August 28 - Forbes - Could the airline sector be taking off soon?
With key players in the industry looking to consolidate, the fall may bring traders' money and headlines to an industry dogged by high fuel prices.
Although he does not believe any deals are imminent, Calyon Securities analyst Ray Neidl said in a research note that the market may start to factor merger considerations into stock prices. Read More.
Thursday, August 30, 2007
Canadian mergers hit record, but may have peaked
August 29 - Reuters - The value of mergers and acquisitions involving Canadian companies surged to a record in the second quarter, data showed on Wednesday, but that could be the peak of a year-long buyout binge.
Companies announced transactions worth C$202 billion ($191 billion) in the quarter, more than double the previous record of C$89 billion set in the third quarter of 2006, according to joint Financial Post and Crosbie & Co. data.
Even without the boost from two blockbuster transactions -- the announced buyouts of telecommunications group BCE Inc and aluminum producer Alcan Inc. -- the three-month period to June 30 would still have been a record. Read More.
Companies announced transactions worth C$202 billion ($191 billion) in the quarter, more than double the previous record of C$89 billion set in the third quarter of 2006, according to joint Financial Post and Crosbie & Co. data.
Even without the boost from two blockbuster transactions -- the announced buyouts of telecommunications group BCE Inc and aluminum producer Alcan Inc. -- the three-month period to June 30 would still have been a record. Read More.
Wednesday, August 29, 2007
CFOs see private-equity activity increasing: survey
Execs expect buyout binge to continue, but others say deals will be smaller
August 28 - MarketWatch.com - A survey released Tuesday of more than 100 chief financial officers found that 75% of them expect the number of companies seeking private equity to increase in the next 12 months.
But others aren't so sure. "I'd be very surprised if private-equity activity picked up at this point," said Jon White, president at Beacon Hill Financial in Orlando, Fla. "The credit crunch is making deals much more expensive. We're probably looking more at moving toward historic long-term averages where private equity deals number a lot less and involve substantially less money."
None of the CFOs expect private-equity activity to decline in the coming year, according to the survey conducted by Tatum LLC. Another 25% forecast some leveling off, according to the Atlanta-based strategic planning firm. Read More.
August 28 - MarketWatch.com - A survey released Tuesday of more than 100 chief financial officers found that 75% of them expect the number of companies seeking private equity to increase in the next 12 months.
But others aren't so sure. "I'd be very surprised if private-equity activity picked up at this point," said Jon White, president at Beacon Hill Financial in Orlando, Fla. "The credit crunch is making deals much more expensive. We're probably looking more at moving toward historic long-term averages where private equity deals number a lot less and involve substantially less money."
None of the CFOs expect private-equity activity to decline in the coming year, according to the survey conducted by Tatum LLC. Another 25% forecast some leveling off, according to the Atlanta-based strategic planning firm. Read More.
Private equity lessons
August 27 - Financial Times - Runaway booms always mask a raft of questionable activities. The buy-out frenzy was no exception. Problems being exposed by the credit market crunch go beyond the exuberant funding promises that the banks now regret. Home Depot’s renegotiation underlines a few of them.
First, there is “stapled finance”. The idea was that banks advising on a sale would also offer financing terms to potential buyers to lubricate the process. That created a conflict of interest by positioning the bank alongside both buyer and seller. In Home Depot’s case, Lehman Brothers advised on selling the supply division, helped provide the financing and then, when the deal looked tenuous, helped to force a renegotiation and price cut. At that point, it was removed as an adviser. But it should never have been on both sides. In a tight spot, the interests of its shareholders were always going to come above Home Depot’s. Read More (subscription required).
First, there is “stapled finance”. The idea was that banks advising on a sale would also offer financing terms to potential buyers to lubricate the process. That created a conflict of interest by positioning the bank alongside both buyer and seller. In Home Depot’s case, Lehman Brothers advised on selling the supply division, helped provide the financing and then, when the deal looked tenuous, helped to force a renegotiation and price cut. At that point, it was removed as an adviser. But it should never have been on both sides. In a tight spot, the interests of its shareholders were always going to come above Home Depot’s. Read More (subscription required).
Tuesday, August 28, 2007
Alternative Energy: Can It Compete?
August 27 - Seeking Alpha - It's no secret that alternative energy is an emerging market with enormous potential for growth; fossil fuel depletion, political volatility in oil producing nations, and the effects of greenhouse gasses have become pressing issues for many in recent years. But for all the hype, the question remains: Can it compete?
The dig against alternative energy has always been costs. Yes, solar power is nice, but if it costs 10X more than burning oil, we'll stick with our dinosaur fuels.
Technological advancements over the past few years, however, have significantly decreased production costs. With rising prices for fossil fuels, solar power, wind power, hydropower, bio-diesel, and ethanol have seen tremendous growth. Thanks to increased cost efficiency, alternative energy sources have caught the eyes of many governments and energy producing companies across the globe, which are throwing increasing amounts of money at the concept. Is this money over the bridge, or have alternative energy sources turned the corner to become cost effective? Read More.
The dig against alternative energy has always been costs. Yes, solar power is nice, but if it costs 10X more than burning oil, we'll stick with our dinosaur fuels.
Technological advancements over the past few years, however, have significantly decreased production costs. With rising prices for fossil fuels, solar power, wind power, hydropower, bio-diesel, and ethanol have seen tremendous growth. Thanks to increased cost efficiency, alternative energy sources have caught the eyes of many governments and energy producing companies across the globe, which are throwing increasing amounts of money at the concept. Is this money over the bridge, or have alternative energy sources turned the corner to become cost effective? Read More.
Monday, August 27, 2007
Capgemini says 28.5 pct of US executives mulling mergers to keep market position
August 23 - Thomson Financial - IT services company Capgemini said 28.5 pct of US executives it surveyed are considering mergers and acquisitions as a way to maintain or increase their companies' global market position in the next three years.
Capgemini said it comes amid a broad lack of confidence that sales can rise enough to achieve this goal with existing resources.
It said 38.3 pct of the executives are considering greater capital investments and 32 pct are thinking of adding jobs.
Other options being considered by at least 32 pct of the executives are improving company practices outside of production, more training and outsourcing some functions.
Friday, August 24, 2007
Developers a-callin' on private-equity firm
August 23 - IndyStar.com - The subprime mortgage collapse. Shrinking credit. Stock market angst.
For many investors and real estate developers, the news lately hasn't been good. But for others, including private-equity firms such as D.W. Funke Investments, the housing market's losses have been their gain.
"We are in high-growth mode," said David W. Funke, president and chief executive of the Carmel-based investment company.
"Because of what's happening with the subprime collapse and the shaking up of the capital markets, generally all we have to do is respond to the phone calls coming in" from commercial real estate brokers, bankers and developers, he said. Read More.
For many investors and real estate developers, the news lately hasn't been good. But for others, including private-equity firms such as D.W. Funke Investments, the housing market's losses have been their gain.
"We are in high-growth mode," said David W. Funke, president and chief executive of the Carmel-based investment company.
"Because of what's happening with the subprime collapse and the shaking up of the capital markets, generally all we have to do is respond to the phone calls coming in" from commercial real estate brokers, bankers and developers, he said. Read More.
Thursday, August 23, 2007
Private Equity Firms Are Vital Components in Today’s Global Economy
August 22 - New Age Media Concepts - Gone are the days of true corporate raider, where companies were torn apart and sold off to the highest bidder. The misconception in today’s market place by investors, not institutional investors mind you but individual investors, is that when a Private Equity Firm takes over a public company that the corporate raider mentality comes into play. This is far from the truth actually.
Private Equity firms, as it relates to public companies, add true value through restructuring. Keep in mind that when a public company does anything dramatic that could temporarily reduce a company’s earnings or asset base, the street is unforgiving. Its this fear that actually puts a blockade in place and prevents most public companies from doing what a private equity firm is already geared up to do, and that is reduce the fat, build a strong sound foundation and add true growth to the company. Read More.
Private Equity firms, as it relates to public companies, add true value through restructuring. Keep in mind that when a public company does anything dramatic that could temporarily reduce a company’s earnings or asset base, the street is unforgiving. Its this fear that actually puts a blockade in place and prevents most public companies from doing what a private equity firm is already geared up to do, and that is reduce the fat, build a strong sound foundation and add true growth to the company. Read More.
Private Equity, Public Gain
Let's lay to rest the myths about private equity, once and for all. There's no question PE is a boon to society
August 21 - Business Week - Recent turmoil in credit markets and hedge fund losses, along with the public offering of the Blackstone Group, have reignited controversies over the growing power of private equity. Critics call private equity outfits such as Blackstone the new robber barons, ready to plunder great corporations and leave them in a shambles.
Nothing could be further from the truth. The dynamic leadership of private equity is providing great benefits to corporations, the economy, and society.
Let's take a closer look at some myths about private equity: Read More.
August 21 - Business Week - Recent turmoil in credit markets and hedge fund losses, along with the public offering of the Blackstone Group, have reignited controversies over the growing power of private equity. Critics call private equity outfits such as Blackstone the new robber barons, ready to plunder great corporations and leave them in a shambles.
Nothing could be further from the truth. The dynamic leadership of private equity is providing great benefits to corporations, the economy, and society.
Let's take a closer look at some myths about private equity: Read More.
Wednesday, August 22, 2007
The Right Stuff
August 21 - ThomasNet Industrial Newsroom - Apathy, budget cuts and growing global competition ... despite a number of concerns, the worldwide aerospace and defense market is on track to grow by more than 19 percent by 2011.
And “as airline profitability improves, OEMs steadily raise delivery schedules and supply chain businesses see strong levels of shipments to Airbus and Boeing,” the outlook for the A&D sector “remains extremely attractive thus far in 2007,” investment firm RSM EquiCo Capital Markets noted in April.
Meanwhile, merger and acquisition activity in the A&D sector continues to rise, as "strategic and financial players gain confidence in the long-term stability of the commercial build-cycle and bipartisan defense spending,” according to RSM EquiCo’s Q2 Aerospace & Defense Review. Read More.
And “as airline profitability improves, OEMs steadily raise delivery schedules and supply chain businesses see strong levels of shipments to Airbus and Boeing,” the outlook for the A&D sector “remains extremely attractive thus far in 2007,” investment firm RSM EquiCo Capital Markets noted in April.
Meanwhile, merger and acquisition activity in the A&D sector continues to rise, as "strategic and financial players gain confidence in the long-term stability of the commercial build-cycle and bipartisan defense spending,” according to RSM EquiCo’s Q2 Aerospace & Defense Review. Read More.
Deals still flowing for mid-market buyout firms
August 20 - Crain's Cleveland Business - A focus on smaller deals has helped insulate Northeast Ohio’s private equity firms from a sudden chill in buyout activity felt at the high end of the acquisition market.
Officials at these middle-market buyout firms, which specialize in acquiring companies with $500 million or less in annual revenue, report healthy deal pipelines. Their ongoing flow of deals contrasts sharply with the recent drying up of transactions involving big buyout firms that as late as this spring routinely were pulling off billion-dollar deals, such as the $7.4 billion acquisition announced in May of a controlling interest in automaker Chrysler Group by Cerberus Capital Management.
“So far, from what we’ve seen, there hasn’t been any appreciable slowdown in the activity of our clients, which are middle-market buyout funds,” said Ira Kaplan, associate managing partner and chairman of the private equity group at Cleveland law firm Benesch, Friedlander, Coplan & Aronoff LLP. Read More.
Officials at these middle-market buyout firms, which specialize in acquiring companies with $500 million or less in annual revenue, report healthy deal pipelines. Their ongoing flow of deals contrasts sharply with the recent drying up of transactions involving big buyout firms that as late as this spring routinely were pulling off billion-dollar deals, such as the $7.4 billion acquisition announced in May of a controlling interest in automaker Chrysler Group by Cerberus Capital Management.
“So far, from what we’ve seen, there hasn’t been any appreciable slowdown in the activity of our clients, which are middle-market buyout funds,” said Ira Kaplan, associate managing partner and chairman of the private equity group at Cleveland law firm Benesch, Friedlander, Coplan & Aronoff LLP. Read More.
Why buyer's won't walk in private equity's world's changed circumstances
August 21 - Blogging Buyouts - For the past few years, things have been nearly perfect for the private equity world. Credit was cheap and public companies were certainly willing to go private.
But, of course, things are much different now. In fact, there is some doubt that mega deals -- such as for TXU Corp. and SLM Corp. - may not get done because of the tough credit environment.
However, can buyers legally walk from a deal?
Not very easily, actually. After all, when a buyer signs a merger agreement, it's an enforceable contract. And, if it is breached, the consequences can be severe. In fact, in some cases, the buyer may be required to complete the deal. The New York Times looks at this issue in depth today. Read More.
Tuesday, August 21, 2007
Chemical M&As "maintaining momentum": report
August 17 - Canada Plastics - Merger and acquisition activity has maintained strong momentum during the first half of 2007, according to the new quarterly Chemical Compounds report by PricewaterhouseCoopers. The report found that Western Europe still maintains the highest deal value, but a larger number of deals are occurring in North America.
Overall, in terms of value, 2007 outpaced the first half of 2006 due to the large value of "mega-deals," the report noted. Read More.
Overall, in terms of value, 2007 outpaced the first half of 2006 due to the large value of "mega-deals," the report noted. Read More.
Friday, August 17, 2007
Private equity still drawing big investors
August 15 - CNN Money - Amid the freeze on private equity deals, big investors like pension funds and college endowments are still plowing money into buyout funds, suggesting they still see opportunities for outsized returns.
Buyout funds have already raised $139 billion globally so far this year and are on pace to exceed the $212 billion raised in 2006, according to London-based research house Private Equity Intelligence.
Another record year of fundraising comes just as the buyout boom has come to a grinding halt. A push back in the debt markets that began in late June has erupted into a full-blown credit crunch, with financing for leveraged buyouts now at a standstill. Read More.
Buyout funds have already raised $139 billion globally so far this year and are on pace to exceed the $212 billion raised in 2006, according to London-based research house Private Equity Intelligence.
Another record year of fundraising comes just as the buyout boom has come to a grinding halt. A push back in the debt markets that began in late June has erupted into a full-blown credit crunch, with financing for leveraged buyouts now at a standstill. Read More.
Private Equity Party Not Pooped In Europe
August 16 - Forbes - The wisest investors are sometimes those who refuse to follow the crowd, and the big guns of private equity are hoping the credit crunch hasn't put off any European buyout fans. As of Thursday, Apax Partners, Kohlberg Kravis Roberts and France's PAI are all looking for over $10 billion each to fund their future conquests of Europe.
According to data from London-based research firm Private Equity Intelligence released Thursday, Apax Partners is raising 10 billion euros ($13.4 billion) for its Europe VII fund, while former BNP Paribas subsidiary PAI partners is also looking for the same amount for its Europe V fund. These are the top two European buyout funds on the market according to target size. Read More.
According to data from London-based research firm Private Equity Intelligence released Thursday, Apax Partners is raising 10 billion euros ($13.4 billion) for its Europe VII fund, while former BNP Paribas subsidiary PAI partners is also looking for the same amount for its Europe V fund. These are the top two European buyout funds on the market according to target size. Read More.
Nanotech’s Impact on Cleantech Growing Rapidly
August 16 - Business Wire - With the fevered search for new clean technologies, attention is turning to nanotech’s potential in energy and environmental innovation. Nanotechnology’s impact on cleantech is growing, and happens both through product and process innovations, with each type of impact posing its own set of challenges, according to a new report titled “Nanotech’s Impact on Energy and Environmental Technologies” available exclusively to Lux Research clients.
“The rapid increase in nano-enabled cleantech patents and publications relative to overall cleantech numbers indicates that nanotechnology’s impact on cleantech, though small at present, is growing at a fast clip,” said the report’s lead Lux Research analyst Jaideep Raje. “However, the near-term cleantech applications of nanotechnology are likely to come in more mundane forms like catalysts, coatings, and additives – not through big-ticket applications like next-generation photovoltaics.” Read More.
Thursday, August 16, 2007
New BCG Study Identifies Major Trends That Will Continue to Drive M&A Through Volatile Financial Markets
Despite Near-Term Slowdown in Deal Making, Most Sectors Expected to Keep Consolidating as Private Equity Firms Remain Influential Players
Report Shatters Several M&A Myths and Sheds Light on Keys to Success in Increasingly Tough Market
August 15 - Marketwire - One of the largest-ever studies of mergers and acquisitions, conducted by The Boston Consulting Group (BCG), identifies several trends that will continue to drive high deal flow, albeit at a reduced rate, through current volatility in the global financial markets.
The study, published in a new BCG report entitled "The Brave New World of M&A: How to Create Value from Mergers and Acquisitions," is based on a detailed analysis of more than 4,000 completed deals between 1992 and 2006. It is believed to be the largest nonacademic study of its kind.
"We are seeing a return to normalcy, which is healthy," said Jeff Gell, a Chicago-based partner and coauthor of the report, upon its release. "Prices and leverage will come down slightly, but volumes will remain high as the strategic need for most deals is still present. Companies are still sitting on excess cash that they need to deploy, and private equity funds still have large war chests that they need to put to work."
Report Shatters Several M&A Myths and Sheds Light on Keys to Success in Increasingly Tough Market
August 15 - Marketwire - One of the largest-ever studies of mergers and acquisitions, conducted by The Boston Consulting Group (BCG), identifies several trends that will continue to drive high deal flow, albeit at a reduced rate, through current volatility in the global financial markets.
The study, published in a new BCG report entitled "The Brave New World of M&A: How to Create Value from Mergers and Acquisitions," is based on a detailed analysis of more than 4,000 completed deals between 1992 and 2006. It is believed to be the largest nonacademic study of its kind.
"We are seeing a return to normalcy, which is healthy," said Jeff Gell, a Chicago-based partner and coauthor of the report, upon its release. "Prices and leverage will come down slightly, but volumes will remain high as the strategic need for most deals is still present. Companies are still sitting on excess cash that they need to deploy, and private equity funds still have large war chests that they need to put to work."
Cheaper stocks may trigger mergers
August 14 - The Cincinnati Post - The beating Wall Street suffered this past week might have actually created the perfect conditions to launch its revival - cheaper stock prices can herald a comeback for corporate acquisitions.
Dealmaking has been one of the market's biggest drivers, with some $1.26 trillion worth of acquisitions and private equity transactions announced in the U.S. so far this year. Market watchers believe mergers and acquisitions - particularly by big public companies - might be the catalyst to help get Wall Street back on track after the volatility seen in the past few weeks. Investors have weathered some tough sessions where stocks zigzagged, making triple-digit gains and losses. The Dow Jones industrials rose more than 150 points on Wednesday, then plunged about 400 points on Thursday and fell more than 200 points Friday before closing with a minuscule 31 point loss. Read More.
Dealmaking has been one of the market's biggest drivers, with some $1.26 trillion worth of acquisitions and private equity transactions announced in the U.S. so far this year. Market watchers believe mergers and acquisitions - particularly by big public companies - might be the catalyst to help get Wall Street back on track after the volatility seen in the past few weeks. Investors have weathered some tough sessions where stocks zigzagged, making triple-digit gains and losses. The Dow Jones industrials rose more than 150 points on Wednesday, then plunged about 400 points on Thursday and fell more than 200 points Friday before closing with a minuscule 31 point loss. Read More.
Canada: Private equity buyouts hit record levels
August 15 - National Post - The value of private equity buyouts in Canada for the first half of the year has already far exceeded the value for all of 2006, the Canadian Venture Capital Association said Wednesday.
In the first six months of 2007, 96 Canadian buyout transactions were announced with a value of $61-billion -- $13.8-billion of which was outside the record-breaking $47.2-billion Bell Canada buyout, the CVCA said.
That compares to 101 buyouts valued at $11.6-billion in all of 2006, it added. Read More.
In the first six months of 2007, 96 Canadian buyout transactions were announced with a value of $61-billion -- $13.8-billion of which was outside the record-breaking $47.2-billion Bell Canada buyout, the CVCA said.
That compares to 101 buyouts valued at $11.6-billion in all of 2006, it added. Read More.
Small cement firms may hog limelight
August 16 - The Economic Times - Shares of smaller cement companies are likely to be back in focus led by attractive valuations, firming product prices and likelihood of mergers and acquisitions (M&A) in the sector, according to investment bank CLSA Asia-Pacific Markets.
Though the cement industry is likely to see some news flow, both positive and negative, over the next three months, positive events may be the winner in the near term, which will bring smaller cement shares back to focus, CLSA said in a note to clients. Read More.
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