Tag Archive for 'M&A'

The Era of the Renminbi?

Published
by
ron
on November 21, 2009
in International Finance
. 1 Comment

RenminbiA recent side-by-side comparison of the U.S. and Chinese economies produced a startling result: There were $34.8 billion of initial public offerings in China this year and only $13.7 billion in the U.S.

With numbers like that, is it any surprise that Western fund managers are scrambling to get a bite of the immensely profitable Chinese market for new companies? As the New York Times reported, U.S.-based Blackstone Group has formed a partnership with Shanghai’s municipal government to raise a $732 million private equity fund.

What’s different this time is that Blackstone’s fund is denominated in the Chinese currency, which is officially called the renminbi. Blackstone’s idea is to take advantage of capital from China’s increasingly wealthy institutional and private investors. The fund will then use the investments to buy companies and take them public, earning a hopefully large profit along the way. There is plenty of interest in the Chinese market for new companies—Carlyle Group announced this week that it had invested $60 million in three Chinese growth companies. So there is no shortage of domestic companies ripe for turnaround [Source].

Citi’s Transformation

Published
by
ron
on January 15, 2009
in Global Strategy and International Finance
. 0 Comments

citi“TOO big to fail, too shit to buy” is the way some Citigroup insiders describe their employer. Not for much longer. On January 13th Citigroup announced that it had reached a deal to spin out Smith Barney, its broking arm, into a joint venture with Morgan Stanley’s broker. The agreement presages even more dramatic changes. The bank has brought forward its fourth-quarter results to January 16th and expectations are high that Vikram Pandit, Citi’s chief executive, will unveil plans to slim the bank further and faster.

Full coverage of Citi’s transformation can be found here “DealBook”

What lesson can be learned from Citi’s faillure:

“Universal banking need not fail. But smaller, focused organisations are easier to run than large, sprawling ones—Citigroup has more employees than the American navy and, apparently, greater destructive power. Mr Weill’s creation, backed by a host of executives, directors and investors ever since, has proved horribly flawed. Unlike HSBC, another giant, Citi has been built through deal making and it shows. Acquisitions were poorly integrated. Cultures overlapped rather than melded (the resilience of the Smith Barney name is one telling indicator). Risk management was dismal. The big balance-sheet was deployed recklessly. It may be inevitable that some banks are too big to fail; but the lesson of Citi is that they can also be too big to manage.”

“The second shift in thinking signalled by Citi’s manoeuvres concerns policy. November’s dramatic government intervention may have quelled fears that the bank would go under. But it has not stopped the bleeding at Citi, which remains focused on survival rather than on ramping up credit. Red ink laps around a host of other banks too. Full-year earnings at American banks are likely to be awful. Many eyes are on Bank of America, whose levels of tangible equity are also thin and, with Merrill Lynch and Countrywide to digest, is seeking billions of dollars in additional capital from the government. In Europe Deutsche Bank revealed a fourth-quarter loss of €4.8 billion ($6.3 billion) on January 14th, thanks in part to misplaced trading bets.”

citi_share_price

High leverage is out, (retail) deposit is back…

Published
by
ron
on September 22, 2008
in International Finance
. 0 Comments

The last two major investment banks (Goldman Sachs and Morgan Stanley) in the US have changed their status to become bank holding companies, allowing them to take deposits from investors. The changes should enable Goldman Sachs and Morgan Stanley to raise more funds by opening commercial banks.

The move – part of a huge restructuring effort on Wall Street – will also give them access to Federal Reserve support. The US government has announced a $700bn (£382bn) package to tackle the worst financial crisis for decades.

Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night, a move that will fundamentally alter the landscape of Wall Street.

Transforming these investment giants into licensed, deposit-taking banks marked the end of an era for Wall Street. It heralds new regulations and supervision of previously lightly regulated investment banks, as well as an end to the outsize paychecks that helped shape the image of the chest-thumping Wall Street banker.

Source:
Bloomberg
BBC
NYTimes

Too big to fail…

Published
by
ron
on September 17, 2008
in International Finance
. 1 Comment

American finance has a new, if reluctant, kingpin: the government. In a dramatic move on the evening of Tuesday September 16th the Federal Reserve agreed to provide American International Group with a loan of $85 billion (€59 billion) to help it stave off bankruptcy.

In return, either the Fed or Treasury will take effective control of the company, which until recently was an icon of private-sector capitalism. After the historic events of the past fortnight, who would bet that AIG will be the last lumbering giant to need resuscitation? Source.

On another note. Gold prices exploded Wednesday — posting the biggest one-day gain ever in dollar terms ($90.40, or 11.6 percent, to $870.90) — as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying. Read more.

Global Market Turmoil Continues

Published
by
ron
on September 16, 2008
in International Finance
. 0 Comments

Once the gold standard in the insurance industry, AIG is the latest victim of the meltdown in the credit markets. The insurance business is all about risk—understanding it, minimizing it, pricing to compensate for it. But American International Group (AIG), the biggest insurance company in the world, seems to have had very little concept of the risk it held in its own businesses. If AIG goes, it is hard to think what else would be considered as too big to fail.

Barry Ritholtz, a prominent financial pundit, writes with tongue not entirely in cheek that the first lesson from the government’s bail-out of Bear Stearns in March was to “Go Big”. “Don’t just risk your company, risk the entire world of finance. Modest incompetence is insufficient—if you merely destroy your own company, you won’t get rescued. You have to threaten to bring down the entire global financial system.”

Who will save Lehman?

Published
by
ron
on September 13, 2008
in International Business and International Finance
. 1 Comment

Executives at Lehman Brothers are racing to meet a deadline of Sunday night to find a new owner for the troubled bank, the BBC has learned. More in-depth coverage can be found at Financial Times and BusinessWeek.

MicroHoo: What Everyone’s Talking About

Published
by
ron
on May 4, 2008
in Global Strategy, High Tech & Media and Social Media
. 0 Comments

Microsoft throws in the towel

Backgrounders on
BBC | Analysis: Microsoft without Yahoo
BusinessWeek | Microsoft Drops Bid for Yahoo
Financial Times | Yahoo under pressure after deal collapse
Bloomberg | Microsoft Walks Away From Yahoo After Fight on Price
CNBC | As Deal Unravels, Pressure Is on Yahoo to Perform
Reuters | Investors eye Yahoo’s alternatives to Microsoft
The Economist | Microsoft throws in the towel
The New York Times | Microsoft-Yahoo: What Everyone’s Talking About
The Wall Street Journal | Microsoft Withdraws Yahoo Offer After Attempt to Bridge Gap in Price

The Mood in The City

Published
by
ron
on April 14, 2008
in International Business and International Finance
. 0 Comments

The mood in London financial markets is not good. House prices are going down, and with them the British pound. Investment bankers within UBS are looking around for jobs, and the Royal Bank of Scotland is sweeping ABN Amro’s trading floor clean with incredible lack of style:

ABN’s structured credit traders were apparently told on Thursday that they should report to RBS’ London office in preparation for a move there on Monday. Terminals needed to be checked and such like. And when they got there… they were all fired (full story).

Luckily, the British have a great sense of humour, and I couldn’t stop laughing at this economic assessment of London 2010 from the price of everything blog:

London, April 2010 – Wall Street firms have just announced their latest results for FY 2009;

300 million staff have been “written down”, leaving just two (Sid and Doris Bonkers) to manage the investment banks’ remaining worldwide debt, equity, merger and advisory, securitisation, syndication and prime brokerage businesses.

Marti Peeps, sole analyst at the last remaining research house, Teletext, welcomed the results as “a bold step in the face of ongoing bad debt provisioning,” though conceded that the City’s newly “rightsized” payroll might struggle to take on board the burgeoning supply of new issuance, namely the packet of Walkers Crisps rumoured to be hitting the primary market in late summer 2012.Hopes for a recovery in Wall Street earnings have for several quarters hinged on the prospects for the successful completion of a 40p private placement of a bag of Salt and Vinegar flavour crisps on behalf of the Walkers Crisps Company. Lead underwriters JPCitigroupMerrill, a subsidiary of the US government, and Northern Rock SocGen KFW Nomura, a wholly owned subsidiary of Tesco plc (Neasden branch), are rumoured to have “solid” interest for the underwriting, most notably from Asia, itself a subsidiary of Texas Pacific Group, but declined to go into further detail. (click here for pdf version. Enjoy!)

Update @ April 15th: London’s financial services sector faces a loss of 20,000 jobs over the next two years. Cuts by Citigroup and RBS are the tip of the iceberg (BusinessWeek).

Microsoft and Yahoo….?

Published
by
ron
on February 1, 2008
in Global Strategy and High Tech & Media
. 0 Comments

Yahoo! and Microsoft

Today, (February 1st) Microsoft Corporation, the world’s biggest software maker, made an unsolicited $44.6 billion offer for Yahoo! Inc. to challenge Google Inc.’s dominance in Internet search services and advertising. The proposed deal, which would transform the software and internet-services industries, values Yahoo! at $31 a share, a 62% premium over the closing price on Thursday. What will the outcome be?

Lenovo IBM Marriage

Published
by
ron
on May 2, 2005
in Global Strategy
. 0 Comments

East meet West

Chinese computer maker Lenovo has completed its $1.75 billion purchase of IBM’s personal computer division, creating the world’s third-largest PC maker, the company said Sunday. The deal — one of the biggest foreign acquisitions ever by a Chinese company — is expected to quadruple sales of Lenovo Group Ltd., already Asia’s biggest computer maker, the company said earlier. Complete coverage of this story can be found here and here.

Lenovo was founded in 1984 by academics at the government-backed Chinese Academy of Sciences and first worked out of a small cottage. First set up to distribute equipment made by IBM and other companies, by 1990 it was selling PCs under its own brand name.

IBM now focuses on consulting and software, outsourcing much of its manufacturing. The sale to Lenovo is expected to cut production costs and breathe new life into the PC business, which now accounts for a small portion of IBM’s total sales and profits.