Independent merger advisers should relish their moment in the sun. The busiest among them have grabbed a record share of the U.S. market this year. Bulge-bracket banks suffered distractions and defections as mid-size deals, and less conflicted advice, have become all the rage. That has helped the crop of firms, including startup boutiques, who are small enough to fail. But the phenomenon may be short-lived.
The shift has been explosive of late. A decade ago, the 16 non-supermarket-type institutions in the top 25 rankings of M&A advisers had about 6 percent of the so-called deal wallet, according to Thomson Reuters data. By 2008, their share had crept up to 10 percent. This year, the group, which includes established advisers like Greenhill and newbies such as Moelis, is at 20 percent.
Wall Street just lost some insurance in more ways than one. At the eleventh hour, Liberty Mutual Group yanked the initial public offering of its property and casualty arm. The $1.2 billion deal would have been the biggest U.S. flotation so far this year. It was also being closely watched as a barometer of investor appetite for the swollen backlog of new share sales meant to keep bankers busy. Weaker trading volumes already had many of them nervous about their fates. If IPOs flag too, more jobs could be on the line.
Liberty Mutual fell back on an old chestnut to explain the indefinite postponement: an “unfavorable environment.” Of course, the environment was less unfavorable for Country Style Cooking Restaurant Chain, the Chinese eatery whose new issue a day earlier closed 47 percent above the offer price. The specifics of the insurance industry and Liberty Mutual Agency undoubtedly made this particular deal hard to get away. Policy sales expectations, comparative valuations, a dual share structure and use of the proceeds all conspired to keep prospective buyers at bay.
American banks and regulators have a poor track record when it comes to adopting global capital standards. The United States was a major driver behind the Basel II accord, signed in 2004, but then barely implemented the rules on an extremely late schedule. That is why many Europeans are right to be wondering whether the tough new framework known as Basel III, agreed by global regulators earlier this month, will again be deemed optional on the other side of the Atlantic.
Senior U.S. officials are making the right noises. Treasury Secretary Timothy Geithner told Congress on Wednesday the United States is “committed to meeting” the end-2012 implementation timeframe. FDIC Chairman Sheila Bair is even more optimistic. She told Reuters this week the American delegation had wanted a quicker transition and reckons plenty of U.S. banks will do it faster on their own anyway.
Uppity investor Ron Burkle has articulated what Barnes & Noble shouldn’t be doing — but not what it should. The activist, who owns nearly 20 percent of the book retailer, may merit board representation. But Burkle’s lack of a blueprint for growth undermines his demand to take three of the company’s nine board seats.
The Los Angeles grocery billionaire makes a good case to “throw the bums out.” Barnes & Noble’s governance has left it exposed. Conflicts, however transparent, abound with the company’s architect, chairman and biggest shareholder, Leonard Riggio, and his relatives. The bookseller leases space, buys textbooks and uses freight services from entities in which the family has an interest. Riggio’s brother, Stephen, remains on the payroll after stepping down as chief executive to babysit his replacement. And many directors have stuck around despite an options backdating scandal three years ago.
Just when financing films was looking too scary, it may be safe to go back into Hollywood. During the boom years of 2004-07, hedge fund managers, private equity barons and bankers splashed out some $15 billion on movies, only to leave mostly scarred for the experience. But it also has left studio executives in a weaker bargaining position, and shifted the industry’s dynamics in a way to make an investment a bit more attractive.
Wall Streeters were not the first to get star-struck. Fund managers trying to lock-in management fees followed earlier generations of Germans seeking tax shelters and Japanese trying to extract profits by uniting movies with electronics. All the hype — along with a string of expensive duds, a steep downturn in DVD sales and skewed economics — mostly led to yet another expensive lesson for well-heeled Tinseltown interlopers.
Caveat emptor won’t apply much in Blackstone’s latest deal. The firm’s advisory team was hired to sell U.S. fabric maker Polymer Group. Now, one of its private equity funds has emerged as the most likely buyer of the $450 million company. It’s the kind of situation that earned Goldman Sachs a spanking in the past. But so long as Polymer and Blackstone come clean about how events transpired, everyone should wind up happy.
Banks are more likely to find themselves in this kind of entanglement than private equity firms. Goldman, above all, has struggled periodically to manage such conflicts of interest. The firm’s British team received a famous “spank from Hank” — then Goldman-boss Paulson — amid an outcry it had not put clients first after its investment arm became a suitor for several publicly traded companies, including airports operator BAA.
George Steinbrenner will be mourned by lovers of pin-stripes everywhere — both financiers who button their suits on Wall Street and fans of the baseball team that sports them at Yankee Stadium.
Steinbrenner, known as “the Boss,” died on Tuesday, at 80. He paid about $10 million for the storied but down-on-their luck New York Yankees in 1973. Some 37 years on, the franchise is worth $1.6 billion, according to Forbes magazine.
One of the most eagerly anticipated numbers in finance has finally been revealed. Kohlberg Kravis Roberts co-founders Henry Kravis and George Roberts collected a combined $44 million last year. That’s plenty — but a far cry from the $611 million Blackstone founders Steve Schwarzman and Pete Peterson pocketed the year before their private equity firm’s 2007 IPO.
KKR’s path to a listing on the New York Stock Exchange has been tortuous. The firm’s original plan to follow close on Blackstone’s well-timed heels ground to a screeching halt as the credit crisis took hold. A subsequent complex plan for transforming the Amsterdam listing of one of its funds into a spot on the New York board for the whole firm delayed things further. That process was simplified last year, and the fifth and possibly final amendment to the firm’s U.S. listing document was at last filed with securities regulators on Tuesday.
Three years on, it may finally be worthwhile for bargain-hunting investors to take a look at Blackstone. On June 21, 2007, Steve Schwarzman and Pete Peterson shook up the private equity world by taking their firm public. They landed a market valuation of some $30 billion, which looked too rich even during those heady days but initially went even higher. Times have changed.
Back then, Blackstone’s shrewd partners knew the top of a cycle when they saw one. They locked in permanent capital provided by lesser mortals, while Peterson cashed out to the tune of nearly $2 billion and Schwarzman pocketed almost $700 million.
It’s hard to surprise the seasoned M&A set. But Alimentation Couche-Tard’s sale of Casey’s General Stores stock, even as it launched a $1.9 billion hostile offer for the rival convenience store chain, baffled more than a few on Wall Street. Whether Couche-Tard’s bid and Casey’s subsequent lawsuit succeed or fail, the tactic could leave its mark on the dealmaking rulebook.
Couche-Tard’s interest in Casey’s began quietly last September when the Canadian company, which operates nearly 6,000 stores, started buying shares in U.S.-based Casey’s. It began private entreaties to Casey’s management in November. And by the beginning of April, Couche-Tard had accumulated nearly 2 million Casey’s shares, or a 3.9 percent stake — short of the 5 percent holding it would have been obliged to disclose publicly.