Posts filed under “M&A”
Barron’s has some interesting data points on deal activity in 2010:
• 1,701: volume of deals in the first half, about stable with the like period in 2009
• $362 billion: total value of deals in the first half
• 8.7%: rise in first-half deal value from the 2009 period
• $41.6 billion: value of private-equity exits in the period, versus $35 billion in all of 2009
All data via Mergermarket and Merrill DataSite.
As a stark counterpoint to How Goldman Sachs Bagged Clients, I recall ever so fondly how Merrill Lynch bagged itself: With a Sept. 2006, top-of-the-market, $1.3 billion acquisition of sub-prime originator First Franklin from National City: First Franklin is one of the nation’s leading originators of non-prime residential mortgage loans through a wholesale network. [...] “This…Read More
Dump the dog, buy the thoroughbred: • Berkshire Buys Burlington Northern in Buffett’s Biggest Takeover (Bloomberg) • Buffett’s Berkshire Sells More Moody’s (Barron’s) Prior to the takeover, Berkshire owned 22.6% of Burlington Santa Fe. At the end of 2008, Berkshire held 48 million shares of Moody’s. Their stake is now down to 38 million shares,…Read More
Some of the emails that recently came to light — from prior to the Merrill acquisition closing — makes it pretty hard for the company to claim MAC — Material Adverse Condition. The email exchanges make clear it they had a pretty good idea about the lousy condition Merrill Lynch was in. To my read,…Read More
Huge Bloomberg article on BofA’s Merrill acquisition. My view is that the vast majority of all mega-mergers are unmitigated disasters. The one true exception seem seems to be Commodity mergers (especially Energy/Oil), where you increase reserves but cut admin overhead. As disastrous and expensive as the acquisition has been, the Bloomberg column argues it also…Read More
The late breaking news doesn’t seem to stop these days: “Comcast, the nation’s leading provider of cable, entertainment and communications products and services, is in talks to buy the entertainment giant NBC-Universal from General Electric, according to knowledgeable individuals. Deal points were hammered out at a meeting among bankers for both sides in New York…Read More
A Bailout Nation reader reached out to me with the following tale. What makes it so compelling even today was what they thought they could do with it: Turn it into another Pay-for-Play business: I was at Morningstar as a mutual fund analyst when S&P tried to buy the company circa 1997. The S&P people…Read More
If they are too big to fail, make them smaller.”
-Nixon Treasury Secretary George Shultz about Fannie Mae and Freddie Mac
This Sunday NYT seems to be all about one of our favorite crisis whipping boys: The concept of TBTF — “Too Big to Fail.” There are numerous articles, stories, blog posts on this pernicious policy, including our own “Too Big to Succeed” meme (aka chapter 18: Too Big to Succeed? in Bailout Nation).
• Gretchen Morgenson asks: Too Big to Fail, or Too Big to Handle?:
Rather than propose ways to shrink these companies and the risks they pose, the Geithner plan argues instead for enhanced regulatory oversight of the behemoths. This suggests the taxpayer safety net will be larger after our national financial train wreck, not smaller.
More than two years after the crisis began, “too big to fail” remains “too problematic to address” with anything other than more souped-up regulation. Given that earlier efforts at policing these entities failed so miserably, why should anyone think that a new-and-improved regulatory approach will fare better?
• Eric Dash asks If It’s Too Big to Fail, Is It Too Big to Exist?:
Today, amid the wreckage of the gravest financial crisis since the Great Depression, bigness is one of our biggest problems. Major banks, the Detroit automakers, the financial basket case that is the American International Group — the only reason these giant, sclerotic companies are still standing is that they have been deemed “too big to fail.”
Or, more precisely, too big to be allowed to fail. Policy makers fear companies like these are so enormous and so intertwined in the fabric of the economy that their collapse would be catastrophic. Hence, all those multibillion-dollar, taxpayer-financed bailouts.
In its overhaul of financial regulation last week, the Obama administration proposed several measures to try to contain the biggest of America’s big banks. But it stopped far short of calling for the dismantling of those institutions.”
Paul Krugman gets meta on the idea — Too big to fail FAIL — and surprisingly argues that we can never eliminate TBTF:
“I’m a big advocate of much strengthened financial regulation. One argument I don’t buy, however, is that we should try to shrink financial institutions down to the point where nobody is too big to fail. Basically, it’s just not possible . . .
So I think of the pursuit of a world in which everyone is small enough to fail as the pursuit of a golden age that never was. Regulate and supervise, then rescue if necessary; there’s no way to make this automatic.”
I totally disagree — size is problem, for it not only creates companies too large to effectively practice risk management with, the mere size creates other issues. The fact that CitiGroup was able to get Glass Steagall repealed, but did so by forcing the government’s hand via a technically illegal merger is quite telling.
When companies get to be that large, their vast wealth buys influence and power and corrupts the political system. Despite the crisis caused by the banks, just look at how successful their lobbying effort was. Their enormous pushback effectively neutered any true regulation of the finacial sector.
I think that from now on, I will be referring to the President as Barack W. Obama — since he is adopting Bush’s economic policies, he might as well as adopt his middle initial.
Too Big To Succeed . . . (January 14th, 2009)
Obama Reform Plan Fails to Fix Whats Broken (June 18th, 2009)