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.
Friday, November 21, 2008
Wednesday, November 19, 2008
Looking for deal activity in '09? Think energy, healthcare and tech
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.
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.
Friday, November 14, 2008
Boston Scientific eyes M&A as biotechs suffer
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.
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.
Wednesday, November 12, 2008
Duke CEO Sees M&A For All Independent Power Firms
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.
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.
Tuesday, November 11, 2008
Summit Partners' Mannion on PE firm write-downs
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.
"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.
Friday, November 07, 2008
Banks Say `Kiss My Ring,' Choke Dealmaking: Chart of the Day
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.
"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.
Thursday, November 06, 2008
Altria Lights Up Deal Financing
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.
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.
Wednesday, November 05, 2008
Distressed markets, low values to spur fund M&A
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.
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.
Tuesday, November 04, 2008
October witnessed 'see-saw' in global M&A deals: report
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.
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.
Monday, November 03, 2008
Bankruptcy M&A Picks Up
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.
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.
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