital, Permira Advisers LLP and Bain Capital LLC have all allowed their LPs to reduce the size of their capital commitments in megafunds. (The Deal Pipeline subscribers can read the full story here.)And with many LPs facing their own cash crunch, they are increasingly looking to reduce their allocation to private equity. Mark A. Coleman of Laurus Transaction Advisors recently wrote in The Deal magazine about the importance of communicating with LPs on the performance of portfolio companies. He writes: The troubled banking industry and pressure on limited partners to rebalance their investment portfolios, specifically their allocations to private equity, have made it critical that private equity firms be more proactive about keeping these parties informed on how portfolio companies are faring. Many firms have even added senior operating personnel and functional specialists at the fund level to more closely monitor performance and provide on-call support for portfolio company executive teams -- with an overriding objective of preserving value.Additionally, with leveraged lending still tight as drum, private equity firms are finding it very difficult to get profitable exits from portfolio companies. Even worse, the recession has sent a record number of LBO-backed companies into bankruptcy as their debt loads weigh them down and prove expensive to refinance. - George White
See Bloomberg storySeeThe Deal Pipeline story (subscription required)
See The Deal magazine story - Finger on the Pulse
See Dealwatch on PE-backed bankruptcies
See Dealwatch on PE/VC fundraising
Thursday, July 02, 2009
40% Drop in M&A Deals in First Half
From DealBook blog, July 2, 2009:
The dearth of big takeover deals continues in the chilly M.&A. market. The first half of this year, which ended on Tuesday, marked the worst such period for global dealmaking since 2004, according to a new report from Thomson Reuters. The total volume of announced mergers and acquisitions worldwide fell 40 percent from last year to $941 billion, according to the report.
The Thomson Reuters report of a sharp decline in M.&A. activity followed a preliminary estimate by Dealogic last week, which showed that overall deal volume fell 36 percent worldwide in the first half. The two data providers differed somewhat in their methodologies for counting deals.
The biggest transaction of the first half was the drug giant Pfizer’s $68.1 billion acquisition of Wyeth followed by Rio Tinto’s $58 billion bid for rival mining company, BHP Billiton. The federal government comes in at No. 5 on Dealogic’s list of biggest deals with its $25 billion stake in Citigroup.
Private equity firms continued to be relatively silent in the first half with only $32.9 billion in announced global deals, the worst six month period of activity since 1997.
Link to Thompson Reuters report:
http://www.scribd.com/doc/17014240/Thomson-Reuters-MA-Review
– Zachery Kouwe
The dearth of big takeover deals continues in the chilly M.&A. market. The first half of this year, which ended on Tuesday, marked the worst such period for global dealmaking since 2004, according to a new report from Thomson Reuters. The total volume of announced mergers and acquisitions worldwide fell 40 percent from last year to $941 billion, according to the report.
The Thomson Reuters report of a sharp decline in M.&A. activity followed a preliminary estimate by Dealogic last week, which showed that overall deal volume fell 36 percent worldwide in the first half. The two data providers differed somewhat in their methodologies for counting deals.
The biggest transaction of the first half was the drug giant Pfizer’s $68.1 billion acquisition of Wyeth followed by Rio Tinto’s $58 billion bid for rival mining company, BHP Billiton. The federal government comes in at No. 5 on Dealogic’s list of biggest deals with its $25 billion stake in Citigroup.
Private equity firms continued to be relatively silent in the first half with only $32.9 billion in announced global deals, the worst six month period of activity since 1997.
Link to Thompson Reuters report:
http://www.scribd.com/doc/17014240/Thomson-Reuters-MA-Review
– Zachery Kouwe
Wednesday, June 17, 2009
Study Projects Upsurge in M.& A. Activity
From DealBook.blog, June 17, 2009:
The market for mergers and acquisitions could see some real growth in the coming months after more than a year of declining deal volume, according to a new joint study published on Tuesday by Thomson Reuters and JPMorgan Chase.
The study, which examines trends in the M.& A. sector, predicts that the current down cycle in deal activity could turn around in the second half of this year, tracking the expected upward growth in the world’s gross domestic product.
Deal activity is very closely related to economic growth. When people are feeling confident and money is available, deal volumes jump. Conversely, when the economy is on the downswing and money is tight, deal activity craters.
Deal volume as a percentage of G.D.P. peaked at the top of the last two economic bubbles: the dotcom bubble in 2000 at about 11 percent and the credit bubble in 2007 at about 8 percent.
Deal activity fell to nearly 4 percent in 2008 and continued to fall in the first half of 2009.
The study found that during the downturn in deals that followed the dotcom bust, M.& A. activity contracted for approximately eight quarters before it rebounded. The credit crunch cycle has so far gone through seven quarters of contraction. As such, total activity in mergers and acquisitions could bottom out during the current quarter, the study found.
Based on their hypothesis that the pattern between M.& A. growth and G.D.P. growth will repeat itself and rebound together, Thomson Reuters and JPMorgan project that global deal activity as a percentage of G.D.P. could reach 3.6 percent in 2009, 3.7 percent in 2010 and 4.5 percent in 2011, mirroring the upturn of 2002, 2003 and 2004.
When the data is matched with the International Monetary Fund’s forecast for global G.D.P. growth in the same years, deal volume could reach $2.6 trillion by 2011.
But the argument for such a spectacular recovery is based on trends seen since 1995, when the easy money policies instituted by the Federal Reserve and other central banks fueled growth and economic bubbles. A tighter monetary policy and stronger financial regulation limiting risk could return growth in the M.& A. market to levels below 2 percent that were seen during the early part of the 1990s.
– Cyrus Sanati
Go to Study from Thomson Reuters and JPMorgan »
The market for mergers and acquisitions could see some real growth in the coming months after more than a year of declining deal volume, according to a new joint study published on Tuesday by Thomson Reuters and JPMorgan Chase.
The study, which examines trends in the M.& A. sector, predicts that the current down cycle in deal activity could turn around in the second half of this year, tracking the expected upward growth in the world’s gross domestic product.
Deal activity is very closely related to economic growth. When people are feeling confident and money is available, deal volumes jump. Conversely, when the economy is on the downswing and money is tight, deal activity craters.
Deal volume as a percentage of G.D.P. peaked at the top of the last two economic bubbles: the dotcom bubble in 2000 at about 11 percent and the credit bubble in 2007 at about 8 percent.
Deal activity fell to nearly 4 percent in 2008 and continued to fall in the first half of 2009.
The study found that during the downturn in deals that followed the dotcom bust, M.& A. activity contracted for approximately eight quarters before it rebounded. The credit crunch cycle has so far gone through seven quarters of contraction. As such, total activity in mergers and acquisitions could bottom out during the current quarter, the study found.
Based on their hypothesis that the pattern between M.& A. growth and G.D.P. growth will repeat itself and rebound together, Thomson Reuters and JPMorgan project that global deal activity as a percentage of G.D.P. could reach 3.6 percent in 2009, 3.7 percent in 2010 and 4.5 percent in 2011, mirroring the upturn of 2002, 2003 and 2004.
When the data is matched with the International Monetary Fund’s forecast for global G.D.P. growth in the same years, deal volume could reach $2.6 trillion by 2011.
But the argument for such a spectacular recovery is based on trends seen since 1995, when the easy money policies instituted by the Federal Reserve and other central banks fueled growth and economic bubbles. A tighter monetary policy and stronger financial regulation limiting risk could return growth in the M.& A. market to levels below 2 percent that were seen during the early part of the 1990s.
– Cyrus Sanati
Go to Study from Thomson Reuters and JPMorgan »
Monday, June 15, 2009
Distressed deals: Strategics coming on strong
From The Deal.com, June 15, 2009:
It's been nearly six months since we reported in The Deal magazine that more and more corporate acquirers were eying the distressed market for potential targets. So, did they arrive? If we narrow the definition of distressed deals to transactions involving a bankrupt seller, the answer is yes. According to The Deal Pipeline's bankruptcy M&A database, 79 corporations have acquired or been approved to buy assets from a bankrupt seller so far this year. That compares to 51 similar transactions in the same period last year, and 102 total in 2008. Looking more closely at this year's numbers, it's no surprise the automotive industry has seen the most action from corporate buyers of distressed assets. There have been 12 bankruptcy M&A deals involving a strategic buyer since Jan. 1. Highlights include:
Hertz Global Holdings Inc.'s (NYSE:HTZ) acquisition of Advantage Rent A Car Inc.
Lazy Days RV Center Inc.'s acquisition of 154 Fleetwood Enterprises Inc. trailer units
Penske Automotive Group Inc.'s (NYSE:PAG) acquisition of General Motor Corp.'s Saturn brand Workhorse International Holding Co.'s acquisition of Monaco Coach Corp.'s recreational vehicle divisionRetail was the next most active industry for corporate buyers, with nine transactions, including:
Winter Sky Retail Ltd.'s acquisition of Madhouse Ltd
Aurora Fashions Ltd.'s acquisition of Mosaic Fashion Ltd.
Sleepy's Inc.'s acquisition of Dial-A-Mattress Operating Corp.Strategic acquirers were also active in the media and energy industries, with six and seven transactions, respectively.For corporate acquires that have yet to dive into the deepening pool of bankrupt assets, be aware that the learning curve is steep. As Sullivan & Cromwell LLP partner Frank Aquila told us recently, even prenegotiated terms will likely be revisited in a bankruptcy sale. Still, as the data above indicates, the opportunities available may be too good to keep many strategics sidelined for long. - Suzanne Stevens
It's been nearly six months since we reported in The Deal magazine that more and more corporate acquirers were eying the distressed market for potential targets. So, did they arrive? If we narrow the definition of distressed deals to transactions involving a bankrupt seller, the answer is yes. According to The Deal Pipeline's bankruptcy M&A database, 79 corporations have acquired or been approved to buy assets from a bankrupt seller so far this year. That compares to 51 similar transactions in the same period last year, and 102 total in 2008. Looking more closely at this year's numbers, it's no surprise the automotive industry has seen the most action from corporate buyers of distressed assets. There have been 12 bankruptcy M&A deals involving a strategic buyer since Jan. 1. Highlights include:
Hertz Global Holdings Inc.'s (NYSE:HTZ) acquisition of Advantage Rent A Car Inc.
Lazy Days RV Center Inc.'s acquisition of 154 Fleetwood Enterprises Inc. trailer units
Penske Automotive Group Inc.'s (NYSE:PAG) acquisition of General Motor Corp.'s Saturn brand Workhorse International Holding Co.'s acquisition of Monaco Coach Corp.'s recreational vehicle divisionRetail was the next most active industry for corporate buyers, with nine transactions, including:
Winter Sky Retail Ltd.'s acquisition of Madhouse Ltd
Aurora Fashions Ltd.'s acquisition of Mosaic Fashion Ltd.
Sleepy's Inc.'s acquisition of Dial-A-Mattress Operating Corp.Strategic acquirers were also active in the media and energy industries, with six and seven transactions, respectively.For corporate acquires that have yet to dive into the deepening pool of bankrupt assets, be aware that the learning curve is steep. As Sullivan & Cromwell LLP partner Frank Aquila told us recently, even prenegotiated terms will likely be revisited in a bankruptcy sale. Still, as the data above indicates, the opportunities available may be too good to keep many strategics sidelined for long. - Suzanne Stevens
Thursday, June 04, 2009
Deal Activity Is Down 40% So Far This Year
From DealBook, June 4, 2009:
Mergers and acquisitions activity continues to languish this year as the fallout from the economic crisis lingers.
There have been $751.6 billion worth of deals announced so far this year, a steep 40 percent drop from the comparable period last year, according to Thomson Reuters. This decline represents the worst drop in deal activity for the period since 2001, when the recession then sent deal volumes down 52 percent from the prior year.
Regionally, European M.&A. showed the largest fall from the previous year, 48 percent, as investors balked at doing deals on the Continent. Meanwhile, the decline in deals in the United States was not quite so steep, falling 33 percent to $266 billion.
Global deal activity picked up a bit in May, with $186 billion in announced deals, up strongly from April when there was only $118 billion in announced deals.
But the majority of deals announced so far this year continued to be in the first quarter, when there were several huge deals announced involving pharmaceutical companies and government stakes in banks.
In fact, the two largest deals so far this year continue to be drug-related, with Pfizer’s $64 billion takeover bid for Wyeth and Merck’s $45 billion takeover bid for Schering-Plough.
The next two largest deals involve the British government’s taking stakes in two of Britain’s troubled banking giants, the Lloyds Banking Group at $22.3 billion and Royal Bank of Scotland at $18.6 billion.
Meanwhile, investment bankers are seeing a severe drop-off in their fees, which is sure to depress this year’s bonus pool. Global M.&A. fees for transactions completed in 2009 stand at $6.7 billion, according to Thomson Reuters estimates. That’s a 58 percent decline from a year earlier, when fees totaled $15.9 billion.
– Cyrus Sanati
Mergers and acquisitions activity continues to languish this year as the fallout from the economic crisis lingers.
There have been $751.6 billion worth of deals announced so far this year, a steep 40 percent drop from the comparable period last year, according to Thomson Reuters. This decline represents the worst drop in deal activity for the period since 2001, when the recession then sent deal volumes down 52 percent from the prior year.
Regionally, European M.&A. showed the largest fall from the previous year, 48 percent, as investors balked at doing deals on the Continent. Meanwhile, the decline in deals in the United States was not quite so steep, falling 33 percent to $266 billion.
Global deal activity picked up a bit in May, with $186 billion in announced deals, up strongly from April when there was only $118 billion in announced deals.
But the majority of deals announced so far this year continued to be in the first quarter, when there were several huge deals announced involving pharmaceutical companies and government stakes in banks.
In fact, the two largest deals so far this year continue to be drug-related, with Pfizer’s $64 billion takeover bid for Wyeth and Merck’s $45 billion takeover bid for Schering-Plough.
The next two largest deals involve the British government’s taking stakes in two of Britain’s troubled banking giants, the Lloyds Banking Group at $22.3 billion and Royal Bank of Scotland at $18.6 billion.
Meanwhile, investment bankers are seeing a severe drop-off in their fees, which is sure to depress this year’s bonus pool. Global M.&A. fees for transactions completed in 2009 stand at $6.7 billion, according to Thomson Reuters estimates. That’s a 58 percent decline from a year earlier, when fees totaled $15.9 billion.
– Cyrus Sanati
Wednesday, June 03, 2009
Buyout Firms Face $400 Billion Overhang
DealBook.blog, June 3, 2009:
Private equity firms may be sitting on a record amount of dry powder, but that isn’t stopping them from continuing to stockpile for a future when deal-making comes back into fashion.
The private equity “overhang” — the difference capital raised and capital invested — stood at $400 billion as of April, an all-time high, according a report by the Alliance of Merger & Acquisition Advisors and PitchBook Data.
The capital backlog ballooned in 2008 when the credit crisis burst the buyout bubble, putting an end to the kind of high-flying deals that took Hilton Hotels and TXU private, but private equity firms kept racking up new capital commitments.
The mismatch between fund-raising and deal-making underscores the unsettled state of the industry. Buyout funds remain popular with investors, such as pension funds and institutions, but they have been distracted by troubled credit markets and problems at existing portfolio companies.
“This historic high of capital yet to be deployed by private equity creates a new deal paradigm and a challenge,” David Cohn, an A.M.&A.A. advisory board member and managing director at Mosaic Capital, said in a statement. “Deal-makers have to put down their pencils and dispense with historical spreadsheet analysis.”
Despite their bulging coffers, buyout shops haven’t slowed their fund-raising pace, according to The Deal. Private equity firms have raised about $30 billion in April alone, while fund-of-funds ponied up another $5.1 billion in fresh capital to invest over the past two months, the publication said, citing data from its Deal Pipeline.
So when will private equity firms start deploying the cash piling up in their war chests?
“The fourth quarter is going to tell the story,” Mr. Cohn predicted. “This summer is the time for a ‘boot camp’ for both private equity and intermediaries to refresh their deal flow and be prepared for the fall.”
Of course, private equity funds traditionally use two sources of funds to buy their portfolio companies: equity from their investors, and loans from banks. The latter is hard to come by these days.
So buyout chiefs may need to be creative as they seek to deploy the equity they’ve raised — at least, until banks turn the spigot back on again.
Go to Article from The Deal.com »
Go to Article from VentureBeat »
Go to Press Release from The Alliance of Merger & Acquisition Advisors and Pitchbook Data via BusinessWire »
Private equity firms may be sitting on a record amount of dry powder, but that isn’t stopping them from continuing to stockpile for a future when deal-making comes back into fashion.
The private equity “overhang” — the difference capital raised and capital invested — stood at $400 billion as of April, an all-time high, according a report by the Alliance of Merger & Acquisition Advisors and PitchBook Data.
The capital backlog ballooned in 2008 when the credit crisis burst the buyout bubble, putting an end to the kind of high-flying deals that took Hilton Hotels and TXU private, but private equity firms kept racking up new capital commitments.
The mismatch between fund-raising and deal-making underscores the unsettled state of the industry. Buyout funds remain popular with investors, such as pension funds and institutions, but they have been distracted by troubled credit markets and problems at existing portfolio companies.
“This historic high of capital yet to be deployed by private equity creates a new deal paradigm and a challenge,” David Cohn, an A.M.&A.A. advisory board member and managing director at Mosaic Capital, said in a statement. “Deal-makers have to put down their pencils and dispense with historical spreadsheet analysis.”
Despite their bulging coffers, buyout shops haven’t slowed their fund-raising pace, according to The Deal. Private equity firms have raised about $30 billion in April alone, while fund-of-funds ponied up another $5.1 billion in fresh capital to invest over the past two months, the publication said, citing data from its Deal Pipeline.
So when will private equity firms start deploying the cash piling up in their war chests?
“The fourth quarter is going to tell the story,” Mr. Cohn predicted. “This summer is the time for a ‘boot camp’ for both private equity and intermediaries to refresh their deal flow and be prepared for the fall.”
Of course, private equity funds traditionally use two sources of funds to buy their portfolio companies: equity from their investors, and loans from banks. The latter is hard to come by these days.
So buyout chiefs may need to be creative as they seek to deploy the equity they’ve raised — at least, until banks turn the spigot back on again.
Go to Article from The Deal.com »
Go to Article from VentureBeat »
Go to Press Release from The Alliance of Merger & Acquisition Advisors and Pitchbook Data via BusinessWire »
Friday, May 22, 2009
BCG on M&A: It's a jungle out there
From TheDeal.com, May 22, 2009:
Dealmakers trying to cash in on companies hurt by the recession have been fighting with said targets over valuation issues. And they may be running out of time to do deals on the cheap. That was made evident in a white paper by Boston Consulting Group Inc., titled "The Clock Is Ticking: Preparing to Seize M&A Opportunities While They Last."
The paper says there are signs the M&A tide could soon turn as equity values stabilize and debt markets show life. BCG isn't urging dealmakers to rush into acquisitions, instead it offers a stress test of sorts about where a company stands in the M&A jungle.
According to a BCG analysis of 281 companies in the S&P 500, just one-fifth of them have a sufficiently robust balance sheet and other financial credentials to engage in M&A (the haves), while another fifth are now so weak and vulnerable that their only course of action is to focus on surviving the downturn (the have-nots).
The paper offers a "predator-prey matrix" to clarify a company's M&A strategy, mapping operational stability against financial stability.
Get to BCG's white paper here. - Baz Hiralal
Dealmakers trying to cash in on companies hurt by the recession have been fighting with said targets over valuation issues. And they may be running out of time to do deals on the cheap. That was made evident in a white paper by Boston Consulting Group Inc., titled "The Clock Is Ticking: Preparing to Seize M&A Opportunities While They Last."
The paper says there are signs the M&A tide could soon turn as equity values stabilize and debt markets show life. BCG isn't urging dealmakers to rush into acquisitions, instead it offers a stress test of sorts about where a company stands in the M&A jungle.
According to a BCG analysis of 281 companies in the S&P 500, just one-fifth of them have a sufficiently robust balance sheet and other financial credentials to engage in M&A (the haves), while another fifth are now so weak and vulnerable that their only course of action is to focus on surviving the downturn (the have-nots).
The paper offers a "predator-prey matrix" to clarify a company's M&A strategy, mapping operational stability against financial stability.
Get to BCG's white paper here. - Baz Hiralal
Friday, May 15, 2009
Dealmakers Expect M&A Activity to Pick Up in Second Half of 2009
ACG-Thomson Reuters Mid-Year 2009 DealMakers Survey Reveals Obstacles and Opportunities for M&A and Private Equity Investing
- - - - - - -
Private Equity Firms Concentrating on Portfolio Company Improvements
CHICAGO, May 13, 2009 – Middle market merger professionals are close to unanimous as to the current state of the M&A market – it is not good. Yet most anticipate it will improve in the second half of 2009, led by distressed sales and by mergers in healthcare and life sciences, manufacturing and distribution, and financial services. The mid-year 2009 survey results were announced today at ACG InterGrowth, Wynn Las Vegas.
The latest twice-yearly survey of by the Association for Corporate Growth (ACG) and Thomson Reuters reveals the most negative outlook in the five-year history of the survey, with 88% of dealmakers saying the current M&A environment is fair or poor, compared to 86% in December 2008.
Over the next six months, the 703 middle market investment bankers, private equity professionals, corporate development officers, lawyers, accountants and business consultants polled expect the number of M&A transactions to:
Increase (56%)
Remain the same (34%)
Slow further (10%)
For links to the complete report, go to http://chapters.acg.org/global/default.aspx
- - - - - - -
Private Equity Firms Concentrating on Portfolio Company Improvements
CHICAGO, May 13, 2009 – Middle market merger professionals are close to unanimous as to the current state of the M&A market – it is not good. Yet most anticipate it will improve in the second half of 2009, led by distressed sales and by mergers in healthcare and life sciences, manufacturing and distribution, and financial services. The mid-year 2009 survey results were announced today at ACG InterGrowth, Wynn Las Vegas.
The latest twice-yearly survey of by the Association for Corporate Growth (ACG) and Thomson Reuters reveals the most negative outlook in the five-year history of the survey, with 88% of dealmakers saying the current M&A environment is fair or poor, compared to 86% in December 2008.
Over the next six months, the 703 middle market investment bankers, private equity professionals, corporate development officers, lawyers, accountants and business consultants polled expect the number of M&A transactions to:
Increase (56%)
Remain the same (34%)
Slow further (10%)
For links to the complete report, go to http://chapters.acg.org/global/default.aspx
Monday, May 11, 2009
Administration Plans to Strengthen Antitrust Rules
WASHINGTON — President Obama’s top antitrust official this week plans to restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.
The new enforcement policy would reverse the Bush administration’s approach, which strongly favored defendants against antitrust claims. It would restore a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s.
Ms. Varney is expected to say that the administration rejects the impulse to go easy on antitrust enforcement during weak economic times.
She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition. The announcement is aimed at making sure that no court or party to a lawsuit can cite the Bush administration policy as the government’s official view in any pending cases.
Ms. Varney is expected to say that the Obama administration will be guided by the view that it was a major mistake during the outset of the Great Depression to relax antitrust enforcement, only to try to catch up and become more vigorous later. She will say the mistake enabled many large companies to engage in pricing, wage and collusive practices that harmed consumers and took years to reverse.
See complete article at: http://www.nytimes.com/2009/05/11/business/11antitrust.html
The new enforcement policy would reverse the Bush administration’s approach, which strongly favored defendants against antitrust claims. It would restore a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s.
Ms. Varney is expected to say that the administration rejects the impulse to go easy on antitrust enforcement during weak economic times.
She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition. The announcement is aimed at making sure that no court or party to a lawsuit can cite the Bush administration policy as the government’s official view in any pending cases.
Ms. Varney is expected to say that the Obama administration will be guided by the view that it was a major mistake during the outset of the Great Depression to relax antitrust enforcement, only to try to catch up and become more vigorous later. She will say the mistake enabled many large companies to engage in pricing, wage and collusive practices that harmed consumers and took years to reverse.
See complete article at: http://www.nytimes.com/2009/05/11/business/11antitrust.html
Thursday, May 07, 2009
SEC Enforcement: Past, Present and Future
by Dave Lynn, Editor of TheCorporateCounsel.net, May 7, 2009:
SEC Enforcement: Past, Present and Future
Before we all move on with the next phase of the SEC’s revived enforcement efforts, we still have occasion to review what may have helped get use into this mess. As reported in this Bloomberg story from yesterday, the GAO released a report at the end of March outlining the headwinds faced by the Enforcement Staff over the past several years. (Broc mentioned the report in the blog last month.) Today, the Senate Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing, and Urban Affairs will hold a hearing on strengthening the SEC’s enforcement responsibilities.
The Bloomberg story points out how the GAO found that the SEC instituted policies that “slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies.” As one unidentified Staffer put it, there was a feeling that the Commissioners prevented Enforcement from “doing its job.” The findings of the GAO’s report bear out my own experience during those years, not only with respect to Enforcement but also with respect to all other regulatory matters - hostility toward the Staff and its recommendations became institutionalized, which served to not only demoralize the Staff but also to result bad decisions being made at all levels.
The report also notes the use of executive sessions during former Chairman Cox’s tenure, where some Enforcement Staff were barred from participating. The report indicates that executive sessions occurred on 40% of the days when the SEC met to vote in closed Commission meetings in 2008, more than three times the rate in 2005 when Cox was appointed Chairman (but equal to the rate from 2003 and 2004).
As for the future of Enforcement, Chairman Schapiro reiterated her agenda for the Division of Enforcement in an address last week to the Society of American Business Editors and Writers. She noted that she has streamlined SEC enforcement procedures by no longer requiring full Commission approval to launch an investigation, and eliminating the need for approval by the full Commission before negotiating a settlement. She stated “before these directives, enforcement attorneys will tell you that they worried about red lights at every turn — now they see green.” This is sure to mean many more inquiries and, in all likelihood, much speedier cases as the - SEC Enforcement: Past, Present and Future
Before we all move on with the next phase of the SEC’s revived enforcement efforts, we still have occasion to review what may have helped get use into this mess. As reported in this Bloomberg story from yesterday, the GAO released a report at the end of March outlining the headwinds faced by the Enforcement Staff over the past several years. (Broc mentioned the report in the blog last month.) Today, the Senate Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing, and Urban Affairs will hold a hearing on strengthening the SEC’s enforcement responsibilities.
The Bloomberg story points out how the GAO found that the SEC instituted policies that “slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies.” As one unidentified Staffer put it, there was a feeling that the Commissioners prevented Enforcement from “doing its job.” The findings of the GAO’s report bear out my own experience during those years, not only with respect to Enforcement but also with respect to all other regulatory matters - hostility toward the Staff and its recommendations became institutionalized, which served to not only demoralize the Staff but also to result bad decisions being made at all levels.
The report also notes the use of executive sessions during former Chairman Cox’s tenure, where some Enforcement Staff were barred from participating. The report indicates that executive sessions occurred on 40% of the days when the SEC met to vote in closed Commission meetings in 2008, more than three times the rate in 2005 when Cox was appointed Chairman (but equal to the rate from 2003 and 2004).
As for the future of Enforcement, Chairman Schapiro reiterated her agenda for the Division of Enforcement in an address last week to the Society of American Business Editors and Writers. She noted that she has streamlined SEC enforcement procedures by no longer requiring full Commission approval to launch an investigation, and eliminating the need for approval by the full Commission before negotiating a settlement. She stated “before these directives, enforcement attorneys will tell you that they worried about red lights at every turn — now they see green.” This is sure to mean many more inquiries and, in all likelihood, much speedier cases as the Enforcement Division ramps up again.
...
- Dave Lynn
SEC Enforcement: Past, Present and Future
Before we all move on with the next phase of the SEC’s revived enforcement efforts, we still have occasion to review what may have helped get use into this mess. As reported in this Bloomberg story from yesterday, the GAO released a report at the end of March outlining the headwinds faced by the Enforcement Staff over the past several years. (Broc mentioned the report in the blog last month.) Today, the Senate Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing, and Urban Affairs will hold a hearing on strengthening the SEC’s enforcement responsibilities.
The Bloomberg story points out how the GAO found that the SEC instituted policies that “slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies.” As one unidentified Staffer put it, there was a feeling that the Commissioners prevented Enforcement from “doing its job.” The findings of the GAO’s report bear out my own experience during those years, not only with respect to Enforcement but also with respect to all other regulatory matters - hostility toward the Staff and its recommendations became institutionalized, which served to not only demoralize the Staff but also to result bad decisions being made at all levels.
The report also notes the use of executive sessions during former Chairman Cox’s tenure, where some Enforcement Staff were barred from participating. The report indicates that executive sessions occurred on 40% of the days when the SEC met to vote in closed Commission meetings in 2008, more than three times the rate in 2005 when Cox was appointed Chairman (but equal to the rate from 2003 and 2004).
As for the future of Enforcement, Chairman Schapiro reiterated her agenda for the Division of Enforcement in an address last week to the Society of American Business Editors and Writers. She noted that she has streamlined SEC enforcement procedures by no longer requiring full Commission approval to launch an investigation, and eliminating the need for approval by the full Commission before negotiating a settlement. She stated “before these directives, enforcement attorneys will tell you that they worried about red lights at every turn — now they see green.” This is sure to mean many more inquiries and, in all likelihood, much speedier cases as the - SEC Enforcement: Past, Present and Future
Before we all move on with the next phase of the SEC’s revived enforcement efforts, we still have occasion to review what may have helped get use into this mess. As reported in this Bloomberg story from yesterday, the GAO released a report at the end of March outlining the headwinds faced by the Enforcement Staff over the past several years. (Broc mentioned the report in the blog last month.) Today, the Senate Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing, and Urban Affairs will hold a hearing on strengthening the SEC’s enforcement responsibilities.
The Bloomberg story points out how the GAO found that the SEC instituted policies that “slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies.” As one unidentified Staffer put it, there was a feeling that the Commissioners prevented Enforcement from “doing its job.” The findings of the GAO’s report bear out my own experience during those years, not only with respect to Enforcement but also with respect to all other regulatory matters - hostility toward the Staff and its recommendations became institutionalized, which served to not only demoralize the Staff but also to result bad decisions being made at all levels.
The report also notes the use of executive sessions during former Chairman Cox’s tenure, where some Enforcement Staff were barred from participating. The report indicates that executive sessions occurred on 40% of the days when the SEC met to vote in closed Commission meetings in 2008, more than three times the rate in 2005 when Cox was appointed Chairman (but equal to the rate from 2003 and 2004).
As for the future of Enforcement, Chairman Schapiro reiterated her agenda for the Division of Enforcement in an address last week to the Society of American Business Editors and Writers. She noted that she has streamlined SEC enforcement procedures by no longer requiring full Commission approval to launch an investigation, and eliminating the need for approval by the full Commission before negotiating a settlement. She stated “before these directives, enforcement attorneys will tell you that they worried about red lights at every turn — now they see green.” This is sure to mean many more inquiries and, in all likelihood, much speedier cases as the Enforcement Division ramps up again.
...
- Dave Lynn
Thursday, April 30, 2009
NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry
Check out this SlideShare Presentation:
Wednesday, April 29, 2009
Another View: A Bailout for the Plaintiff’s Bar
DealBook, NYT, April 29, 2009
In January 2008, I saw a rock musical in Los Angeles called “Blood, Bloody Andrew Jackson.” The refrain from the main number was “pop-u-li-sm: yeah, yeah!” By early 2009, thanks in no small part to the likes of the Troubled Asset Relief Fund, John A. Thain of Merrill Lynch and the American International Group’s bonus babies, that chorus spread east, enveloped the country and galvanized The People.
Such atrocities as banker bonuses and Mr. Thain’s bathroom redecoration have made delicious targets of contempt. It was the liberal media’s dream: a chance to position the lowly taxpayer, the outraged face of TARP, against the mustache-twirling titans of Wall Street.
Taxpayer vs. corporate bad guy is a good one. But how about taxpayer vs. shareholder?
That, surprisingly, is a story that’s largely evaded the news pages, despite the fact that settlements resulting from the scores of shareholder suits against TARP entities will stretch into the stratosphere.
Sure, through TARP, taxpayer money may be used to pay off mortgages and fund bonus pools. But, in what will amount to a far more expensive proposition, TARP money will also be used to line the pockets of allegedly aggrieved shareholders and the lawyers who, wrapped smugly in the flag of corporate governance, are in the process of making a billion-dollar cottage industry out of filing strike suits.
Take the villainous Merrill Lynch. On Jan. 16, the government announced it would invest $20 billion of TARP money in Bank of America and guarantee $118 billion of assets in order to help it absorb its acquisition of Merrill. On that same day, Merrill announced it would shell out $550 million to settle claims by shareholders that it misled investors about assets backed by subprime mortgages.
Where is that settlement money going to come from? At the minimum, settlements like this one mean Bank of America is less able to pay back TARP money. At the worst, the bank must cut into its TARP allotment in order to settle up. In either case, shareholders of companies that would have gone bankrupt but for TARP are instead getting their settlements funded by bailout money.
And there will be more. Thirty-two TARP recipients had received $1 billion or more in federal money as of April 15, according to the Treasury’s Web site. And 19 of those companies have been sued since January 2008, according to data accumulated by the Stanford Securities Class Action Clearinghouse. Put otherwise, of the more than $300 billion that’s been paid out in TARP money, nearly $240 billion of it, or 78 percent, is subject to shareholder suits.
Even in flush times, the shareholder class action is a controversial legal mechanism. Its backers claim that these suits keep companies honest by deterring corporate malfeasance and making the bad guys pay. (Yes, believe it or not, some will argue that even with the Department of Justice, the Securities and Exchange Commission and Attorney General Andrew M. Cuomo of New York patrolling Wall Street, we still need shareholder suits to keep companies honest.) But even in a typical, TARP-free paradigm, the bad guys don’t pay. Instead, shareholders wind up paying each other.
The shareholder class action is a “circular and costly” process, according to Adam Pritchard, a professor at the University of Michigan Law School. He explains: “It’s the company’s dollar that gets paid out in these suits. Shareholders effectively take a dollar from one pocket, pay about half of that dollar to lawyers on both sides, and then put the leftover change in their other pocket.”
But now, in the world according to TARP, that settlement money is no longer coming from the corporation or its insurance plan. It’s coming from you.
“At the end of day, you can’t avoid the fact that, in settling these cases, you will inevitably be taxing the taxpayer, as you shift tax money to the plaintiff-shareholder class,” says Joseph Grundfest, a professor at Stanford Law School and a former S.E.C. commissioner.
Ironically, by appearing to provide shareholders with a real remedy, class actions have long been billed as corporate law’s most populist event. But when taxpayer money, rather than the corporate coffer, is being used to fund the resulting settlements, whose bad behavior are we really punishing?
Dan Slater, a former litigator, is a freelance journalist in New York.
In January 2008, I saw a rock musical in Los Angeles called “Blood, Bloody Andrew Jackson.” The refrain from the main number was “pop-u-li-sm: yeah, yeah!” By early 2009, thanks in no small part to the likes of the Troubled Asset Relief Fund, John A. Thain of Merrill Lynch and the American International Group’s bonus babies, that chorus spread east, enveloped the country and galvanized The People.
Such atrocities as banker bonuses and Mr. Thain’s bathroom redecoration have made delicious targets of contempt. It was the liberal media’s dream: a chance to position the lowly taxpayer, the outraged face of TARP, against the mustache-twirling titans of Wall Street.
Taxpayer vs. corporate bad guy is a good one. But how about taxpayer vs. shareholder?
That, surprisingly, is a story that’s largely evaded the news pages, despite the fact that settlements resulting from the scores of shareholder suits against TARP entities will stretch into the stratosphere.
Sure, through TARP, taxpayer money may be used to pay off mortgages and fund bonus pools. But, in what will amount to a far more expensive proposition, TARP money will also be used to line the pockets of allegedly aggrieved shareholders and the lawyers who, wrapped smugly in the flag of corporate governance, are in the process of making a billion-dollar cottage industry out of filing strike suits.
Take the villainous Merrill Lynch. On Jan. 16, the government announced it would invest $20 billion of TARP money in Bank of America and guarantee $118 billion of assets in order to help it absorb its acquisition of Merrill. On that same day, Merrill announced it would shell out $550 million to settle claims by shareholders that it misled investors about assets backed by subprime mortgages.
Where is that settlement money going to come from? At the minimum, settlements like this one mean Bank of America is less able to pay back TARP money. At the worst, the bank must cut into its TARP allotment in order to settle up. In either case, shareholders of companies that would have gone bankrupt but for TARP are instead getting their settlements funded by bailout money.
And there will be more. Thirty-two TARP recipients had received $1 billion or more in federal money as of April 15, according to the Treasury’s Web site. And 19 of those companies have been sued since January 2008, according to data accumulated by the Stanford Securities Class Action Clearinghouse. Put otherwise, of the more than $300 billion that’s been paid out in TARP money, nearly $240 billion of it, or 78 percent, is subject to shareholder suits.
Even in flush times, the shareholder class action is a controversial legal mechanism. Its backers claim that these suits keep companies honest by deterring corporate malfeasance and making the bad guys pay. (Yes, believe it or not, some will argue that even with the Department of Justice, the Securities and Exchange Commission and Attorney General Andrew M. Cuomo of New York patrolling Wall Street, we still need shareholder suits to keep companies honest.) But even in a typical, TARP-free paradigm, the bad guys don’t pay. Instead, shareholders wind up paying each other.
The shareholder class action is a “circular and costly” process, according to Adam Pritchard, a professor at the University of Michigan Law School. He explains: “It’s the company’s dollar that gets paid out in these suits. Shareholders effectively take a dollar from one pocket, pay about half of that dollar to lawyers on both sides, and then put the leftover change in their other pocket.”
But now, in the world according to TARP, that settlement money is no longer coming from the corporation or its insurance plan. It’s coming from you.
“At the end of day, you can’t avoid the fact that, in settling these cases, you will inevitably be taxing the taxpayer, as you shift tax money to the plaintiff-shareholder class,” says Joseph Grundfest, a professor at Stanford Law School and a former S.E.C. commissioner.
Ironically, by appearing to provide shareholders with a real remedy, class actions have long been billed as corporate law’s most populist event. But when taxpayer money, rather than the corporate coffer, is being used to fund the resulting settlements, whose bad behavior are we really punishing?
Dan Slater, a former litigator, is a freelance journalist in New York.
Tuesday, April 14, 2009
Report Sees Signs Bankruptcy-Related M&A Deals on the Rise
Brian Baxter, 04-14-2009
Citing data compiled by Thomson Reuters, the Financial Times reports that bankruptcy-related M&A deals have hit their highest level globally since August 2004. With the economic downturn forcing more companies into sales of distressed assets, it seems likely the trend will continue.
"We've only just begun," Skadden, Arps, Slate, Meagher & Flom restructuring Co-chair J. Gregory Milmoe told the Financial Times. "Given the dearth of capital and the substantial increase in the number of companies that will be troubled, one would expect the M&A rate to increase dramatically."
A few weeks ago we posted on the rise in section 363 asset sales and liquidations occurring in bankruptcy, citing pending sales by BearingPoint and The Greenbrier Hotel.
"[Section 363s] are a capital markets-driven phenomenon; there's less DIP financing to stay in the ordinary course of operations and support a standalone [bankruptcy] plan," Willkie Farr & Gallagher business reorganization Chair Marc Abrams told us. "And there are equally reduced levels of exit financing that would permit a company, once it comes up with a stand-alone plan, to emerge from bankruptcy."
The Financial Times points to the $350 million BearingPoint deal and the decision by auto parts manufacturer Delphi to sell its brakes business to a Chinese company for $100 million as evidence that bankruptcy-related M&A is on the rise.
Thomson Reuters identified 34 such deals in March alone and 67 so far this year. The bulk of those deals were in the U.S. and Japan, the Financial Times reports, because of the length of time both countries have been in recession and more liberal bankruptcy rules that allow companies to operate while they restructure.
According to Thomson Reuters data, monthly totals for bankruptcy-related M&A peaked at 87 such deals in July 2002 and dwindled to a mere seven in May 2007, shortly before the onset of the global recession.
While many of the deals of the last downturn involved telecoms and tech startups being acquired by strategic and private equity buyers, this time around, the private equity money has remained on the sidelines because debt has become more expensive.
Since insolvencies tend to peak 12 to 18 months after the beginning of a recession, Thomson Reuters data suggest that more bankruptcy-related M&A work will emerge later this year, the Financial Times reports.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
Copyright 2009. Incisive Media US Properties, LLC. All rights reserved.
Citing data compiled by Thomson Reuters, the Financial Times reports that bankruptcy-related M&A deals have hit their highest level globally since August 2004. With the economic downturn forcing more companies into sales of distressed assets, it seems likely the trend will continue.
"We've only just begun," Skadden, Arps, Slate, Meagher & Flom restructuring Co-chair J. Gregory Milmoe told the Financial Times. "Given the dearth of capital and the substantial increase in the number of companies that will be troubled, one would expect the M&A rate to increase dramatically."
A few weeks ago we posted on the rise in section 363 asset sales and liquidations occurring in bankruptcy, citing pending sales by BearingPoint and The Greenbrier Hotel.
"[Section 363s] are a capital markets-driven phenomenon; there's less DIP financing to stay in the ordinary course of operations and support a standalone [bankruptcy] plan," Willkie Farr & Gallagher business reorganization Chair Marc Abrams told us. "And there are equally reduced levels of exit financing that would permit a company, once it comes up with a stand-alone plan, to emerge from bankruptcy."
The Financial Times points to the $350 million BearingPoint deal and the decision by auto parts manufacturer Delphi to sell its brakes business to a Chinese company for $100 million as evidence that bankruptcy-related M&A is on the rise.
Thomson Reuters identified 34 such deals in March alone and 67 so far this year. The bulk of those deals were in the U.S. and Japan, the Financial Times reports, because of the length of time both countries have been in recession and more liberal bankruptcy rules that allow companies to operate while they restructure.
According to Thomson Reuters data, monthly totals for bankruptcy-related M&A peaked at 87 such deals in July 2002 and dwindled to a mere seven in May 2007, shortly before the onset of the global recession.
While many of the deals of the last downturn involved telecoms and tech startups being acquired by strategic and private equity buyers, this time around, the private equity money has remained on the sidelines because debt has become more expensive.
Since insolvencies tend to peak 12 to 18 months after the beginning of a recession, Thomson Reuters data suggest that more bankruptcy-related M&A work will emerge later this year, the Financial Times reports.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
Copyright 2009. Incisive Media US Properties, LLC. All rights reserved.
Friday, April 10, 2009
Q1 Worldwide M&A League Table
Here's Thomson Reuters' Q1 Worldwide M&A league table.
Announced deals 01/01/09 - 31/03/2009
1. Morgan Stanley - $218.6bn deal volume, 70 deals
2. JPMorgan - $203.3bn, 70
3. Citi - $182.7bn, 59
4. Goldman Sachs - $160.2bn, 37
5. Deutsche Bank - $133.4bn, 50
6. Credit Suisse - $116.2bn, 50
7. Bank of America / Merrill Lynch - $99.2bn, 42
8. UBS - $93.1bn, 42
9. Barclays Capital - $69.7bn, 11
10. Evercore Partners - $67.3bn, 6
11. Lazard - $41.6bn, 39
12. Rothschild - $35.4bn, 52
13. Nomura - $31.9bn, 58
14. Santander - $28.3bn, 16
15. RBC Capital Markets - $26.1bn, 23
16. Mediobanca - $21.5bn, 10
17. China Int Capital Co - $20.1bn, 11
18. Blackstone Group - $19.3bn, 11
19. CIBC World Markets - $19.0bn, 8
20. BNP Paribas - $12.1bn, 17
21. ING - $11.9bn, 9
22. RBS - $11.1bn, 13
23. NIBC NV - $10.8bn, 2
24. Scotia Bank / Bank of Nova Scotia - $7.9bn, 9
25. Grant Samuel - $7.6bn, 7
Source - Thomson Reuters
Announced deals 01/01/09 - 31/03/2009
1. Morgan Stanley - $218.6bn deal volume, 70 deals
2. JPMorgan - $203.3bn, 70
3. Citi - $182.7bn, 59
4. Goldman Sachs - $160.2bn, 37
5. Deutsche Bank - $133.4bn, 50
6. Credit Suisse - $116.2bn, 50
7. Bank of America / Merrill Lynch - $99.2bn, 42
8. UBS - $93.1bn, 42
9. Barclays Capital - $69.7bn, 11
10. Evercore Partners - $67.3bn, 6
11. Lazard - $41.6bn, 39
12. Rothschild - $35.4bn, 52
13. Nomura - $31.9bn, 58
14. Santander - $28.3bn, 16
15. RBC Capital Markets - $26.1bn, 23
16. Mediobanca - $21.5bn, 10
17. China Int Capital Co - $20.1bn, 11
18. Blackstone Group - $19.3bn, 11
19. CIBC World Markets - $19.0bn, 8
20. BNP Paribas - $12.1bn, 17
21. ING - $11.9bn, 9
22. RBS - $11.1bn, 13
23. NIBC NV - $10.8bn, 2
24. Scotia Bank / Bank of Nova Scotia - $7.9bn, 9
25. Grant Samuel - $7.6bn, 7
Source - Thomson Reuters
Thursday, April 09, 2009
Nail the Shorts?
Floyd Norris, NYT, Notions on High and Low Finance, April 8, 2009:
The S.E.C. is putting out for comment a bunch of possible short-selling restrictions today. There are several variations on two ideas. First is an uptick rule, like one we used to have, that bars short-selling at a price lower than the last different price. Second is some type of circuit breaker, like barring further short sales of a particular stock on a day that stock has fallen 10 percent.
I assume the commission will eventually adopt something. The pressure from Congress, and the public, is great.
And I suspect that the eventual impact of what they adopt will be modest, at best.
Listening to the five commissioners speak was refreshing, in contrast to the unlamented S.E.C. during the chairmanship of Christopher Cox. Last fall, the S.E.C. introduced panic measure after panic measure to halt or reduce short-selling. There was little effort to carefully consider whether there was any evidence to support the measures, which seemed to change every hour or two. Then they had to be tweaked as unanticipated consequences piled up.
This time, all five commissioners, led by Chairwoman Mary Schapiro, seemed to understand that there is no empirical evidence to support the belief that short-sellers are to blame for much of anything, even if there is public outrage. Whatever rule is adopted will be chosen after everyone has a chance to comment and point out unintended consequences.
It sounds as if panic is receding at the commission.
The S.E.C. is putting out for comment a bunch of possible short-selling restrictions today. There are several variations on two ideas. First is an uptick rule, like one we used to have, that bars short-selling at a price lower than the last different price. Second is some type of circuit breaker, like barring further short sales of a particular stock on a day that stock has fallen 10 percent.
I assume the commission will eventually adopt something. The pressure from Congress, and the public, is great.
And I suspect that the eventual impact of what they adopt will be modest, at best.
Listening to the five commissioners speak was refreshing, in contrast to the unlamented S.E.C. during the chairmanship of Christopher Cox. Last fall, the S.E.C. introduced panic measure after panic measure to halt or reduce short-selling. There was little effort to carefully consider whether there was any evidence to support the measures, which seemed to change every hour or two. Then they had to be tweaked as unanticipated consequences piled up.
This time, all five commissioners, led by Chairwoman Mary Schapiro, seemed to understand that there is no empirical evidence to support the belief that short-sellers are to blame for much of anything, even if there is public outrage. Whatever rule is adopted will be chosen after everyone has a chance to comment and point out unintended consequences.
It sounds as if panic is receding at the commission.
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