<> bulge bracket shop ?
oldmonk Wrote: ------------------------------------------------------- > numi Wrote: > -------------------------------------------------- > ----- > > If I get laid off, I will try to find another > job > > in private equity. If that doesn’t work, I’ll > > probably just chill, do some volunteer work, > and > > exercise a lot while writing some b-school > apps. > > Howz the deal flow at your firm numi? Private equity deal flow isn’t very exciting right now. It’s not exactly a seller’s market, and although we’re still seeing some deals, most of it is coming through auction and the offerings aren’t generating much enthusiasm. We want to put money to work so we’ll still look at stuff that are at attractive valuations, but we also don’t want to sacrifice quality just for the sake of doing deals. Oh, and the other thing that makes the deal environment challenging right now is credit – credit isn’t available and most lenders see the credit environment staying the way it is or potentially getting even more expensive over the next couple quarters. Since we’re not seeing too many great deals, we’re spending more time on portfolio companies because we’re going to have to make some changes to headcount and possible strategies there in order to adapt to the changing currents in the market. > > Also, what do you think about M&A? Surely, the > skills in PE should be transferable to M&A. And > this bloodbath is likely to produce some good > acquisitions candidates and w/o cheap debt, do you > think that corporate takeover market is likely to > pick up a bit? If you’re asking about sell-side M&A, I really don’t have any desire to move to investment banking or any other sell-side function. I’ve been in private equity for about eight months now and I can see a potential longer-term career in this field. As for the M&A environment in general, I don’t expect to see many deals getting done. It’s true that valuations have come down, but the problem is that the markets are trading based on technicals or pure sentiment now and it’s really hard to tell what companies are really worth at this time. As for your comment about debt, I think it’s pretty much assumed that you won’t see highly leveraged transactions for a while – in fact, a lot of the highly levered deals that were announced months ago are still on hold right now, and some recent LBO’s have been carried out around 55% debt/45% equity or something like that. Not exactly levered to the hilt, but that’s the best that private equity firms can do in the current market. You might see some corporate takeovers because company valuations are so depressed right now (as evidenced by the recent deals in the financial institution space). However, in general, cash is so valuable right now and credit is so scarce that low valuations aren’t as attractive as you might imagine. Even companies that don’t have much short-term debt and have a fairly cash-heavy balance sheet and reliable cash flow from operations, like the larger tech and media companies, are not expected to do much M&A in the foreseeable future, simply because credit is in such short supply. Shareholders would most likely react unfavorably if companies decided to drawn down their cash balance for acquisitions instead of paying it out to shareholders in times like these. Those are my impressions. What do you think? Anyone else have thoughts?
dspapo Wrote: ------------------------------------------------------- > my company is looking to increase our m&a activity > (my department). we’re one of the few > non-essential consumer goods companies that’s > surviving. we’re looking to pick up some bargains > while we can dspapo, what’s your email address? i have a job profile similar to yours, would be good to share notes…
I think the hiring freeze is partly current economic/market conditions but I think a lot of 60+ crowd are getting their September 401Ks and saying “Well that does it, I’m going to HAVE to stick around the office for AT LEAST 5 more years”. Willy
numi Wrote: Even companies that don’t have > much short-term debt and have a fairly cash-heavy > balance sheet and reliable cash flow from > operations, like the larger tech and media > companies, are not expected to do much M&A in the > foreseeable future, simply because credit is in > such short supply. Shareholders would most likely > react unfavorably if companies decided to drawn > down their cash balance for acquisitions instead > of paying it out to shareholders in times like > these. > > Those are my impressions. What do you think? > Anyone else have thoughts? How about consolidation of the asset management industry? I think that could provide some M&A activity.
> > Those are my impressions. What do you think? > Anyone else have thoughts? Corporate takeover will shortly rebound. With valuation at these levels and with the amount of cash sitting idly around at 1% interest coupon, it’s very easy to make deals very accretive. The software space for example will be heavily consolidated over the next year and a half. In private equity, bigger shops should do well with creative financing. high coupon convertible preferred, perpetual preferred with cheap warrants… etc. With valuation coming down, it’s not hard to reach hurdle rate with low debt. LBO is an important tool in PE, luckily it’s not just the only one.
swtxlady, what you’re saying doesn’t seem to make sense to me, unless I misunderstand what you’re saying. I don’t think it’s “easy” to make deals very accretive, because for a plethora of reasons I highlighted above, cash is king and credit is tight. Why would shareholders favor acquisitions over dividends or some other type of payment to shareholders, especially in this type of market? Also, accretion assumes that the target will help the acquirer boost earnings in the foreseeable future. With all indications prognosticating further deterioration in the economy over the short term, I don’t see how you think there’s going to be much accretion. Most companies have been suffering the effects of the economic downswing already. As for your comment about private equity, show me someone who’s willing to accept “creative financing” like the examples you mentioned. There are no “cheap warrants” out there, and credit continues to get more expensive by the day. Hardly anyone is lending right now, and any lenders still in the market are asking pretty ridiculous terms on their loans – far from “cheap” – and so much so that the leveraged deal flow is expected to be fairly inconsequential through the end of the year. I don’t know if you’re in banking or PE (I assumed that you were not), but if you’re seeing differently, I’d be curious to know what PE firms you’re referring to and what types of deal structures you’ve been seeing. Also, while valuations are coming down, there is still a premium for good companies, as few of them are being sold in the current market. Most of the deals that have been going through auction haven’t generated much enthusiasm, and PE firms aren’t desperate enough to do deals just for the sake of doing deals. It’s true that good companies that we end up purchasing during this time should do very well when we exit 3-5 years down the line, but valuation multiples are only one part of the equation. The fact that company earnings are largely expected to be flat to down for at least the next year has to be taken into consideration as you think about your potential returns. As such, I can’t say I agree that it’s “not hard to reach the hurdle rate with low debt” – credit is an essential part of the buyout shops, and is far more than just a “conveinent tool” in private equity. Maybe I’m just more bearish than you, but I see every day that the contraction in multiples hasn’t even come close to offsetting the problems in the credit market and the relative dearth of attractive companies being shown around right now.
krnyc2008 Wrote: ------------------------------------------------------- > > How about consolidation of the asset management > industry? I think that could provide some M&A > activity. TROW will likely buy PFG for the booming 401K business
I’m in oil and gas… looks like it’s going to be slow…
numi Wrote: ------------------------------------------------------- > swtxlady, what you’re saying doesn’t seem to make > sense to me, unless I misunderstand what you’re > saying. I don’t think it’s “easy” to make deals > very accretive, because for a plethora of reasons > I highlighted above, cash is king and credit is > tight. Why would shareholders favor acquisitions > over dividends or some other type of payment to > shareholders, especially in this type of market? > Also, accretion assumes that the target will help > the acquirer boost earnings in the foreseeable > future. With all indications prognosticating > further deterioration in the economy over the > short term, I don’t see how you think there’s > going to be much accretion. Most companies have > been suffering the effects of the economic > downswing already. > > As for your comment about private equity, show me > someone who’s willing to accept “creative > financing” like the examples you mentioned. There > are no “cheap warrants” out there, and credit > continues to get more expensive by the day. Hardly > anyone is lending right now, and any lenders still > in the market are asking pretty ridiculous terms > on their loans – far from “cheap” – and so much > so that the leveraged deal flow is expected to be > fairly inconsequential through the end of the > year. I don’t know if you’re in banking or PE (I > assumed that you were not), but if you’re seeing > differently, I’d be curious to know what PE firms > you’re referring to and what types of deal > structures you’ve been seeing. > > Also, while valuations are coming down, there is > still a premium for good companies, as few of them > are being sold in the current market. Most of the > deals that have been going through auction haven’t > generated much enthusiasm, and PE firms aren’t > desperate enough to do deals just for the sake of > doing deals. It’s true that good companies that we > end up purchasing during this time should do very > well when we exit 3-5 years down the line, but > valuation multiples are only one part of the > equation. The fact that company earnings are > largely expected to be flat to down for at least > the next year has to be taken into consideration > as you think about your potential returns. As > such, I can’t say I agree that it’s “not hard to > reach the hurdle rate with low debt” – credit is > an essential part of the buyout shops, and is far > more than just a “conveinent tool” in private > equity. Maybe I’m just more bearish than you, but > I see every day that the contraction in multiples > hasn’t even come close to offsetting the problems > in the credit market and the relative dearth of > attractive companies being shown around right now. For public/private companies, acquiring other companies at these valuation levels are highly accretive because the ROI on cash is low. Companies have a ton of idle cash sitting around, they don’t need debt to finance acquisitions. When I say accretive, I was referring to the EPS line. It doesn’t matter if the acquiree’s P&L are bad/worsen, as long it’s not negative. Like Oracle said, now is great opportunity to acquire companies. I cover a fair number of software companies, and they are sitting on massive amount of cash, that earns 2% at best in this environment. You can pay 25x for a company and still do better than 2%. I am strictly referring to companies with cash, which seems to be the norm in the space I cover. I am not talking about LBO model here… M&A will pick in the public space. Debt market for corporates will soften in the coming months (sure, it looks bad now, but we’re in terrible times). Shareholders do not want dividend in this market. If they did, dividend paying stock would NOT be trading at yield of 5%+. Debt market for PE shops is a different story. I agree with you that PE shops are in pain. I think most people are incorrect in assuming that LBO and PE are synonymous. They’re not. I never said that PE shops will blossom.
I called COGN deal last year and have been looking for targets ever since - what do you like. Some well known targets = INFA, OTEX, TLEO, KNXA. I like OTEX
I agree with Numi. I am interning at a boutique investment bank in midtown Manhattan from last 10 months. Currently, I am working on M&A and PE deals. M&A Deals are not executing because EBITDA and Sales multiples came down severely this year. I met many companies CEO and they really feel poor about themselves. Yesterday I met a guy who owns more than 20 retail stores in North East area. he has zero debt and 3 million dollar cash hard on Balance sheet, but he is not able to get loans (asset based) in this tight credit market. Now we gonna help him to liquidate his stores (like overstocks.com or bluefly.com) below the original inventory costs. this is how our business changed from acquisition advisory to the liquidation advisory. I am a CFA level 2 candidate and an MBA student graduating in December this year. I am working in this company unpaid full time from last 10 months in hope that one day I will get a junior IB Analyst/Associate job once I graduate. I dont see my company or any other PE shop will offer me full time job. I might go back to India and work there after graduation, but IB in India dont pay good salary. I have already had huge debt from MBA fees. Anybody wanna join this club?
if you are good, you shouldn’t be worried
Dude there aren’t many openings for junior people in boutique banks.
parikhvh Wrote: ------------------------------------------------------- . I might go back to India > and work there after graduation, but IB in India > dont pay good salary. How is it like working in a IBank in India? I heard the salaries are closed to Rs 30 lacks p.a. If the deal to work there is lucrative enough, I might also just get a mariners compass and start sailing back.