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.

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.

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.

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.

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

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.

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.

M&A Activity Down but Not Out: Strong Cross-Border Deal Environment, Middle Market and Corporate Deal Activity and Robust Sectors Bolster M&A Market

June 16 - PRNewswire - With approximately US$1 trillion in global deal volume recorded during the first 19 weeks of 2008 vs. US$1.4 trillion during the same time last year, total transaction volume so far in 2008 has fallen below the record highs of 2007. However, merger and acquisition activity is expected to stabilize throughout the remainder of 2008 and the first half of 2009, according to Ernst & Young LLP's Transaction Advisory Services group.

"PE firms and corporations still remain armed with tremendous arsenals of cash to conduct transactions once the lending environment is restored,"said John O'Neill, Ernst & Young's Americas Director of Private Equity. "Once the overhang from the credit crunch is gone and lenders return to the transactions table and sellers adjust to more rational price expectations, we expect to see this cash funneled directly into the deal market." Read More.

Analytics to see rise in M&A activities

June 16 - Business Standard (India) - Market research and analytics, a relatively new entrant into the knowledge process outsourcing industry, is expected to witness a spate of mergers and acquisitions in the coming days.

The M&A activity in the area will see companies acquiring small and niche players in the US and Europe to improve their front-end capabilities and consolidation in the domestic market, largely dominated by over 110 small-size companies in the revenue bracket of $2-$10 million. 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.

M&A Deal Activity in Industrial Products Slows

May 14 - Modern Distribution Management - Weakness in the U.S. economy continues to affect M&A deal activity and value in the industrial products sectors, specifically industrial manufacturing, chemicals, and metals, according to a series of PricewaterhouseCoopers LLP first quarter M&A reports. While deal activity remains steady, deal volume and value is not on pace to exceed 2007 levels; however, the number of deals announced during the quarter is on track to meet or exceed 2006 levels.

The slowdown in the pace of large deals announced in the first quarter is a direct reflection of the difficult financing environment. Only the transportation & logistics sector is on pace to exceed the level of large deals in both 2006 and 2007. Deal interest for targets in Asia has been particularly strong during the quarter across each subsector. Additionally, the weak U.S. dollar is driving the increased interest in U.S. targets by cross-border acquirers. Read More.

Private-Equity Firms Active In Less-Splashy Deals

April 29 - CNN Money - Apollo Advisors has invested $4 billion of equity since last October but the leveraged buyout climate won't return to a semblance of normality until sellers of companies lower their prices to reflect economic reality, Apollo's founding partner said Tuesday.

"Credit has to work its way through the system and prices have to come down," said Leon Black at a panel on the state of the private-equity industry at a conference in Beverly Hills sponsored by the Milken conference.

Banks are beginning to clear up their backlog of past leveraged buyout loans and are slowly beginning to lend for middle-sized deals but asking prices have barely budged, he and others on the panel said. Read More.

The International Mergers & Acquisitions Review 2008 Will Provide A Far-Reaching Discussion And Analysis Of The Global M&A Market

March 27 - Business Wire - Research and Markets has announced the addition of “The International Mergers & Acquisitions Review 2008” to their offering.

The International Mergers & Acquisitions Review 2008 will provide a far-reaching discussion and analysis of the global M&A market, written by leading experts from investment banks, law firms and consultants. The next 12 months look like being eventful with several major M&A deals in the pipeline and increased activity returning to the sector.

The International Mergers & Acquisitions Review 2008 will provide the reader with a unique insight into the global M&A market by highlighting the opportunities as well as the pitfalls that face M&A practitioners in this ever changing dynamic arena. Read More.

Canadian banks scouting for buying opportunities

March 27 - Dealscape Blog (The Deal) - Outperforming their American rivals these days -- thanks to the U.S. credit crisis -- Canada's banks are on the prowl for acquisitions south of the border -- but don't expect them to ride to the aid of troubled U.S. banks. Reuters reported Wednesday that Royal Bank of Canada, the country's largest lender, is cautiously eyeing the M&A landscape to the south, though it is not interested in buying an investment or corporate bank, but rather wealth management and private banking.

"Yes, we are interested in being an opportunistic buyer, but not in the capital markets side of the business," RBC president and CEO Gordon Nixon told a Canadian financial services conference in Toronto. Although RBC is primarily looking at wealth managers, Nixon added, however, that banks are always considering large, transformational deals. Read More.

South Korea firms in quest for more M&A deals in U.S.

February 29 - Reuters - South Korean companies are hunting for U.S. acquisitions as subprime woes throw up opportunities to move into a market in which they would otherwise have to start from scratch, a senior investment banker said on Friday.

Demand ranges from manufacturers to banks and size from $100 million all the way up to $5 billion, ChunKee Lee, who leads Credit Suisse' South Korean operations, told Reuters in an interview.

"We do a lot of cross-border deals. Something that hadn't happened a few years ago," he said. "There are a lot of opportunities, particularly in the United States." Read More.

Oil, gas M&A undeterred by credit crunch

February 15 - Accounting Age - Mergers and acquisitions deals in the oil and gas industry were edging up slightly throughout 2007 despite the impact of the credit crunch, PricewaterhouseCooper’s latest annual analysis of M&A activity in the sector, O&G Deals, reveals.

The report shows deal totals rose from $US291.1bn to $US292.2bn year on year. There was no clear evidence of a decline in O&G deal activity in the second half of the year as the credit crunch broke, reflected in the number of 2007 final quarter deals – up 7% on the final quarter of 2006. Read More.

Transportation and Logistics M&A Deal Volume Hit 20-Year High in 2007

But despite record number of deals, total deal value in 2007 saw significant drop, PricewaterhouseCoopers reports

February 7 - Supply & Demand Chain Executive - Total transportation and logistics merger and acquisition deal volume reached a 20-year high with 1,291 deals in 2007, toppling the prior record reached in 2006, according to a new report from consulting firm PricewaterhouseCoopers.

"Intersections," PwC's quarterly report on M&A in the global transportation and logistics industry, shows that despite the record number of deals, total deal value in 2007 experienced a significant drop to $83 billion, down from the 20-year high of $164 billion set in 2006.

This decline was due in part to several large deals announced in 2006, including competing bids for a passenger air target and the proposed acquisition of another passenger air target, although all but one bid was eventually withdrawn, the consultancy reported. Read More.

Can M&A save the market?

Commentary: Deal making remains robust, but can it fuel a stock rally?

January 31 - MarketWatch - A funny thing happened on the way to the recession. Someone forgot to tell the deal makers.

Despite dire predictions of a mergers-and-acquisitions slowdown, the M&A rush that fueled the market's outsized gains last year may not be slowing after all. Sure, the scope and characteristics of deals are changing, but buyouts are still taking place. This steady stream of deal making is largely thanks to the huge cash stockpile -- more than $200 billion -- of private-equity capital that's looking for a home.

The bears will probably point out that, though there may be a lot of cash on the sidelines, there is still a debt backlog of about $250 billion, according to Anthony DiNovi of Thomas H. Lee Partners, who spoke Wednesday at the Dow Jones Private Equity Analyst Conference. Read More.

Banking M&A Likely to Decline in 2008

Analysts See M&A Volume Among Banks to Decline in 2008 Amid Credit Concerns

January 15 - Associated Press - Fewer buyers and uncertainty surrounding credit markets will likely lead to a decline in bank consolidation in 2008, analysts said.

"There will very likely be a decline in deal activity simply because banks have fairly significant credit concerns," Keefe, Bruyette & Woods Inc. analyst Robert Hughes said. Banks are struggling to understand their own credit issues, so they are unlikely to take others as well, Hughes said in an interview.

A smaller number of bank chief executives believe merger and acquisition activity will increase in 2008 compared with 2007, according to a UBS study. Read More.

Large Deal Activity Will Be Hardest Hit in 2008 While Middle Market M&A Activity to Remain Steady, Says Piper Jaffray M&A Report

January 3 - PRNewswire - Credit market worries will continue to weigh on the U.S. M&A market through at the least the first half of 2008, especially with regard to large buyouts, according to a report recently released by the Piper Jaffray M&A team. The report titled, "Mergers & Acquisitions Insights: Middle Market M&A Outlook 2008," analyzes M&A activity and trends in the middle market.

Despite the credit crunch, the middle market has remained active as the total deal volume is only off 4 percent through the first nine months of 2007 compared to the same period in 2006*. While Piper Jaffray believes M&A activity in 2008 will cool from the previous year, it will remain well above the recessionary levels seen in 2002 due to the strength of the global economy. The report indicates large deal activity will likely be the hardest hit, as the "mega-buyouts" will have difficulty securing financing in the first half of the year. Read More.

Credit crunch seen keeping financial M&A strong

'Darwinian economics' predicted to mean big changes in financial services

January 2 - MarketWatch - Merger-and-acquisition activity in the financial-services business will remain strong this year as the credit crunch creates opportunities for strong companies to bolster their market share, investment bank Freeman & Co. said Wednesday.

Disruptions caused by the meltdown in subprime mortgages will likely encourage private-equity and hedge funds to increase investments in financial services, hoping to pick up bargains, the New York-based investment boutique explained.

Indeed, buyout giant Carlyle Group is hunting for deals in the sector and in July hired Edward Kelly the former chief executive of Mercantile Bankshares, to run a new 10-person team focused on prospective financial-services transactions, according to a Wall Street Journal report. Read More.