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Top Stories
P.E. Firms Look to Shift L.P.s, Survey Reveals
Richmond, VA. -Approximately 60% of the private equity firms surveyed by Harris Williams & Co. indicated that they plan to seek out more universities, pension plans, and endowments in future fundraising efforts, as well as look overseas more often for funding. Harris Williams, an M&A advisory firm, released the results of its survey earlier this week.
More than half the private equity firms surveyed by Harris Williams ranked interest rates and the continued strength of the U.S. economy as the key factors impacting their M&A decisions over the next five years. One third of respondents said that competition from other private equity players had the greatest impact on their deal-making. Sourcing Thomson Financial, the survey noted that private equity accounts for an estimated 25% of all M&A activity, up from 8% a decade ago.
Rubin: Raise Taxes for P.E. and Hedge Funds
 The tax treatment of alternative-investment profits is coming under increased scrutiny by government officials and their lackeys. Robert E. Rubin, Treasury secretary under President Clinton, called on Congress to double the tax rate paid by private equity and hedge fund managers at a conference Tuesday in New York. Profits are charged at 15 percent as capital gains, rather than as income where they would be subject to a top rate of 35 percent. “It seems to me what is happening is people are performing a service, managing peoples’ money in a private equity form, and fees for that service would ordinarily be thought of as ordinary income,” Mr. Rubin told the Hamilton Group, a Democratic-center think tank, according to the New York Times. Ranking Senate Finance Committee members – i.e., the guys who set tax rates – have been publicly griping about tax treatment of alternative investments for some time. Editorializing in the Wall Street Journal on Wednesday, Holman W. Jenkins, Jr. connected the dots: “When vast new fountains of wealth open up, Congress must get its ransom in campaign donations.”
More online at
The New York Times
The Wall Street Journal
Fore! Milstein Buys $145M Stake in Nicklaus Cos.
Howard Milstein’s New York Private Bank & Trust paid $145 million for a stake in Nicklaus Cos., the golf-course design, marketing and sports gear business founded by the links legend Jack Nicklaus. Mr. Nicklaus stays on as chairman and chief executive. The size of Mr. Milstein’s stake was not disclosed.
Wexford Deal Gets Federal Approval
WASHINGTON - Federal antitrust regulators said Wednesday they have approved CACI International Inc.'s acquisition of the Wexford Group, a government consulting company. CACI, based in Arlington, Va., provides information technology and communications services, primarily to U.S. defense and intelligence agencies. Wexford, based in Vienna, Va., provides acquisition management, strategic communications and other consulting services. Its revenues are about $100 million a year.
Global Central Bank: Till Debt Do Us Part
BASEL, Switzerland - The Bank for International Settlements warned earlier this week that fast-rising levels of debt was leaving companies – and by implication, economies – more vulnerable to inflationary pressures. The institution, effectively the central bank of central banks, noted in its annual report that the M&A juggernaut has been steadily increasing leverage in financing deals. In its annual report, released Tuesday, the bank noted that M&A acquisition activity had reached an historic $1.1 trillion in the U.S. over the first five months of this year, and $1 trillion in Europe. At the same time, the report commented, equity was dropping while debt was rising; about 12 percent of deals completed in the first quarter were financed by equities, compared with an average of 50 percent during the technology merger boom of 1998-2000.
IHS Acquires Jane's from Woodbridge for $183.5M
ENGLEWOOD, Colo.- IHS Inc. (NYSE: HIS), a global data provider, announced today it has acquired Jane's Information Group, which specializes in the government and defense markets, from the Woodbridge Company. HIS issued 4.4 million shares of new common stock which it transferred to the seller. Woodbridge cannot sell the shares for three years, according to terms of the deal.
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Steel Partners Japan Takes Bull-Dog to Court Over Poison Pill
TOKYO - Steel Partners Japan Strategic Fund filed an action with Tokyo District Court Wednesday seeking to bar Bull-Dog Sauce Company and its directors from activating takeover defense measures aimed at diluting the fund’s shareholder value and blocking its tender offer to its shareholders. The action followed the mass-mailing of letters addressed to all Bull-Dog employees asking them to reconsider their opposition to the company’s tender offer and requesting a face-to-face meeting with employee representatives. In a letter dripping with politeness, the fund pointed out that meeting in person to discuss significant matters was the Japanese way.
American Oriental Eyes $30M China Deal
NEW YORK - American Oriental Bioengineering said Wednesday it signed a letter of intent to buy drug maker Changchun Xinan Pharmaceutical Group Co., a Chinese company, for not more than $30 million. American Oriental has 90 days to enter into a definitive purchase agreement with Changchun. American Oriental said Changchun has a set of women's health products that would complement its product offerings and said the purchase would also expand its manufacturing capabilities.
Providence Equity Buys Stake in NexTag from Morge nthaler
Providence Equity Partners has bought a two-thirds stake in a privately held Internet shopping site, NexTag, for $830 million, according to The Deal.com. Morgenthaler Ventures, which has backed NexTag since 1999, retains an equity position. The site allows shoppers to compare prices for a goods ranging from real estate to groceries.
Broadcom Corp to Acquire Global Locate for $146M
IRVINE, Calif. - The Broadcom Corporation, a chip-maker, agreed this week to pay $146 million for Global Locate Inc., a closely-held producer of global-positioning software. The sellers stand to collect an additional $80 million if the company meets agreed-upon performance goals.
We have an extraordinary conference and awards gala planned for you on the 25th and 26th, at the Standard Club in Chicago. If you haven’t already registered, just click the banner at the top of this email and visit the conference Web site and reserve your place today. If you’ve been to our programs before, you know there’s nothing like it for meeting new people, gaining insight from the field’s top performers, and just having a good time with your professional peers.
The program opens, after a welcome at 1, with a presentation by Donald F. McLellan at 2. Listen as the acting chairman of the Motorola Inc. Equity Investment Board, and a senior vice president for mergers and acquisitions shares his unique perspective as a corporate dealmaker.
At 2:30 our first panel, “Riding the Wave of Mergers and Acquisitions Financing Boom,” gets underway. Presenters are Bruce V. Rauner, principal and chairman, GTCR Golder Rauner, LLC; Jeff Rosenkranz, managing director and head of business services and industrial growth, Piper Jaffray, Co.; and Noel Ryan, managing director and head of the private finance group, Houlihan Lokey Howard & Zukin, Inc.
After a break we resume with “Matching Financing Solutions to Corporate Growth.” David Evans, chairman of Leoville Holdings, LLC. opens the program. Presenters are James Dugan, chief executive and managing partner, OCA Ventures/O’Connor Partners; Karen Gottwald, senior vice president, Hilco Financial; Michael C. Ferrara, former president and chief executive, X-Rite; and Christopher Wilson, managing director, Headwaters Inc.
At 4:30 William H. Venema, managing partner, Epstein Becker & Green, P.C., chairs a panel that assesses strategic buyers versus financial buyers. Presenters are Rachel Gonzalez, senior vice president and group counsel for mergers and acquisitions, at Affiliated Computer Services Inc.; Thomas A. Avery, managing director and head of financial sponsor group, Raymond James & Associates, Inc.; and Walter C. Florence, managing director, Frontenac Company, LLC.
We start up again Tuesday morning at 9 with “Elements of Debt Financing,” chaired by Elizabeth A. Davidson, partner, Jenner & Block. Presenters are Kenton L. Brown, principal, William Blair & Company; Thomas S. Bagley, senior managing director, Pfingsten Partners; and Bradley J. Charchut, director, Dymas Capital Management Company, LLC. |
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June 25 - 26, 2007:
Middle Market Financing, Chicago |
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Mohsin Y. Meghji
Restructuring Specialist
Mo Meghji is a principal and founder of Loughlin Meghji + Company, which helps restructure distressed companies. Prior to founding LM+Co, Mo was a partner in the restructuring practice of Arthur Andersen LLP.
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M&A: You hear a lot these days about rescue finance.
M.M. Absolutely. I’m seeing a lot of appetite by lenders to lend money almost regardless of how difficult a company’s problems are. They have convinced themselves that they can price any risk acceptably. Someone described this situation to me as: We’re in the seventh inning of a liquidity and credit cycle. In other words, the cycle is nearly over but there are still two innings to go. At this moment we are seeing some stupid deals being done.
M&A: How stupid?
M.M. I mean investing in companies where there are risks associated with the fundamentals, and where the turnaround story is not very advanced. Yet the money required is pretty cheap relati ve to those risks. So money flows. I’m working with a company in that situation right now. We are working on their business plan. This company has turned it around in the textile industry. Five years ago I would have been begging lenders to come in and take a look. I have been surprised at the interest level, pleasantly surprised.
M&A: Are new funding sources adding to the supply?
M.M. Hedge funds have become a key part of the lending market now.
The money center guys were conservative five years ago, but now they’ve learned to compete aggressively. They’re jumping on the bandwagon. They’re saying, hey, we’ll give you money before you have to go into bankruptcy so you’ll have time to fix your problem.
M&A: They’re competing in the same market, but in very different ways.
M.M.: Yes. Hedge funds aren’t regulated, so there is no credit examination process by any government entities. The banks, the financial institutions, they have regulators coming in looking at their loans. A hedge fund can carry a problem loan at par value without federal scrutiny.
M&A: How do the differences play out on the ground?
M.M. In my experience, hedge fund people are very much financial and restructuring people. The commercial lenders have had decades dealing with problem loans and will typically want to bring experts in to fix the problem. I had a company last year that ran into problems soon after being issued. The lenders were focused on how the company was doing, how the operations were. The hedge funds were focused on yields. They said, ‘Let’s stop wasting time trying to figure out the operation.’ Therein lies opportunity for our firm. We go in and our primary focus is to work with management teams and boards. We work with the company. Our focus is improving profitability.
M&A: You see a lot of troubled companies. Can you generalize about what causes companies to falter?
M.M. The issue of globalization is hurting a lot of companies right now. Offshore sourcing continues to grow, and just about every kind of product is being manufactured off shore. Why make it in the U.S. if you can make it for less in Pakistan to Mexico? Companies have to aggressively attack the supply chain issue and force that.
M&A: Where is the opportunity in turnarounds today?
M.M. As the government deficit issue gets more focused, I see more opportunity in health care. Medicare is such a big component that any changes there will cause huge issues. I am hearing early rumblings that I think will produce opportunities over the next 18 to 24 months. Also, in general, there are so many highly-leveraged transactions given the M&A market today.
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Mr. Meghji participates in the panel on Restructuring June 26 at 11 AM in Chicago, at the M&A Advisor Middle Market Financing Conference. To learn more about Mr. Meghji and Loughton Meghji, log onto lmco-ny.com. |
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