Private equity sponsors struggle to make sense of the new ...

More documents

Recommendations

Info

WatercoolerPoison Pills on the WanePublic companies in the US are less inclinedto set up hostile defense mechanisms beforesuch actions are requiredCorporate executives are apparently morelikely to avoid preventative care, at leastwhen it comes to the adoption of poisonpills and other takeover defense initiatives. Reuters,citing data from FactSet SharkRepellent, reportedthat the number of domestic companies with shareholderrights plans sat at 1,000 as of late March, atrough that hadn’t been reached since 1990.The decline, however, doesn’t necessarily reflecta shortage of hostile deals or a concession on thepart of targets that they can’t stave off unsolicited bids. Rather,as the article identified, the lower number reflects that companiesthat aren’t in play don’t want to attract negative attention fromtheir institutional shareholders. Moreover, it is generally understoodthat companies can quickly institute a shareholders’ rightsplan on an as-needed basis.To wit, in March, after Carl Icahn set his sights on LionsgateEntertainment and accumulated a 19% stake in the company,the Lionsgate board adopted a poison pill that would betriggered once a hostile acquirer’s stake exceeds 20percent. Icahn had initially sought a 30% stake inan effort to scuttle a Lionsgate bid for rival MGM.He later made a tender offer for the entire company,though analysts covering Lionsgate’s stock saw littlechance of Icahn getting his own slate of directorsin to repeal the pill.Reuters, again citing FactSet, also reported thatthe number of companies in the S&P 500 with staggeredboards had fallen significantly over the pastdecade. Last year, 164 companies had staggeredboards.Hostile activity, meanwhile, seemed to rebound in recentmonths, as Kraft agreed to acquire Cadbury, while OSI Pharmaceuticalsand Airgas each faced unsolicited bids in March andFebruary, respectively.A Media Deal Bellwether?Is it okay to again celebrate the excesses ofthe deal life?For M&A executives looking for signs of a recovery, onerecent deal may signal that the good times are not too faroff. DealFlow Media’s acquisition of Doubledown Media,the publisher of the shuttered Dealmaker, Trader Monthly andCorporate Leader magazines, could revive the titles, which in alot of ways came to symbolize the excesses of the credit bubble.After filing Chapter 7 bankruptcy last year, Doubledown wasunable to fetch any significant bids for the assets. According toFolio, the Dealmaker title received a bid of $100,000, which fellPOLITE CONVERSATION“I think people should recognize that intelligence ishelpful, but if you’re too smart, you might outwit yourself.I don’t think geniuses necessarily do as well in businessas people who are reasonably intelligent.”— The Carlyle Group co-founder David Rubenstein, as quotedby Fortune Magazineshort of the $300,000 minimum identifiedin the auction notice.Dealmaker and Trader Monthly, in additionto other titles from Doubledown,such as Cigar Report and Private Air, glorifiedthe lifestyle of deal pros and traders,featuring sections highlighting expensivecars, watches and other luxuries. The last issue,which was published after Lehman collapsedon September 15, 2008, was ananachronism to a market that had seemed long gone by the timeissue arrived in mailboxes. Doubledown was also the publisherbehind Lenny Dykstra’s Players magazine, a failed effort to targetthe ultra-high-net worth professional athleteaudience. Players was not included inthe acquisition.DealFlow Media, meanwhile, has mademoves on the M&A front before, acquiringdata analytics company PrivateRaise in 2008.Terms of the Doubledown deal were notdisclosed.6 MERGERS & ACQUISITIONS May 2010
Small TalkSo, how was your potato yield this year?Wall Street’s rogues apparently aren’t nearly as slick they thinkthey are. The Securities and Exchange Commission, in March,nabbed another insider trading ring using insider informationabout M&A to trade ahead of the deals. The guilty parties tried to hidetheir activity by using ill-conceived code words to discuss the specifics ofthe trades over email.UBS Securities’ Igor Poteroba tipped off friends Aleksey Koval andAlexander Vorobiev ahead of at least 11 transactions, according to theSEC. In various exchanges documented byregulators, Poteroba at different times used“frequent flier miles,” “coupons” for a weddingregistry, and potato harvests as code forthe trades.In one exchange, Koval describes a frequentflyer program he signed up for. “I gotfive thousand of sign-in bonus miles, butthinking maybe if I fly often, I will get additionalthree to five K miles.”Poteroba then responded that Koval “should sign up for anotherflight, if you can, since they are providing bonus mileage soon.”Next time, they might be better served discussing sports, the weather,or something people actually talk about.THEMIDDLEMARKET.COMMay’s web exclusives, found only atTheMiddleMarket.com. You can also followMergers & Acquisitions on Twitter athttp://twitter.com/TheMiddleMarket.Chemicals in DemandPrivate equity has targeted the chemicals space, butmuch of the event-driven activity over the past few yearshas started to wane, making it tough for platforms to buildthrough add-on strategies.Destination SydneyDrawn by a growinggross domestic product, theinvestment banks, led byGreenhill & Co., Lazard andMoelis & Co., are rushing toAustralia.The Leveraged LoanMarket Comes to LifeAfter three dead quarters,the primary loan marketheld a steady heartbeatthrough the first quarter of2010. Marketwatchers anticipate an even stronger quarterto follow.Flipping Through the ArchivesIn early 2009, few knew what was going to become of private equity.Mergers & Acquisitions, that March, took a close look at how the industrywould re-invent itself. The consensus among deal pros was thatsurvival would require a significant makeover and that it wouldn’t comewithout significant casualties.With the economy on the mend, this past March, the Private EquityCouncil unveiled a new study, declaring victory for the asset class byshowing that PE-backed companies managed the difficult environment betterthan other highly leveraged companies.The PEC cited that the defaultrate for private equity-backed companies was 2.84% during 2008 and 2009versus a 6.2% annualized default rate for “similarly financed businesses.”The PEC took aim at a few competing studies, saying that the resultsflew in the face of other research from the past two years, citingspecifically research from Moody’s, Standard & Poor’s and the Boston ConsultingGroup, all of which predicted more pain for the industry.The Private Equity Council is an advocacy group that was formed in2006 with backing from the largest buyoutgroups, such as Kohlberg Kravis Roberts, ProvidenceEquity Partners,The Blackstone Groupand others.While the study is among the first sincethe recession technically ended, the loomingrefinancing cliff, in which $770 billion inleveraged loans will mature by 2015, meansthat PE-backed companies are far from outof the woods. According to Thomson Reuters, roughly aquarter of the leveraged loan volume for 2010 was related to “amendand-extend”facilities, as of mid March, implying that many groups maysimply be putting off the pain.Moody’s, meanwhile, issued its own research in March, showing thatof the 163 non—financial corporate defaults last year, 77 came fromPE-backed companies.May 2010 MERGERS & ACQUISITIONS 7
Page 1 and 2: THE OFFICIAL PUBLICATION OFMAY 2010
Page 3: Inside WordMay 2010 Volume 45, Numb
Page 8 and 9: WatercoolerTOMORROW’S DEALSAmeric
Page 10 and 11: OutlookA Synergy Runup?Synergy esti
Page 12 and 13: OutlookBuyers May ConsiderTaking th
Page 14 and 15: LBO WatchGrowth SpurtNeed meets opp
Page 16 and 17: Private equitysponsorsstruggle toma
Page 18 and 19: Pinched“There is a bigshake outgo
Page 20 and 21: Emerging Managers’Catch 22The mar
Page 22 and 23: likely surpasses many similarly siz
Page 24 and 25: Q&Aor is it more about renegotiatin
Page 26 and 27: Elizabeth BorowThompson Street Capi
Page 28 and 29: the market, but the bifurcation sti
Page 30 and 31: when people start to tackle the ref
Page 32 and 33: were just allocating their assets t
Page 34 and 35: ‘05 dividend recaps, you’re goi
Page 36 and 37: It’s still not in the market toda
Page 38 and 39: “It can save the deal.”Agency,
Page 40 and 41: turing, then you avoid the expense
Page 42 and 43: Guest ArticleThe End of the RoadIs
Page 44 and 45: Guest ArticleFASB’s Fair Value Up
Page 46 and 47: PeopleBankers MoveThe mid-market in
Page 48 and 49: PeopleStephens. He has primarily fo
Page 50 and 51: THE PULSEvestment capital in East A
Page 52 and 53: COMMUNITY COMMENTARYchain and ident
Page 54 and 55: COMMUNITY COMMENTARYfrom the perspe
Page 56 and 57:
COMMUNITY COMMENTARYin another dire
Page 58 and 59:
ROUNDTABLE continued from page 47Zu
show all

Private equity sponsors struggle to make sense of the new ...

Create successful ePaper yourself

Delete template?

Save as template?