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)

Squeezing out a smaller premium

BRITAIN/PepsiCo Inc’s offers to buy the remaining stakes in its two largest bottlers came as a surprise, but the biggest surprise may be the scant 17.1 percent premium in the overtures.
PepsiCo’s bid to buy the rest of the bottlers it does not already own constitutes a so-called “squeeze-out,” or a transaction in which the buyer already owned some portion of the target and was seeking to own the 100 percent.
Even given that squeeze-out premiums are typically lower than cases where a buyer did not own any part of the target and was seeking to acquire 100 percent, this one looks particularly low, according to FactSet Mergerstat.
The average 1-day premium for a squeeze-out deal was 35.77 percent versus the average 1-day premium of 44.10 percent for a full acquisition, FactSet Mergerstat said.
Put another way, the PepsiCo premium was half the normal premium for a typical squeeze-out. Both Pepsi Bottling Group and PepsiAmericas rose above PepsiCo’s offer, suggesting that shareholders expect the deal to get a little sweeter.

At home with each other


The foundation for the first of what could be a wave of deals in the badly beaten up homebuilding sector may in some ways have been laid in industry conferences and other interactions between chief executives.

Centex Chief Executive Timothy Eller and Pulte’s Richard Dugas have known each other for a long time and the possibility of a transaction was not new, people familiar with the matter said. 

Eller and Dugas did not discuss any specific terms when they talked about a deal earlier, but when talks began in earnest some two months ago an agreement was reached fast, one of the sources said. 

Dow Chemical: Official Rainmakers’ Punching Bag

Poor Dow Chemical.

Not only did the company end up having to buy Rohm and Haas at basically the same steep price it agreed to last year, but it has also become the favorite target of lawyers, bankers and maybe even judges at the Tulane Corporate Law Institute, an annual gathering of top dealmakers.

Timothy Ingrassia, head of Goldman Sachs mergers and acquisitions business in the Americas struck the first blow on Thursday morning.

 ”You’ve already had Dow Chemical’s unique interpretation of the merger agreement. There was never a transaction that made Apollo look better,” Ingrassia said, referring to private equity firm Apollo’s previous efforts to get out of an agreement to buy Huntsman Corp. 

(Be)league(red) tables

Preliminary first-quarter data from Thomson Reuters on mergers and acquisitions (M&A) and capital markets are out. And unsurprisingly, spring has not sprung in investment banking, with the big exception of a record deluge of corporate bonds.

Fees across investment banking (M&A, loans, and debt and equity capital markets) halved, while fees for completed M&A topped that with a 68 percent fall. Overall announced M&A fell by a third, compared to the same period last year, to $444 billion.

And even that figure is flattered by two huge pharma deals, which bankers doubt will be followed by more of the same, and a flurry of bank bailouts.

The dealscape according to Stone Key Partners

dsc00328Two Wall Street veterans, former Bear Stearns investment bankers Denis Bovin and Michael Urfirer, officially launched Stone Key Partners today. The boutique investment banking firm, which has been operating under the radar for nearly a year, will focus on strategic advisory services, including M&A advice.

Stone Key, which has about a dozen people in all right now, plans to focus on technology, aerospace, defense, homeland security and information services. The firm made it to Thomson Reuters’ annual rankings for 2008 for advising on about $5.5 billion in M&A transactions. Bovin and Urfirer, who have worked together since 1994, have been involved in big deals such as Finmeccanica’s $5.2 billion acquisition of DRS Technologies, among others.

Bovin, 61, and Urfirer, 49, are co-chairmen and co-CEOs of Stone Key. Dealzone caught up with the two of them for a Q&A:

In a spin

Financial public relations firms, who elevated the honing of corporate messages to a highly profitable art form, are having to adapt their businesses and in some cases cut staff as the economic gloom intensifies.

With far fewer deals to publicize and lucrative “retainer” contracts under pressure, companies are cutting costs and are increasingly focusing on work thrown up by the crisis, such as capital-raising, restructuring and repairing tarnished images.”

So what exactly are they up to?

Some recent pr industry blogs and other web postings shine a light on some of the spinmeisters’ latest tactics.

Hard ball from Basel

schwanExpect a bruising fight.

In the battle for control of the world’s most valuable biotech company, Roche CEO Severin Schwan is playing hard ball. The reason is simple: he needs to clinch a deal that clearly enhances earnings.

The Swiss drugmaker has been the most highly rated Big Pharma company for years but financial results last week suggest it may be losing its mojo. Certainly, its premium rating is slipping.

Genentech had wanted $112 a share but Roche’s tender offer for the 44 percent of Genentech it doesn’t already own actually cuts the price to $86.50, or about $42 billion, from the $89 proposed last July.

Simply, Buffett

Warren BuffettWhat’s one of Warren Buffett’s advantages in this environment, when credit is tight, markets are in disarray and deals are so difficult to do?

Simplicity, apparently.

The famed investor gave a financing commitment letter that was just two-and-a-half pages long in the Mars-Wrigley deal, said Timothy Ingrassia, Goldman Sachs’s head of mergers in Americas.

Compare that to deal contracts that average about 90 pages these days and commitment papers that run into hundreds of pages, Ingrassia said during a panel discussion at a Practising Law Institute seminar on M&A in New York.

A trigger for more drug deals?

Jeff KindlerPfizer has taken the plunge, and others may follow.

The world’s largest drug maker is buying rival Wyeth for $68 billion in cash and stock to become even larger.  

Pfizer’s Jeff Kindler is content with swallowing Wyeth for now. He told CNBC the company has no plans to do any huge transactions in the near future.

But the merger could trigger a wave of consolidation in the cash-rich sector as big pharma looks to diversify revenues in the face of competition from generic-drug rivals, analysts say.