DealZone

MACs are big

A demonstrator wearing a model of a hamburger on his head protests in Munich

And earn-outs are in. So says a new survey looking at almost 500 European deals from 2007-08 (most below $500m). As I wrote:

“The balance of power in European mergers and acquisitions (M&A) has shifted towards buyers, with deals containing more legal safeguards against a purchase turning sour, a survey released on Tuesday showed.

“The survey, by lawyers and accountants CMS, found more deals now contain ‘earn-out’ or ‘material adverse change’ clauses to protect buyers, and they often get longer to assess if a business is all it was promised to be.”

There was a bit of jiggery-pokery with the figures – the comparison periods were seemingly changed arbitrarily across categories, in order that the biggest difference possible emerged. Nonetheless, they highlight a trend:

* 17 percent of deals in the fourth quarter of 2008 contained earn-outs, which vary purchase prices depending on a target business’s future performance. That compared to 9 percent in the first half of 2008.

Better late than never?

A giant sculpture constructed with the faces of clocks is seen outside a Paris train station

Is now the time to be bulking up in M&A and other kinds of corporate finance advice?

On Monday, Societe Generale trumpeted the hire of a top French dealmaker from JPMorgan — the auspiciously named Thierry d’Argent — and reiterated its big plans for European M&A. Daiwa Securities SMBC agreed to buy mid-market corporate finance house Close Brothers Corporate Finance. Meanwhile Barclays Capital is making lots of equity markets hires, and says it aims to be one of the world’s top full-service investment banks.

As I wrote:

“A clutch of banks with previously limited reach in European takeovers and other corporate advisory work are betting now is a good time to grab market share — before the dealmaking business recovers.

Deals du jour

A journalist inspects a board with newspapers and magazines during the annual news conference of German publisher Axel Springer in BerlinState Street is selling $2 billion of stock, Morgan Stanley expects more listed company share sales and billionaire Kirk Kerkorian strikes his latest deal, and more. Here are the latest deal-related stories:

State Street sells stock, takes $3.7 billion charge

Morgan Stanley exec sees more follow-ons

Kerkorian buys MGM Mirage shares, stake now 42 percent

Fujitsu eyes more M&A to boost software operations

Lehman seeks OK to probe Barclays payment

Kona Grill shareholder offers to take company private

Morgan Stanley to sell remaining stake in MSCI

And in the morning papers:

The U.S. Treasury has preliminarily granted BlackRock Inc a second-recond interview to buy toxic assets from U.S. banks, using taxpayer money, the Wall Street Journal said on its website.

German retailer Arcandor AG‘s Chief Executive, Karl-Gerhard Eick, said he opposed Metro AG‘s proposal to combine the two companies’ department store chain, Sueddeutsche Zeitung reported. Reuters story here.

Deals du jour

A man rides past a newsstand with French daily newspapers in Nice, southeastern France, February 24, 2009.

AIG plans to float its Asian crown jewel, Volkswagen halts talks with Porsche, Nomura hires for a massive push in U.S. equities, and more. Here are the latest deal-related stories:

AIG to launch IPO for Asia crown jewel

Volkswagen halts tie-up talks with Porsche

Nomura hires for massive U.S. equity push

Cubs’ offer won’t be voted on next week: sources

Babcock & Brown infrastructure fund gets acquired

China pension fund plans foreign PE deals: sources

China government OKs Minmetals’ OZ Minerals deal

Daiwa SMBC to buy unit of Britain’s Close Brothers

Whitehaven says to drop merger deal with Gloucester

Metro to present Karstadt deal outline: sources

And in Europe’s morning papers:

* Hedge fund manager Noam Gottesman, co-chief executive of GLG Partners Inc (GLG.N), plans to move to New York from London to build up the fund’s U.S. assets, the Daily Telegraph said.

* Alan Miller, former fund manager at New Star, plans to launch two new funds in a joint venture with Alexander Spencer Churchill, the Daily Telegraph said.

Could market rebound ease way for M&A?

The drop in U.S. stocks through the first three months of 2009 did little to spur merger activity in the U.S. industrial sector, but a top executive at blue-chip manufacturer United Technologies Corp argued on Thursday that the recent rebound in share prices could spur buying.

“This recovery that we’ve seen in the market probably helps because it sets a more realistic baseline from which to negotiate,” said Greg Hayes, chief financial officer of the world’s largest maker of elevators and air conditioners, which has said it plans to be aggressive in seeking acquisitions this year. “Obviously you’d like to buy everything as cheaply as you can, but you have to be realistic. It’s probably a better market today than it was even six weeks ago.”

The rest of the year may put his thesis to the test, as the falloff in M&A activity was dramatic in the first quarter. Data from PricewaterhouseCoopers showed just 13 industrial sector deals worth a total of $1.6 billion. That’s down from 43 deals worth $8 billion in the first quarter of 2008.

Dell hunts for a banker

rtr21rzjDell is looking to hire an M&A chief, The Wall Street Journal reports, adding that the computer maker has been interviewing “investment banking and technology industry veterans” for the newly created executive position, and could announce a hire within the next month.

Two bankers have told me in the past few weeks this is the case. One Silicon Valley banker said Dell has been trying to fill the position for quite a while, but no M&A banker worth his or her salt wants to join the company, which is notorious for lagging behind on acquisitions, even as rivals like Cisco, Hewlett-Packard and IBM go forth and acquire every few months.

“Joining Dell is basically as good as saying goodbye to your M&A career,” said a banker who has received feelers from the Round Rock, Texas-based company.

Unfriendly deals are up this year

Broadcom’s tender offer for Emulex shares may be techland’s first hostile deal this year, but unwanted moves seem to be fairly popular across the rest of the M&A landscape. At any rate, more popular than last year.

This year, 30 percent of all deals involving U.S. public companies have been “unfriendly,” compared with 21 percent in the same period last year, according to FactSet MergerMetrics data. In absolute numbers, there were more such deals last year (23) than this year (18).

In its definition of “unfriendly” deals, FactSet includes both unsolicited offers, in which “the acquirer has publicly disclosed its offer to acquire the target,” and hostile deals, in which “the target’s board has formally rejected the unsolicited offer and the acquirer has continued to try and get control of the target.”

Bought a bank? Better tell its customers

MoneyA good way to keep customers from abandoning ship when a bank is acquired sounds simple — tell them about the deal. Yet, not many banks seem to do it nowadays, a new study shows.
 
A survey involving four of last year’s deals — JPMorgan Chase-WaMu, Wells Fargo-Wachovia, PNC-National City, and Capital One-Chevy Chase — showed fewer than half the customers of the acquired institutions reported receiving enough information from the bank about the deal.
 
Lack of communication could come back to bite the bank, though, as a deal increases by as much as three times the likelihood that customers will switch banks, according to the J.D. Power and Associates report on bank deals. 
 
Moreover, customers who hear about the acquisition in the news or from family and friends are twice as likely to switch banks than those who hear about the deal from the bank itself, the report said. 

 About 75 percent of customers of the banks being merged said they received information about the deal from third-parties, according to the report. Some 12 percent of one bank’s customers said they first found out about the deal from the survey they received for the J.D. Power’s study. J.D. Power declined to reveal the name of the bank.
 
The report was based on responses from 3,111 customers evaluating 17 banks. The four more recent deals were chosen because the number of responses from customers of these banks were statistically significant.
 
“Overall, customers of acquired banks perceive that acquiring institutions are far less focused on customers’ interests and personal service than their previous bank,” said Rockwell Clancy, executive director of financial services at J.D. Power and Associates.
 
(Photo: REUTERS/Romeo Ranoco)

Everyone wants to soak up some Sun

rtxdiroThe Wall Street Journal’s Deal Journal blog wrote a post yesterday about how Sun Microsystems, which has agreed to be acquired by Oracle, now looks “less dumb” than before. In the days after IBM walked away from the negotiating table about two weeks ago, the media was rife with comparisons between Sun and Yahoo, which bungled up a $47.5 billion buyout offer from Microsoft last year.

But now we all know why Sun was driving such a hard bargain with IBM, as Deal Journal says. It actually had some negotiating leverage because Oracle was already waiting in the wings.

Sources told me yesterday that Oracle began courting Sun way back in end-February/beginning-March. Initially, the business enterprise software maker sent feelers to Sun about buying just its software business. After all, Sun’s Java programming language and Solaris operating system work very closely with Oracle products.

First Reserve’s deal war-chest expands

oilFirst Reserve is sitting on another $9 billion of spending money for energy deals after finishing raising its latest buyout fund, Fund XII. The private equity giant, which specialises in energy investments, said the fund is the largest ever raised in the energy sector and exceeds its previous fund, Fund XI, which raised $7.8 billion in 2006. 

The fund appears to be lower than target, however. London-based private equity intelligence firm Preqin said in a recent report that the fund had a $12 billion target.

“Energy remains a large, dynamic and complex industry where change creates new, attractive investment opportunities,” said William Macaulay, Chief Executive Officer of First Reserve in the press release (below).