Commentaries
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Where cash is not yet king
In deal-making, the appeal of cash is obvious. Cash offers a cleaner exit for investors, particularly foreign ones. It has a value that will not fluctuate the way that stock prices can between when a deal is announced and when it closes.
For companies sitting on large piles of cash, using some of the money for deals makes sense given the low-yielding alternatives.
And a number of American acquirers are stumping up and putting cash on the barrel. Abbott Laboratories said today that it would spend 4.5 billion euros in cash ($6.6 billion) in cash for the drug unit of Solvay of Belgium. Last week, Dell announced that it would spend $3.9 billion in cash for Perot Systems. (Abbott will be left with more than $2 billion in cash on its balance sheet, while Dell will have $9 billion.)
Yet cash accounts for a smaller slice of the M&A universe than it did pre-financial crisis. Cash-only deals by American acquirers account for only 20.3 percent of total merger volume so far this year, according to Thomson Reuters data. That’s 803 transactions representing $93 billion worth of deals. Compared that all of 2007, when 1,919 all-cash transactions accounted for 54.5 percent of total dollar deal volume in the United States – or $796 billion worth of deals.
Cazenove’s yield may muddy JP Morgan deal
As your friendly neighbourhood investment bank rarely tells you, something like 80 percent of deals don’t pay off. So why do one if you don’t have to?
That is the question facing the mighty City of London firm of Cazenove. Five years after Caz poured its investment banking business into a joint venture with the U.S. bank, JP Morgan <JPM.N>, it has to decide whether to go the whole hog and sell the remainder — or to hang on.
True confessions
Journalists are suckers for a confessional story.
There’s belief among journalists that confessional stories carry more resonance with readers because they often are narrative tales about insiders fessing-up to the truth.
And so today we have Andrew Ross Sorkin in The New York Times telling us the great confession of British private equity chieftain Guy Hands. What’s Hands’s great admission? That private equity firms charge excessive fees to investors and that highly-leveraged takeover artists aren’t always the great managers they purport to be.
July: It rained, the deals didn’t
With stock markets on the rise and some signs of economies steadying, if not recovering, investment bankers have recently sounded more optimistic about the prospect for deal-making for the second half of the year.
This month? Not so good.
July, with just $96 billion in announced deals around the globe, is the first month to have less than $100 billion in worldwide M&A since September 2004, reports Thomson Reuters Deal Intelligence. No deal was more than $5 billion, the first time that has happened in a month in nearly six years. (The biggest announced merger was in Japan, the $4.4 billion acquisition of Nipponkoa Insurance by Sompo Japan Insurance. The biggest U.S. acquisition was Sanofi-Aventis’ $4 billion offer for Merial.)
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The Wall
