Showing posts with label Mergers and Deals. Show all posts
Showing posts with label Mergers and Deals. Show all posts

21 Aug 2023

Acquisitions can easily misfire - especially in a People business like Fund Management

Goldman Sachs explores investment adviser sale in retreat from mass market

Careful due diligence can mitigate risks associated with Acquisitions - Temple Associates has 50+ years hands-on experience in the financial markets, in different cultures.

21 Oct 2019

Fund Management Consolidation - a caveat

Anath Capital acquires Stratton Street  and will integrate the credit fund manager's $500 Mio AuM with its Garraway Capital subsidiary to bring combined AuM to $ 1 Bio.
While consolidation in the Asset Management space continues it will not end in a completely oligopolistic landscape. The bigger the dominant firms become the less able they will be to differentiate their products or achieve outperformance. This will always leave room for up-and-coming managers - apart from the human desire to run their own business rather than being stuck in huge bureaucracies.

27 Sept 2017

Invesco may acquire Guggenheim ETF Biz

All very well, consolidation, getting critical mass etc - but is 3% of AuM not a bit rich for a business with wafer-thin (and still trending down, towards zero?) margins?
Invesco may acquire Guggenheim ETF business

14 Apr 2017

Softbank acquires Fortress - Marriage made in Heaven or Hell?

There could be no greater discrepancy between the business model of these two parties. Apart from the fact that Fortress alone already has its fingers in too many pies, this deal seems to increase the impact of 'diworsification' by the power of two. It will be interesting to see how this pans out over time. In the meantime, hats off to the Fortress Principals, it looks like an excellent deal for them!
The Fall of Fortress

15 Mar 2017

Merger Poker - EFG, BTG Pactual and BSI Lugano

There is lots of talk about the need to get bigger in the Financial Services Industry. But there are plenty of potholes on the route to 'Bigger and Better'. Apart from accounting and valuation issues the question of contrasting management cultures can also pose significant integration risks. Do not write off smaller competitors or even nimble mid-sized Asset Managers or Private Banks.
Joe Strähle verrechnete sich mal kurz um 41% - Inside Paradeplatz

14 Jan 2016

Another painful lesson from a disastrous Acquisition

News that Unicredit finally has extricated itself from its exposure in the Ukraine serves as a reminder that 'Strategic Transactions' (Acquisitions, Disposals and Mergers) need the utmost attention and best Advice. We are proud to document that we voiced serious doubts when similar acquisitions were conducted some years back (a close look at the 'Mergers and Deals' Blog entries offers a salutary lesson in Merger Hybris).
The usual suspects among the coterie of advisers (Investment Bankers, Lawyers and Accountants) may all be worth their money but they are not always on your side as they tend to have a financial incentive to make sure that a deal goes through, whatever the rationale behind it.

31 Jul 2015

Buying a Hedge Fund is not so easy

Hedge fund firms are difficult to sell/buy as they depend - in general - too much on the style of a few individuals running the show. Quite often their mentality is not well suited to build a lasting institution. One of the main reasons - apart from the possibility of greater financial rewards - of starting a hedge fund was to be free of the bureaucratic constraints they experienced during their previous employment with a larger institution. So I am not surprised that Carlyle's acquisition of Vermillion asset management has hit rocky shores. (Wall street Journal, Paywall).

10 Jul 2015

Future of 'Universal' Banking Model in doubt

The sudden exit of another Bank CEO - now at Barclays Bank - is a stark reminder that managing a 'Universal' Bank requires near-superhuman skills, and a good portion of luck (or friends in high places as JP Morgan's Jamie Dimon or Lloyd Blankfein at Goldman Sachs would probably confirm).The business model did work quite well in a period of slow technological change, markets that were quite insulated and regulation that kept unwanted competition out.But a universal bank is basically nothing but a financial conglomerate and the conglomerate model - while offering certain advantages - is not one that has demonstrated that it is likely to be successful in the long run. Who still remembers names such as LTV or Gulf+Western? Both were high-fliers on the stock market until they hit the buffers as they become unmanageable, their mastermind retired or they hit unfavourable economic headwinds.

17 Jun 2013

Co-op Bank: Slaughter of the Innocents?

Talk of bailing-in holders of certain bonds demonstrates that investors and depositors in European Banks are well-advised to be ultra cautious and not rely too much on reassurances uttered by regulators and their political paymasters. It beggars belief that after the chaotic 'resolution' of the debt crisis in Cyprus there is even talk of applying a hair-cut to the value of certain bonds issued by the Co-op bank. Most of those looking at losses would be retail investors, the most vulnerable and least sophisticated participants in the financial markets. Before their investments are impaired it would be appropriate to seize the full equity value of the bank - and one would hope that there is one.

Apart from this glaring injustice this episode is another sad illustration about the danger inherent in Merger transactions. The list of desasters is a long one, Bankamerica/Countrywide and Merrill Lynch, Commerzbank/Dresdner Bank, Lloyds TSB'HBOS to name the most prominent one

7 May 2013

Commerzbank defeated in Bonus Fight

All managers involved in employee compensation will be well advised to study the implications of this protracted legal case (see here and here). When senior managers of Dresdner Bank in London tried to pacify members of staff that were unsettled by news that Commerzbank was about to make a takeover bid they did not foresee the implications of the verbal promises intended to calm the nerves of their employees. They would not have expected that two trials in the British courts would have considered their statements to be a legally binding contract that even the dramatic upheavals of the financial crisis in the later part of 2008 would not have been able to extinguish.
In a similar vein, all-too-often I find that the coordination between senior management and human resource departments leaves a lot to be desired. In addition, special deals - often verbally - are agreed with staff members that lead to further confusion and mistrust among other staff members that feel that they are discriminated against. In the case of the promises made to Dresdner Bank one could also have said (even without the benefit of hindsight!) that employment prospects during the summer/early autumn of 2008 were already less than rosy and the threatened (or feared) exodus was highly unlikely.

14 Dec 2012

Merger Blues: Another day, another Write-off

Now it is Legg Mason's turn to eat humble pie and write off a major junk of its investment in Permal, the hedge fund group. No blame sticks to Permal though as no one (except maybe some advisers too keen on their fees?) held a gun to Legg Mason's head and forced them to pay over the odds. It remains to be seen if adding some heft to Permal's assets via the acquisition of Fauchier will help to right the ship. Fund of Hedge Funds are relatively new businesses, often built by one or a handful of entrepreneurs and the task of creating a lasting enterprise culture is a daunting one. The purchase is the easy thing!
Permal to acquire Fauchier Partners (Financial Times)

Man Group faces huge write-off on Acquisition

It was clear to me from the outset that the decision by Man Group to acquire the hedge fund GLG was more out of desperation (to diversity, or as Warren Buffett would say 'diworsify') than rational calculation. While the hedge fund business has been - and will remain - a good business to be in it requires more than any other business a fine judgement of people, enterprise cultures and business trends. Needless to say, the 'advisers' on both side of the deal above all will be interested to bank their not inconsiderable fees while wash their hands of any subsequent problems that may emerge post-deal.
Man Group faces heavy GLG write-off (Financial Times)

11 Dec 2012

Distastrous Acquisitions

Rumors have it that Bank Austria may lose nearly 80 pct of the more than $US 2.2 billion that it paid for Kazakhstan's ATF bank in 2007. Together with the huge write-off that Credit Agricole recently had to make on its Greek adventure and the problems that
Man Investment has digesting its acquisitions this provides more evidence that poorly planned and/or executed acquisitions can prove to be hugely expensive.

10 Dec 2012

FSA: Jobsworth at the controls!

Jobsworth: "a person who uses their job description in a deliberately uncooperative way, or who seemingly delights in acting in an obstructive or unhelpful manner." (Wikipedia). This definition comes to mind when observing the activities of - nameless and faceless - bureaucrats who have the ultimate say on who can occupy a senior position in the British financial service industry. I was always wondering why anyone would submit himself to the humiliating treatment meted out by people that would hardly ever stand a chance to succeed in a competitive environment. If politicians want to safeguard the financial system it is up to them to devise good regulation and not start micro-managing the sector in what can only be called a proto-stalinist manner. I have proposed simple and effective solutions in several posts, but so far no one seems to care - creating thousands of pages of new regulatory pamph is much more to the regulator's liking. Does Vernon Hill really need the aggravation at this stage in his life? The British Jobsworth establishment seems to do everything it can to protect the existing banking oligopoly while shedding crocodile tears about the lack of competition and bank lending.

3 Dec 2012

Swiss-Life CEO: 'We paid too much for AWD'

With better advice Swiss-Life could have saved itself a lot of money and even more bad publicity. The chances that main-stream investment banking 'advisers' talk a willing client out of any deal he wants to do is very small. Too high is the pressure to generate fees that justify a high cost base for the employing firm, too strong the desire to buy an even bigger pad in London's Westend or in the Hamptons. A cursory examination by an experienced observer would have had loud warning bells ringing at the prospect of marrying a solid but staid organisation with a gogo marketing firm lead by a high-profile entrepreneur. On paper the numbers may have made sense - especially before the eruption of the global financial crisis - but the all-important human aspect was overlooked by the blue-eyed analysts in Swiss-Life's planning and strategy team. That the CEO still thinks that acquiring AWD was the right decision is odd - to say the least.

30 Nov 2012

HP/Autonomy: Poor Due Diligence, Poor Implementation

This tale of woe again demonstrates that relying on number crunching accountants and fee-hungry deal brokers is the wrong approach to acquisitions. And when a desperate CEO (see story) is at the controls of a business this turns into a toxic cocktail. Looking at targets for acquisitions all-too-often omits the human aspect of the assets to be acquired and - even more deadly - afterwards neglects the fact that a business is the sum of its human capital and not just a number on a balance sheet. Dealing with real people all the time in our recruitment business allows us to bring this crucial aspect into play when advising on strategic transactions.

22 Nov 2012

Hewlett-Packard - one poor Acquisition after another

Hewlett-Packard could easily become Exhibit Number One for any future case studies about the dangers and pitfalls of hastily concocted acquisitions. When common sense takes a leave of absence and megalomania takes charge of a CEO's desires nothing can stand in the way. An army of (sycophantic and conflicted) advisers is nothing but a rubber stamp and the board - full of well sleepy 'worthies' that are appointed by the CEO and for the CEO - are not providing the necessary checks and balances. The same can be said for the (mostly institutional) shareholders who are not given half a chance to properly question the proposed transaction.

7 Nov 2012

Commerzbank wins right to appeal UK bonus ruling

This headline made me look up the details of the original court case in which a large group of employees in the former Dresdner Kleinwort investment bank were vindicated in their claim that the bank should honor its promise of a guaranteed bonus pool. This amazing quote made by Stefan Jentzsch in a town hall meeting in the winter of 2008/09 makes you wonder what goes on in the heads of Commerzbank management when he said.....".. both Martin Blessing and Michael Reuther are men of honour who will stick to the bonus commitments already publicly made. Also I could not understand how and why, for what no doubt will be just a small economic amount even if it happened, they and their senior Commerzbank management collectively would wish to destroy their reputation as trustworthy leaders ..". No further comment required I think. The irony is that it was sheer folly for Commerzbank to buy Dresdner in the first place - but in that respect the management found itself in good company as Lloyds and Bankamerica entered into similarly suicidal bids at roughly the same time when they purchased HBOS and Merrill Lynch respectively.

11 Oct 2012

Bear Stearns Deal: I am a big boy says Dimon

You may well be a big boy many a JP Morgan Shareholder may think. But the revelation that the deal may have possibly cost JP Morgan $5 to $10 billion demonstrates that Mergers and Acquisitions are a dangerous game that more often than not destroys value for the acquirer as many academic studies document. Apart from the business aspect there is also the fact that corporate governance is not properly functioning with respect to dealmaking. Shareholders (and not only those on the acquiring side) have too little say and are not able to scrutinise the terms of the deals before they are agreed.

7 Jan 2012

Banks may lose Euro 1 Billion in Hungary

A Fiat Law imposed on banks in Hungary by the 'democratic' Orban regime could cost them nearly Euro 1 billion. This is due to the setting of an artificial exchange rate on foreign currency borrowings by Hungarians (mostly to finance mortgages at cheap Euro or Swiss Franc interest rates).
We have always scratched our heads when we read about the absurdly high prices that were paid for East European banking 'assets' before the credit crunch. The financial structure was also wrong - the subsidiaries in the individual countries should have been organised on a stand-alone basis so they could be cut loose in a worst-case scenario. Local funding would mean than devaluations would not be a problem for the parent company.