High hopes for Global, MidMarket M&A

September 18 - Reuters - While large-cap private equity firms are licking their wounds, a brighter picture has emerged from another section of the M&A community: the midmarket.

Indeed, private equity executives and bankers–large and small–say the midmarket is where it’s at (link to Smaller buyout shops feel the love story)these days. So does Grant Thorton, which says in a recent survey that 75 percent of mid-market companies expect to engage in international M&A at least once in the next 12 months. Read More.

Debt market may tighten further in Canada, but opportunity remains

September 18 - Financial Post (Canada) - The market for highly-leveraged, mega-cap private equity deals involving names like First Data Corp. and TXU Corp. in the U.S., and Bell Canada Inc. in Canada, may be tightening up, but that does not appear to be the case in the mid-market just yet.

The space where companies with roughly $50 to $300-million in revenue operate is the focus of institutional fund manager Penfund, who is eager to capitalize on any such shift in debt markets. The firm does equity investing via buyouts and minority investments, as well as provides private high-yield debt.

“Right now, conditions are still pretty good,” said Adam Breslin, a partner at Penfund. “There hasn’t been a major bank tightening for the middle market so far.” Read More.

Dutch finance ministry publishes proposals aimed at sharpening M&A laws - UPDATE

September 14 - Forbes - The Dutch Finance Ministry has published proposals to sharpen regulations around company takeovers to provide greater transparency about the bonuses paid to company directors and the consequences for employees, while also implementing stricter time frames.

The legislation will also serve to implement the Dutch government's response to the EU Takeover Directive, obligating a company that takes a 30 pct stake or more of another company to make a mandatory offer for all of the company's outstanding shares at a fair price.

Greater supervisory powers will also be granted to the Dutch stock markets regulator AFM, which will in future be required to assess a company's offer documentation. Read More.

Private equity will emerge much-changed

September 16 - FT.com - Remember private equity? It was the future once – the model not just for amassing vast personal wealth but for running companies, period. At present, it is shrouded in the fog that covers most of the financial landscape. But when that clears, what place will private equity have in the scheme of things?

To answer the question, we must first deconstruct the model. How much of the industry’s returns in recent years came from running companies better, and how much from financial engineering or simple leverage?

Indeed, how much of the takings for private equity managers came from their share of the profits and how much from management fees?

The hard-line advocates of private equity will tell you that nearly all the returns came from better management. Read More.

Private equity groups foresee slowdown in deals as credit sources dry up

September 14 - Times Online (UK) - One of Britain’s leading venture capitalists has given warning that the market for leveraged buyouts will dry up for the next one to two years in the wake of the credit crisis.

Guy Hands, in a quarterly letter to investors in his Terra Firma buyout group, said: “The days of simply buying a good company, financing it well and enjoying a great return are over. The debt simply will not be there.”

The financier, who closed his £2.4 billion acquisition of EMI just before the markets turned, said that private equity firms would have to work much harder to get deals done. Read More.

M&A market may cool down with capital supply getting squeezed

September 13 - The Economic Times (India) - Mergers and Acquisitions market might cool down with supply of capital drying up in the context of increasing credit defaults and private equity (PE) activity about to peak, the Boston Consulting Group said.

"One of the factor not in favour of increased M&A in the light of the unfolding subprime crisis was that an increase in corporate defaults could reduce the amount of capital available to prospective acquirers," BCG's global study on M&A said. Read More.

Private equity is in pause mode, Leech says

September 12 - The Globe & Mail (Canada) - Private equity buyers are adapting to the pricier debt market and there appear to be few people walking away from deals, said Jim Leech, who will take on the chief executive officer role at the Ontario Teachers' Pension Plan on Dec. 1.

Volatility in the credit sector sparked by defaults on high-risk mortgage loans in the United States has dampened the private equity market, but "this is a pause, not a conclusion," Mr. Leech, currently senior vice-president of Teachers' Private Capital, said in a speech in Toronto yesterday. Read More.

Bubble Energy?

September 11 - Forbes - Talk of an alternative energy "bubble" started percolating in the trade and cyber-press over the past several months. The fact is, the staid Dow Jones industrial average has done as well or better than most alternative energy indexes. So, hot, or not? Since global energy demand is rising unabated, the core question is, How big a piece can alternatives capture?

According to (some) wizards at Harvard, "Solar could meet one-fifth of U.S. energy needs within two decades." At least that's what they said 30 years ago in the widely acclaimed book Energy Future. What happened? If you count as solar both the obvious solar and indirect solar sources such as wind, wood, corn, geothermal and the like, America today hit a collective 4%, or one-twenty-fifth share. Read More.

Private equity eyes UK property funding role

September 6 - Reuters (London) - Private equity smells an opportunity in UK commercial property. Prices are falling, but developers cannot get the funds to buy bargains because lenders rocked by the subprime crisis are running shy of the sector.

Unlike the vulture funds of the 1990s though, these opportunists are not planning hostile takeovers of property firms paralysed by a lack of credit.

Instead, private equity sees itself as "white knight", offering its own cash for funding should the need arise, with a view to a more traditional debt refinancing when banks' appetite for lending returns. Read More.

Flurry of deals carves up a Canadian industry

With foreign players knocking, energy executives say there's still a place for independents

September 10 - The Globe & Mail (Canada) - Canada's nascent wind power business has caught the attention of foreign players, who have been steadily buying up domestic companies as the industry consolidates into fewer and fewer hands.

While more buyouts are expected, wind energy executives say there is still room for small independent wind developers in an industry that is finding its feet in a burgeoning market for alternative energy sources.

This summer, two very different foreign players grabbed a foothold in the Canadian wind business. In June, U.S. investment bank Lehman Brothers bought a big stake in private Toronto wind and solar power developer SkyPower Corp. for an undisclosed sum. Read More.

M&A Hiring Shows Life Despite Leery Outlook

September 10 - WSJ - European banks and other financial institutions plan to hire more merger-and-acquisition staff, even though there has been a sharp jump in the percentage that think a bursting loan bubble poses the greatest threat to deals in the next year, according to a survey by IntraLinks M&A Monitor, in association with Financial News.

A poll of 348 banks, corporations, legal firms, and private-equity businesses conducted as the worst of the credit crisis was unfolding this summer found that 84% were seeking to hire staff, marking a sharp increase from 69% in April and 75% a year ago. The optimism was highest in Germany, where more than 90% of respondents said they expected to recruit additional personnel, the study found. Read More.

Wall Street Beat: M&A, VC funding stay hot

Cognos, Yahoo, and Oracle are among the companies making acquisition announcements

Merger and acquisition news from companies as diverse as Yahoo, Cognos, and MetroPCS Communications heated up IT investor interest this week, shoring up confidence in the sector even as credit-market concerns continued to buffet the stock exchanges.

After wireless carrier MetroPCS proposed a merger valued at about $5.5 billion with rival Leap Wireless, its share price Tuesday spiked $1.36 to close at $28.65. Brokerage Jefferies & Co. Wednesday then upgraded its rating on the stock from "hold" to "buy," sparking another uptick in the company's share price. Though the merged company would have about 6.2 million customers, a far cry from the 50 million-plus subscriber base that market leaders like AT&T and Verizon have, the combined company would be the fifth largest in the U.S., with a national footprint. Read More.

Mergers can survive without private equity: Rubin

September 7 - Financial Post (Canada) - If mergers and acquisitions are going to continue to drive stocks higher, forget about getting much of a boost from private equity buyout firms.

These firms had been playing an increasingly important role during the buyout boom earlier this year and were involved in big deals, like the takeover of Bell Canada Inc. and Chrysler. Now, though, they appear to be withdrawing from the market.

According to Jeff Rubin, chief economist and chief strategist at CIBC World Markets, global private equity deals hit a peak of about US$150-billion in May, but then declined substantially in June and again in July. In Mr. Rubin's words, they then fell off a cliff: In August, there were just US$17.8-billion of private equity deals, a tiny fraction of their former glory. Read More.

BMO Capital Markets Releases Annual M&A Report on the North American Transportation Industry

M&A activity remained strong in 2006 and deal volume is expected to continue but may be slower in the short-term due to current credit market conditions

September 6 - CNN Money - The two-volume report provides an in-depth review of mergers and acquisitions and corporate finance activity among Transportation Industry Service Providers and Transportation Equipment Manufacturers. The report also looks at the level of M&A activity in various sub-sectors, including active strategic and financial acquirers and a summary of financial parameters, including valuation metrics.

"Overall, the M&A activity in the transportation industry remained strong in 2006 with a total number of 253 transactions being announced," said Paul Hawkinson, Managing Director and Head of BMO Capital Markets' Commercial & Industrial Sector Group. "The volume of activity was driven by several secular trends including the continued outsourcing of transportation activities by corporations and the off-shoring of manufacturing activity as corporations moved to lower costs." Read More.

Deals Boom Fizzles As Cheap Credit Fades

September 6 - WSJ - The global mergers-and-acquisition boom that began in 2003, the greatest deal frenzy in history, is winding down.

This summer's crisis of confidence has choked off the easy credit that fueled buyouts for years, abruptly altering the psychology of the deal market. Through June, M&A activity, as measured by total transaction values, had been running at its highest annual rate ever and was on pace to generate the deepest pool of investment-banking fees.

But within weeks, the market began to run out of steam. In August, there were about $222 billion worth of deals around the globe, according to market research firm Dealogic, the lowest monthly total since July 2005, and a far cry from the $695 billion figure struck in April and the $579 billion in July. Read More.

Dissident investor wins 3 H&R Block board seats

September 6 - Reuters - Activist investor Richard Breeden has won three seats on H&R Block's board, advancing his effort to push the company to focus on tax preparation and quit businesses such as banking and mortgage lending.

The slate proposed by Breeden, a former Securities and Exchange Commission chairman, was victorious based on a preliminary count of shareholder votes, H&R Block said Thursday at its annual meeting in Kansas City, Missouri.

Since late June, Breeden had campaigned for seats on H&R Block's 11-member board, and had won the support of the three major U.S. proxy advisory firms. He won seats for himself and two associates: Robert Gerard, a former assistant U.S. Treasury secretary; and L. Edward Shaw. Read More.

UK and global M&A set new record - and open to new players

September 5 - Finance Week - Acquisitions by, and of, UK companies both jumped in the second quarter; but this may have featured the final flourish for big, leveraged private equity deals. While raising loans for M&A has got a lot harder in Q3, the global boom is set to continue – but with new trade players leaping on devalued stocks, especially in the US.

British companies stepped up their overseas M&A activity in Q2, but also became more frequent targets for foreign acquirers, according to figures released yesterday by the Office of National Statistics. Foreign acquisitions by UK-based firms totalled £16.9bn in Q2, four times the Q1 expenditure and three times the amount in Q2 last year. Acquisitions of UK firms from abroad reached a new record of just under £50bn, nine times the Q1 figure and more than 2.5 times that of Q2 2006. Read More.

ACG/Grant Thornton: U.S. Middle Market Corporate Executives and M&A Professionals Target More Cross-Border Deals

Dealmakers Search for Geographic Diversification, Access to New Markets, and Greater Efficiencies

69% Bullish About Cross-Border M&A 92% Say Deals Met Objectives; 58% Say Took Longer than Expected

September 4 - ACG - U.S. mid-market corporate executives and merger professionals are looking to aggressively target cross-border acquisitions in the next 12 months, according to a survey of more than 200 U.S. active representatives of middle-market companies, investment banks, private equity firms, law firms, accountants and consultants by ACG (Association for Corporate Growth), Grant Thornton LLP, and Eureka Private Equity.

The survey found that nearly three-quarters (72%) of respondents have been involved in cross-border M&A, and, almost as many, 70% anticipate doing at least one cross-border deal in the next 12 months. Most are bullish on the current environment for cross-border M&A, with 69% saying the current environment is good, and 31% calling it fair. Read More.

M&A robust for tech sector

August 31 - Small Business Times - Merger and acquisition activity within the technologies service sector is robust, with strategic
buyers targeting companies that provide help desk, data center, hosting, outsourced IT departments and other services.

Strategic buyers are more active in the IT sector than private equity investors.

“The big difference is that in IT, it’s virtually all strategic buyers,” said Victoria Fox, managing director with Emory & Co., a Milwaukee-based investment banking firm. “There is really not a big private equity interest.”

Strategic buyers generally look for two things in the IT service sector – geographic location or an add-on offering they do not currently provide. Many IT service providers are trying to have as many offerings as they can for clients, making niche providers especially attractive. Read More.

Field leveling for M&A players

August 30 - TwinCities.com - Not everyone is stressed about the credit crunch. Reid MacDonald might even go so far as to say he's a little excited about it.

The CEO of Minneapolis-based Faribault Foods says he thinks small companies like his that are looking to make acquisitions will benefit from the new credit environment because they'll be better able to compete for deals.

As lenders pull back on financing, the private-equity firms that have been snapping up companies at record prices could be forced to pull back on highly leveraged deals. As they do so, the prices they pay for their acquisitions likely will come down, finance experts say.

That's good news for strategic buyers like Faribault Foods, which has been outbid by private-equity firms on at least a handful of deals in recent years. Read More.