M&A Daily (formerly Mike's M&A Blog)

Where’s the Mezz?

noreply@blogger.com (Unknown) — Wed, 21 Jan 2009 17:17:00 +0000

The mezzanine market, armed with billions of dollars, still needs the senior lenders to show signs of life before it can resume its renaissance

By DANIELLE FUGAZY
January 21, 2009

Last year, more than $25 billion was raised by roughly 30 mezzanine providers, according to data from Thomson Reuters. While other lending sources have effectively dried up amid the credit crisis, one would think the mezzanine market would be enjoying a renaissance as one of the few financing options still available. Such a scenario, however, has yet to materialize.

“Very few private equity firms will do a mezz and equity deal; they want senior lending,” says Andy Steuerman, a senior managing director with Golub Capital. “If you can’t get the senior lenders interested, then you have no transaction. That is the situation today.”

Another factor is, quite simply, that the deal market has effectively stalled. Economic uncertainty, on top of the credit woes, has both buyers and sellers retreating to the sidelines until more clarity emerges. For the most part, the only deals being pursued are the transactions that are absolutely necessary for a company’s survival. “We are telling our clients to hang on, now is not the time to sell,” says one banker, speaking anonymously. That in turn keeps the private equity market stagnant, which effectively idles the mezzanine providers, even if they’re armed with billions dollars worth of dry powder.

For the few deals that are out there, another factor is limiting the appeal of mezz financing; namely its price. The mezz market has become costly, almost to the point that it rivals the equity portion of the deal. Read more.

Edge - Chaparral Merger A No-Go

noreply@blogger.com (Unknown) — Thu, 18 Dec 2008 01:10:00 +0000

The all cash transaction was cancelled as a result of the lack of debt and equity financing.

Dec 17, 2008 - Mergers Unleased - By AVRAM DAVIS - Edge Petroleum and Chaparral Energy have terminated the all-stock merger, due to lack of debt and equity financing. Chaparral was to acquire Edge, with Edge stockholders receiving 0.2511 shares of Chaparral for each share of Edge stock. Edge and Chaparral are both oil and natural gas companies, based in Houston, Texas and Oklahoma City, Oklahoma respectively.

The companies cancelled the transaction as it became apparent that it was “highly unlikely” that the conditions necessary for the deal to close would be satisfied. It was necessary for the conditions of the merger agreement to be met by December 31, 2008, and the companies were not able to raise sufficient debt and equity financing. Read more.

The M&A Slowdown by the Numbers–The Case of the Missing Fees

noreply@blogger.com (Unknown) — Thu, 11 Dec 2008 22:44:00 +0000

11 Dec 2008 - Deal Journal - “M&A is all but dead.”

That was the pronouncement from Deal Journal colleague Matthew Karnitschnig this morning.

Global deal volume fell to $262 billion last month, according to Dealogic. While low, that number is nothing to sneeze at. But exclude the spate of government investments last month and the total tumbles to levels not seen since 2003. For those who have tried hard to forget those barren years, global deal volume reached $1.4 trillion that year and the value of only eight deals topped $10 billion. Now compare that with last year, when $4.5 trillion of deals were announced and more than 30 deals topped $10 billion.

Perhaps more importantly, the value of withdrawn deals is higher than the value of announced deals, Karnitschnig points out. And that fact is hitting investment bank where they don’t want to get hit–in their wallets.
Read more.

Morgan Stanley M&A Chief McDonald Dies

noreply@blogger.com (Unknown) — Mon, 08 Dec 2008 17:39:00 +0000

Dec. 8 - LONDON (Reuters) - Gavin MacDonald, the head of mergers and acquisitions at Morgan Stanley, has died. He was 47.

MacDonald died on Friday evening, after suffering a heart attack at Morgan Stanley’s offices in Canary Wharf, London, earlier last week, Morgan Stanley spokesman Michael Wang said.

A founding member of Morgan Stanley’s European M&A team, MacDonald had worked on a string of multi-billion dollar deals, and became global head of M&A in 2007 — the first London-based banker to hold that role for the Wall Street firm. Read more.

William Blair & Co. to cut staff

noreply@blogger.com (Unknown) — Fri, 05 Dec 2008 00:33:00 +0000

4 Dec 2008 - Chicago Business (Crain’s) — Investment firm William Blair & Co. said Thursday it's cutting staff in an effort to combat declining business during the economic slowdown.

The Chicago-based company said it is laying off less than 10% of its 1,000 employees, according to the Chicago Tribune. Read more.

Credit crunch may fuel oil and gas M&A

noreply@blogger.com (Unknown) — Fri, 05 Dec 2008 00:31:00 +0000

4 Dec 2008 - TheDeal.com - Nearly three-quarters of oil and gas CFOs polled in a recent survey said they expect the U.S. economic crisis to impact their ability to borrow money or extend bank debt in 2009. In addition, well over half the 100 executives surveyed by the accounting firm BDO Seidman LLP in October and November said that credit capacity restraints, including access to capital, will be their greatest challenge next year, followed by falling oil or natural gas prices. "They feel gravely concerned about raising money," said Charles Dewhurst, a partner at the firm and leader of its national energy practice in Houston.

Dewhurst says the credit drain may lead more companies to consider buyouts or bankruptcy as a solution. "With less credit and lower prices, smaller E&P [exploration and production] companies are going to be attractive acquisition targets for larger companies, and because of debt constraints, many are going to feel compelled to sell," he said.

Companies that put together projects and borrowed money based on $150 barrel oil will be most vulnerable. Read more.

Tech Giants Still Seek Acquisitions–At the Right Price

noreply@blogger.com (Unknown) — Wed, 03 Dec 2008 19:21:00 +0000

3 Dec - Deal Journal - Deep-pocketed technology giants such as Microsoft and Google plan to continue snapping up companies during the economic downturn, likely benefiting from an ability to drive a hard bargain with even red-hot start-up companies, according to executives speaking at a venture capital conference Tuesday.

At issue is the fairly nebulous way that Silicon Valley’s closely-held start-up companies calculate their own values, absent the input of a larger group of investors in a public market. In more flush times, even small companies with relatively undeveloped businesses often commanded high acquisition prices.

Those days are over, executives said during a presentation at the AlwaysOn Venture Summit. Microsoft Corporate Vice President Dan’l Lewin said that while the Redmond, Wash., software giant’s appetite for acquisitions hasn’t waned, its willingness to entertain high valuations has. “The negotiations on valuation might be difficult, but we’re not going to stay away because of the economic climate,” Lewin said.

Read more.

JPMorgan Plans 3,000 I-Banking Job Cuts

noreply@blogger.com (Unknown) — Fri, 21 Nov 2008 17:50:00 +0000

Nov. 21 - PEHUB - NEW YORK (Reuters) - JPMorgan Chase & Co is cutting 10 percent of its investment banking staff — about 3,000 jobs — as the economic slowdown starts to bite into its earnings, people familiar with the situation said on Thursday.

JPMorgan shares slid as much as 18 percent as one analyst said the cuts could reflect greater-than-expected weakness at the bank, long seen as one of the industry’s few stalwarts through the credit crisis.

“Because JPMorgan has held up relative to the group, they’re more vulnerable to a fall,” said Ben Wallace, securities analyst at Grimes & Co in Westborough, Massachusetts, which holds JPMorgan shares.

“Cutting investment banking jobs raises questions about profitability at the firm,” he said.

The company will likely cut staff in line with competitors such as Goldman Sachs Group, which is cutting 10 percent, the sources said.

On Thursday, JPMorgan let go at least six equity sales officials from its New York desk, according to one person familiar with the matter. Read more.

Looking for deal activity in '09? Think energy, healthcare and tech

noreply@blogger.com (Unknown) — Wed, 19 Nov 2008 20:11:00 +0000

Nov. 18 - Thedeal.com - The 2009 outlook for M&A activity is bleak for most sectors, but it's not universal. Jeff Bistrong (pictured), a managing director with the middle-market investment bank Harris Williams & Co., predicts relatively robust dealflow in energy, healthcare and technology. Here's what he had to say about each sector:

Energy: "The downward movement in equity and commodity prices in the energy market will temper short-term deal activity," says Bistrong, "but it will not undermine the long-term prospects." He points to the sale his firm helped facilitate in October of energy maintenance, repair and industrial cleaning provider Aquilex Holdings LLC from Harvest Partners LLC to the Ontario Teachers' Pension Plan as an example of the healthy appetite for deals in the sector. "We've invested heavily in this space, and we'll continue to do so," says Bistrong.

Healthcare: Harris Williams helped sell online health counselor HealthMedia Inc. in October to Johnson & Johnson Services Inc., and the company is working on the sale of three additional healthcare companies operating in the Internet space. Bistrong predicts decent dealflow in the healthcare sector because it is secular from the macroeconomic environment, but he says activity will be particularly robust among healthcare IT companies.

Technology: The software-as-a-service model is driving deal activity in the tech sector. That's a change, says Bistrong, from the not-so-distant days when lenders favored deals involving hardware companies with assets to sell over software companies with less predictable cash flow. Now, he says, "lenders are supporting tech growth by focusing on software companies with recurring revenue models, often subscription-based, where there is significant revenue visibility, and therefore significant visibility into cash flow. Read more.

Boston Scientific eyes M&A as biotechs suffer

noreply@blogger.com (Unknown) — Fri, 14 Nov 2008 16:52:00 +0000

Nov. 13 - thedeal.com - Boston Scientific Corp. CEO Jim Tobin, a guy who knows a thing or two about acquisitions, spoke at the Cleveland Clinic's Medical Innovation Summit Wednesday. Lazard Capital Markets LLC analyst Sean Lavin summarized Tobin's speech in a note to clients Thursday morning. First, Tobin reinforced what he and other execs have said recently: Boston Scientific is on the prowl with $2 billion in cash on hand. The downturn could present good deals for the diversified medical device maker, which is trying to dig out of the hole it created with its $27 billion takeover of Guidant Corp. in 2006.

Boston Scientific built its device empire through acquisition, but since the Guidant deal, the firm has shed several noncore product divisions and investments, often at a loss.

Tobin said Wednesday Boston would only buy "things that increase top-line growth. Small startups are generally out of luck." Boston will look for products that doctors want, he said, not interesting technology that might turn into products in the future.

He also said the dearth of IPOs -- no life sciences firm has gone public since March -- could be a death knell for venture-funded startups. "If you are a startup without the dollars to get to market, you are out of luck," he said. He also predicted unprofitable public biotechs would start running out of cash and disappearing. Read more.

Duke CEO Sees M&A For All Independent Power Firms

noreply@blogger.com (Unknown) — Wed, 12 Nov 2008 17:38:00 +0000

Nov. 12 - PEHUB - The remaining independent U.S. power producers will likely all be involved in some sort of merger or takeover activity in the next year and a half, the head of Duke Energy Corp told Reuters on Tuesday.

A hostile takeover attempt of NRG Energy Inc by Exelon Corp, and the purchase of Constellation Energy Group Inc by MidAmerican, has shaken up the industry’s view of so-called merchant power providers.

So analysts and executives now wonder who will be next in a sector that includes Mirant Corp, Dynegy Inc, Reliant Energy Inc and Calpine Corp.

While he did not name any specifically, Duke Chief Executive Jim Rogers said generally: “I think within 18 months you’ll see either consolidation or acquisition of all of them.” Read more.

Summit Partners' Mannion on PE firm write-downs

noreply@blogger.com (Unknown) — Tue, 11 Nov 2008 20:35:00 +0000

Nov. 11 - TheDeal.com - At The Deal's M&A Outlook 2009 conference Tuesday morning, Martin Mannion, a managing director at Summit Partners, spoke about the reluctance of owners to face the music when it comes to write-downs. "We have a Hobbesian choice," Mannion commented. "A lot of people aren't taking the pain. In the industry as a whole, if we took our medicine, it might be for the best.

"There's a lot of folks out there that are saying I don't have to take the pain yet because the capital structure on our deals is so stable, we can wait it out seven years," Mannion said. "Buyout guys tend to be optimistic, and sometimes they don't take their pain fast enough.

"We don't see the sellers capitulating at all," he said. "They're still not willing to come down on the prices."

Nor does he expect write-downs to be the only source of grief for private equity firms. "I think there's going to be fairly large shrinkage in our industry because a lot of firms aren't going to be raising new funds." Read more.

Banks Say `Kiss My Ring,' Choke Dealmaking: Chart of the Day

noreply@blogger.com (Unknown) — Fri, 07 Nov 2008 18:25:00 +0000

Nov. 7 (Bloomberg) -- The credit squeeze choked off the market for most debt-financed takeovers worth more than $5 billion last year. Now the smallest deals are getting killed too.

"There aren't people lending," said Paul Weisbrich, an investment banker at RSM McGladrey Inc. To even consider a loan, lenders are saying, "Kiss my ring."

The CHART OF THE DAY shows U.S. mergers since 2005 by dollar value and by number of transactions. They plummeted by value in 2007, when banks cut back the syndication of loans for multibillion-dollar deals. This year, the number of deals has plunged too, as banks reject financing for takeovers worth just $50 million, said Weisbrich, who is based in Costa Mesa, California. Read more.

Altria Lights Up Deal Financing

noreply@blogger.com (Unknown) — Fri, 07 Nov 2008 01:41:00 +0000

Nov. 6 - WSJ.com - Just as the price of cigarettes has been rising, so is the cost of financing a merger.

That is why companies not as strong as Altria Group might beware: Attempts to replicate the cigarette producer’s successful sale of $6 billion of debt to pay for its $10.4 billion acquisition of smokeless tobacco rival UST could be hazardous to their health.

That is because Altria’s underwriters, J.P. Morgan Chase, Citigroup and Goldman Sachs, priced the giant bond offering late Wednesday at a hefty six percentage points more than comparable Treasurys for each of the five-year, 10-year and 30-year tranches. Read more.

Distressed markets, low values to spur fund M&A

noreply@blogger.com (Unknown) — Thu, 06 Nov 2008 00:16:00 +0000

Nov 4 - Reuters - A U.S. asset manager shakeout looms as struggling banks line up to sell their mutual fund arms to raise capital and fund companies exit the money-market segment, hoping to cut losses.

The global financial crisis may also force companies with strong brands, such as Janus Capital Group Inc, into the hands of a private equity firm or a publicly traded rival, analysts and executives said.

"What's happening now is as part of the knock on effect of October. You are seeing a lot of firms come on to the auction block as potential rescue trades from distressed sellers," said Benjamin Phillips, research director at consulting firm Casey, Quirk & Associates LLC.

Asset managers are weathering the crisis better than banks, which have been clobbered by massive write-downs and exposure to losses in subprime mortgages that snowballed into the worst financial crisis since the 1930s. Read more.

October witnessed 'see-saw' in global M&A deals: report

noreply@blogger.com (Unknown) — Tue, 04 Nov 2008 22:41:00 +0000

Nov. 4 - Business Standard - The month of October assumed significant importance in the merger and acquisition calendar of this year as the announced M&A volume and the withdrawn deal volume hit record highs, a report says.

Global M&A volume totalled $451.5 billion in October, the largest month so far this year, up 30 per cent from September, deal-tracking firm Dealogic said in its latest report, adding that in this very month $119.8 billion worth of deals were withdrawn, the highest monthly withdrawn volume in 2008 year-to-date.

"October saw 142 deals withdrawn globally, the most of any month on record. The five most active months, based on the number of withdrawn deals on record, have all been in 2008," Felipe Pizarro, an analyst with Dealogic said. Read more.

Bankruptcy M&A Picks Up

noreply@blogger.com (Unknown) — Mon, 03 Nov 2008 22:40:00 +0000

Financial-services sector has boosted bankruptcy dealmaking, according to Thomson Reuters.

Nov 3 - Mergers Unleased - Bankruptcy M&A-related activity has increased for the first time in the last six years, according to new data from Thomson Reuters.

The number of Chapter 11 M&A purchases increased to 167 on a year-to-date basis, valued at $11.2 billion. Last year, 136 deals produced $16.9 billion of volume for the entire year. Not surprisingly, more than a third of bankruptcy activity took place in financial services with the sale of assets by New York investment bank Lehman Brothers and the $2.8 billion acquisition of Japan’s Ashikaga Bank by a consortium. Read more.

Value of tech M&A craters in third quarter

noreply@blogger.com (Unknown) — Fri, 31 Oct 2008 16:01:00 +0000

Oct 30 - The Deal.com - The total enterprise value of technology M&A deals in the third quarter plummeted to $15.3 billion, down 51% from $31 billion in the previous quarter, according to a new report from investment Updata Advisors Inc. Enterprise value as a multiple of the trailing 12 months' revenue fell 17% from the prior quarter and 12% from the year-ago period.

Deal volume in Q3 was up slightly, to 202 transactions, from the 194 deals announced in Q2. But the dealmaking environment, which was already deteriorating in July and August, fell apart in September, Updata says.

"While deals are still getting done, they are taking longer to complete as buyers are cautious yet opportunistic during an uncertain economic period," says Ira Cohen, managing partner at Updata, in a statement. "The climate tends to favor strategic versus financial buyers, as they continue to seek key acquisitions to capture market share, expand product portfolios or reach new customer segments. We're also seeing selected cross-border activity with U.S. targets." Read more.

Weill Seeks to Gain From Pain: Considers Fund to Invest in Battered Financials

noreply@blogger.com (Unknown) — Thu, 30 Oct 2008 23:56:00 +0000

Oct 23 -- Wall Street Journal -- Sanford Weill, the architect of Citigroup Inc., is considering a plan to profit from the same turmoil that has clobbered the banking giant.

Mr. Weill, who pulled off the deal that created Citigroup a decade ago and became its chairman and chief executive, is in talks about launching a private-equity fund that would invest in beaten-down financial companies and assets, according to people familiar with the matter.

Mr. Weill's potential partners are Michael Klein, who was co-head of Citigroup's investment bank until he left in July, and Michael Masin, former chief operating officer at the New York company.

Such ventures often fizzle before getting off the ground, so it isn't clear if Mr. Weill will go through with the plan. In recent weeks, though, Mr. Weill's team has reached out to potential investors, including sovereign-wealth funds, outlining their strategy and gauging interest in putting money into such a fund, people familiar with the discussions said. The tentative goal is to raise about $5 billion. Read More.

RSM EquiCo Capital Markets is Renamed McGladrey Capital Markets

noreply@blogger.com (Unknown) — Mon, 29 Sep 2008 18:16:00 +0000

Global investment bank RSM EquiCo Capital Markets LLC, one of the nation’s most successful merger and acquisition advisory firms, has changed its name to McGladrey Capital Markets LLC (www.mcgladreycm.com).

The firm’s new identity reflects its closer integration with RSM McGladrey, Inc., one of the nation’s largest providers of accounting, tax and business consulting services. Both firms are indirect subsidiaries of H&R Block, Inc. (NYSE: HRB).

Tech M&A plunges in 2nd quarter

noreply@blogger.com (Unknown) — Mon, 28 Jul 2008 13:35:00 +0000

July27 - Seeking Alpha - The technology industry may be weathering the worst of the economic storms, but tech M&A is suffering. The total enterprise value of deals in the sector in the second quarter was roughly $31 billion, down 59% from nearly $75 billion in the year-ago quarter, according to a new report from Updata Advisors. There were 194 deals in the quarter, compared with 256 transactions in the previous quarter and 263 in the year-ago period. Deal pricing is also feeling the pinch, with median multiples of enterprise value to trailing 12 months revenue falling 8% from a year ago. Read More.

Survey: M&A volume at bottom, will improve in 2nd half of '08

noreply@blogger.com (Unknown) — Thu, 24 Jul 2008 13:35:00 +0000

July 22 - Baltimore Business Journal - Middle market mergers and acquisitions professionals are frustrated with the current M&A environment. But they believe the volume of deals has bottomed out and are optimistic about the second half of 2008, according to a report released Tuesday.

In its twice-yearly survey, the Association for Corporate Growth and Thomson Reuters reported that only 43 percent of middle market M&A dealmakers believe the current M&A environment is good. That's down significantly from a year ago, when the figure was 93 percent.

Nearly half of the more than 500 investment bankers, private equity professionals, corporate development executives, lawyers, accountants and business consultants polled say the greatest obstacle to M&A activity is the weak economy, the report said. Read More.

India looks attractive despite global M&A fall: Accenture

noreply@blogger.com (Unknown) — Wed, 23 Jul 2008 13:27:00 +0000

July 21 - MoneyControl.com - According to a study by Accenture Ireland, the M&A activity has fallen off significantly. But India has managed to sail through despite the global fall. CNBC-TV18's Shreen Bhan spoke exclusively to corporate honchos from India Inc and from Accenture.

According to Peter Smyth, Lead, Accenture Ireland, there has been quite a significant fall off in the level of merger and acquistion activity. The Q1 stats for 2008 have seen a 24% drop in the value of M&A Activity, he said."We saw a fall in March 2008 of 40%, so the trend is getting much steeper," Smyth said. Read More.

U.S. Companies Eye Growth Overseas as Economic Uncertainty Lingers at Home

noreply@blogger.com (Unknown) — Thu, 17 Jul 2008 13:18:00 +0000

HSBC reports findings of inaugural survey of under-researched market segment, representing nearly $6 trillion in sales and employing 32 million -- Two-thirds (67%) of senior executives say sales abroad to grow faster than U.S. -- Nearly half (49%) intend to raise international sales targets

July 16 - MarketWatch - HSBC Bank USA, N.A. announced today the result of an inaugural survey of U.S. middle-market companies, a vital yet under-researched segment of the U.S. economy. The HSBC poll which, queried 500 senior financial executives from companies with annual sales between $20 million and $5 billion, focused on the opportunities and challenges they face when expanding into markets overseas. Read More.

China Flexes Its M&A Muscles

noreply@blogger.com (Unknown) — Thu, 17 Jul 2008 13:03:00 +0000

Julyl 15 - N.Y. Times Blog - The Olympics will give China a chance to celebrate its status as a political and economic heavyweight. The games also come as the Asian nation has been raising its profile in the deal-making business.

While the volume of mergers and acquisitions around the world was down 30 percent in the first half of the year compared with the same time in 2007, transaction volumes were actually up 5 percent in Asia, in large part because of aggressive buying by Chinese companies. Read More.