Indian firms are mature to handle M&As now

June 29 - The Economic Times (India) - It’s raining deals for India Inc. Put aside the global recession, Indian companies are not only looking to tap opportunities offshore but are also being seen as a lucrative asset by foreign companies. The emerging-market M&A activity in 2008 so far is up 17% over last year at this time, at $218 billion, while for the rest of the world it is down 43%, at $991 billion. But all is not well, feels Abhey Yograj, chairman and MD, Tecnova. In the last two decades, his company has helped over 280 global organisations make their Indian foray by providing cross-border acquisitions, workable strategy solutions and implementation assistance. He explains the challenges ahead in the M&A segment. Read More.

More mergers seen in U.S. defense space

June 25 - Reuters (U.K.) - Italian defense manufacturer Finmeccanica SpA's recent $4 billion acquisition of U.S. defense company DRS Technologies Inc was a big one, but it is not the last one.

More European defense manufacturers looking to gain a presence in the U.S. defense market -- the world's largest -- will likely be targeting U.S. defense suppliers.

Increasing acquisition activity is also expected within the domestic defense sector as suppliers consolidate to become one- stop shops for manufacturers such as Boeing Co, Lockheed Martin Corp and Northrop Grumman Corp. Read More.

Survey: most U.S. and Canadian oil execs foresee increase in M&A activity

June 23 - The Canadian Press - Merger and acquisition activity is expected to heat up across oilpatch, a survey by a Calgary law firm suggests.

Blake, Cassels & Graydon LLP asked 100 executives and financial advisers in the oil and gas industry about trends they expect to see over the next year. The survey suggests 60 per cent of U.S. and Canadian respondents expect the total volume of merger and acquisitions to increase.

The sentiment was stronger among Canadians surveyed, with 70 per cent saying they agreed with that view. Read More.

Private equity Asia – the market today

June 23 - FinanceAsia.com - Asia has been an area of focus for a number of global and local private equity players for many years. The credit crunch has prompted an even larger number of financial sponsors from the US and Europe, and the advisers who look to work with them, to ramp up their Asian presence and make it a key market for their business. Of course, simply increasing presence and capital available in Asia will not be enough for private equity players to succeed in the region.

Asia continues to present some formidable challenges to private equity investment. While these vary from country to country, generally speaking they include a combination of cultural, commercial and regulatory factors that get in the way of successfully investing and successfully exiting in a time honoured fashion. In many markets, and in particular in the two markets which dominate Asian investing - China and India - this means that even the basic LBO deal model that has served private equity so well in the US and Europe often cannot be used. Having said that, certain innovative (and highly structured) solutions have been developed to overcome this issue in India. Read More.

Research shows 2008 may be the best year for M&A

June 17 - Innovatives Report (Germany) - Results from the latest stage the of ongoing Towers Perrin/Cass Business School research looking at the value created in the last three global M&A cycles reveals that, contrary to received wisdom, 2008 may be the best time to do a deal.

This most recent part of the study looked at the performance of companies before and after peak years of the cycles. Together with Towers Perrin, Scott Moeller, Professor of Mergers and Acquisitions at Cass, examined the two prior merger waves and found the post-peak years (1990 and 2000) delivered higher shareholder value compared with deals in the frenzy of the M&A booms. This was true for all deals, although the research focused on those between $400 million and $1.5 billion in size (adjusted for inflation).

Combining the two waves gives a clear and statistically significant picture of performance in pre-peak, peak and post-peak years. The post peak years show the performance outperformed the MSCI World Index by 5.4% on average over the two periods. Read More.

Rule Makes Execs Think Twice About Dealmaking

A Deloite survey says FASB's new merger rule will put the kibosh on transactions that until recently would have gone forward.

As always, acquiring companies value the target company's assets and liabilities, identifiable intangible assets, and some previously unrecognized contingencies at fair value at the time of the sale. But under the new measurement system, unobservable assets and liabilities, such as contingent liabilities that are measured using estimates, must be valued on what the company believes a hypothetical third party would pay for them, rather than rely on in-house models. "The most difficult part of implementing FAS 141(R) is coming to grips with fair-value principles that were never required before," Jay Hanson of McGladrey & Pullen told CFO.com in an earlier interview.

For example, Hanson opined on potential problems related to the way companies record merger-and-acquisition transactions in which the acquiring company buys less than 100 percent of a target company. Read More.

Middle market deals prove resilient

June 12 - Financial News (U.K.) - Two private equity transactions announced Tuesday and Wednesday demonstrate the continued resilience of the middle market this year as larger deals struggle to gain traction in the wake of the credit crunch. Read More (subscription required)

Mining Replaces Financial Services as Biggest Driver of M&A

June 12 - Bloomberg - Metals are the new green on Wall Street, as mining has displaced financial services to become the biggest source of mergers and acquisitions.

The value of announced mining takeovers more than tripled to $199 billion in the first five months of 2008 from a year ago, even as the global pace of M&A dropped 37 percent, data compiled by Bloomberg show. Financial-services companies, the largest driver of merger fees for the past two years, disclosed $173.5 billion of transactions in the first five months. It's the first time mining mergers have topped the M&A table since Bloomberg began compiling the data in 1998.

"We have moved into the age of commodities," said Carl Hughes, a London-based partner at Deloitte & Touche LLP, who oversees the firm's energy and resources practice. "You clearly have a large number of mining companies just generating cash and profit like there is no tomorrow." Read More.

What to make of this frenzy of energy deals?

June 11 - Corporate Dealmaker Blog (The Deal) - "Duane was in the hot tub, shooting at his new dog house with a .44 Magnum."

That's how Larry McMurtry began "Texasville," his 1987 sequel to "The Last Picture Show." Having gotten rich in the energy boom of the early 1980s, Duane Moore opens this novel teetering on the brink of bankruptcy amidst the subsequent bust.

A couple of items in Wednesday's news bring Duane to mind. One is the acquisition of Hunt Petroleum Corp. by XTO Energy Inc. for $2.6 billion in cash plus $1.6 billion worth of XTO's hot stock. This is XTO's third deal since April, and CEO Bob Simpson says he expects to do another $1 billion to $1.5 billion worth of deals this year. He's not the only one; energy deals are surging right along with energy prices. Read More.

Marketplace trends focus of symposium

June 8 - Green Bay Press Gazette - I just got back from the 2008 Midwest Business Brokers and Intermediaries annual symposium for lower-middle market mergers and acquisitions companies. More than 80 professionals attended the event in Milwaukee.

We heard from lenders, private equity groups and business intermediaries and discussed trends in the marketplace. Here is what I've seen, and what I learned:

• Lending has tightened, no surprise there, but not across the board. For lower-middle market deals, those with revenues between $1 million and $30 million, the lenders were clear: "We have money to lend." Read More.

Mega-buyouts won't be back for years, says Carlyle's Rubenstein

The hang-up? Banks are still stuck with loans, institutional buyers are still spooked

June 4 - Financial Week - The age of the mega-buyout isn’t over, but it may take a number of years for it to return, the head of one of the world’s top leveraged buyout firms firms said on Wednesday.

David Rubenstein, co-founder of the $81 billion Carlyle Group, said a resurgence of large buyout activity of the kind that occurred in recent years is contingent on banks selling inventories of loans used to finance previous deals. Read More.

Credit crisis may spark more M&As in China

June 6 - China Daily - The global credit crisis could actually increase the volume of M&A deals in Asia's financial sector and China is likely to be the most active area this year, according to a recent report.

The findings are based on a survey of 281 senior executives working in Asian financial institutions. The Economist Intelligence Unit, on behalf of PricewaterhouseCoopers, conducted the survey in March 2008, marking PwC's third report on financial services M&A.

According to the findings, although the credit crunch has led to market volatility and put a halt on larger financial service deals in the first quarter of 2008 throughout Asia, 44 percent of respondents believed that the credit crisis could actually increase the volume of M&A deals in Asia. Read More.

Convergence of Accounting Standards May Slow M&A Activity

June 3 - Seeking Alpha - Efforts to reconcile US and international accounting standards could contribute to a significant slowing of merger and acquisition activity, according to Deloitte.

When more than 1,850 executives were asked about the impact of Financial Accounting Standards Board Statement No. 141 [R], Business Combinations, 40 percent said that the revised standard would cause them to rethink deal strategy and/or impact planned deal activity, according to an online poll from Deloitte.

Statement 141 [R] is the first substantially converged accounting standard by the FASB and the International Accounting Standards Board. The rule will change how companies approach financial planning and reporting around mergers, acquisitions and ownership changes. Statement 141 [R] is effective for companies with fiscal years beginning after December 15, 2008. Read More.

A New Direction in Energy M&A

June 3 - The Motley Fool - When it comes to onshore drilling for oil and especially natural gas, directional is the new vertical.

Now that the industry is targeting shale plays like the natural gas-bearing Marcellus and the oil-bearing Bakken, players such as Devon Energy, Chespeake Energy, and XTO Energy all have to send their drillbits sideways to hit more "pay."

This is a major boon for drillers like Precision Drilling Trust, whose rigs are able to perform this more demanding directional activity. Another beneficiary of the trend is W-H Energy Services, whose PathFinder subsidiary provides both the personnel and the equipment to hit those hard-to-reach reservoirs. Read More.

Why the Credit Crunch Should Help Corporate M&A

May 28 - Knowledge@Wharton - Credit market turmoil is altering the global playing field in buyouts and acquisitions, a field rife with complaints in recent years about too much money chasing too few good deals. The credit shortage puts pressure on pricing and transactional quality, while also giving public companies a better shot at acquisitions that the more aggressive private equity firms might previously have snatched away.

These are some practical implications of a paper presented at a recent Wharton conference sponsored by the Weiss Center for International Financial Research whose theme was "A Global Perspective on Alternative Investments." The paper, titled "Leverage and Pricing in Buyouts: An Empirical Analysis," documents the pricing anomalies that have characterized private equity transactions in recent years. Chief among them: The greater the leverage applied to a deal, the greater the price it has tended to command. Read More. (subscription required)

Private Capital Symposium: DLJ's Rattner on creating value

May 28 - DealScape Blog (The Deal) - At The Deal's Fifth Annual Private Capital Symposium Steven Rattner, managing director of DLJ Merchant Banking Partners, explained why it is easier to create value in middle market companies.

There is a difference in creating value from middle market deals to large cap deals, he said. "When you buy a 20 billion market cap company. Those companies have their own languages and religions...In today's type of market's where it is about creating value in the companies you own, it is easier to create that value in middle market companies," Rattner explained. Watch the video.

Report: M&A seen strong among private companies

May 23 - Corp DealMaker Blog (The Deal) - The folks over at Grant Thornton International Ltd. put together an international business report, entitled titled Mergers and acquisitions: Opportunities for global growth. The report confirms what we've been hearing for months: that the recent tightening of lending policy and an uncertain economic outlook has had an impact on transactions worldwide at the top end of the market.

But they also found that privately held businesses in the BRIC economies, North America, mainland Europe, the U.K. and Ireland, and the rest of the world are confident about their prospects for M&A over the next three years. Privately held businesses in China were the most bullish, with 67% predicting deal activity over the next three years, followed by Brazil at 64%. Forty-eight percent of private U.S. businesses expect to do deals in the time period. Read complete report.

India comes of age in M&A, but not always smooth

May 9 - Reuters - Bharti Airtel's overtures towards South African telco MTN Group, which could lead to India's biggest foreign takeover, are a sign that big Indian firms are hungry for deals and undaunted by a global credit crisis that has dented M&A activity around the world.

While Bharti shares have been hit as analysts query the mobile firm's ability to fund a deal that could top $20 billion, few doubt there will be more acquisitions by increasingly outward-looking Indian firms.

"Indian corporates have come of age," said Pramit Jhaveri, head of investment banking at Citi India, which advised Tata Motors on its $2.3 billion buy of Ford Motor's Jaguar and Land Rover brands in March. Read More.

Carlyle Group's David Rubenstein: 'The Greatest Period for Private Equity Is Probably Ahead of Us'

May 6 - Knowledge@Wharton - David Rubenstein is co-founder and managing director of The Carlyle Group, the Washington, D.C.-based private equity firm with more than $70 billion in assets under management. In March, members of the Wharton Private Equity Club interviewed Rubenstein about the ongoing credit crisis, the industry outlook, the rise of sovereign wealth funds, and why private equity is "one of the greatest exports of the United States." An edited version of the conversation appears below. Read Q&A. (Subscription required)

Video: Middle-market matters

May 5 - DealScape Blog - Today, the middle market is a robust, fertile area of dealmaking in a veritable desert of megadeals. A year earlier, before the credit crunch pinched the ability of buyout firms to execute deals over $1 billion, a panel at The Deal's 2007 Private Capital Symposium discussed how most firms had abandoned the middle market to niche players.

Now that the credit crunch has put a stop to the parade of megabuyouts, the middle market is once again a key target area for deep-pocketed financial buyers looking to escape the worst of a tight debt market. At The Deal's Fifth Annual Private Capital Symposium on May 14, the climate for deals in the middle market will be the subject of a panel discussion. With the effects of tight credit starting to spill into midmarket deals, the panelists will consider the current climate, as well as key issues such as where the credit crunch is biting hardest and how middle-market lenders are reacting to the contraction of the debt markets. Read More and Watch Video.