The deal world remained muted this year in terms of big transactions and activity. According to Dealogic, the number of announced takeovers in the United States so far this year was down about 22 percent, while volume was $1.1 trillion, up about 15 percent from last year but still below the level in the years before the financial crisis. . Despite the relative doldrums, there were still some highlights and lowlights. Here are some of them:
THOMA BRAVO FLIPS DIGITAL INSIGHT TO NCR The private equity firm Thoma Bravo receives an A for buying Digital Insight for $1.025 billion then selling it 124 days later to NCR for $1.65 billion. The real loser was the initial seller, Intuit, which lost out on $600 million in profit because it reportedly insisted on a quick sale timetable, which strategic buyers like NCR couldn’t meet. Sometimes it pays to take it slow. Intuit receives an F.
US AIRWAYS AND AMERICAN AIRLINES The merger of the two airlines left US Airways’ management in charge even though American was the larger airline. American’s creditors and shareholders still cheered as they received something almost as rare as a unicorn: a full recovery in bankruptcy. The two airlines’ biggest feat, though, and what warrants an A, was extracting a favorable settlement from the Justice Department, which clearly overreached in a lawsuit brought to halt the combination.
COMMONWEALTH REIT/CORVEX The father and son duo who head CommonWealth â€" Barry and Adam Portnoy â€" and CommonWealth’s counsel at Skadden Arps showed little regard for shareholder rights, doing everything in their power to prevent Corvex Management and the Related Companies from removing the Portnoys. The Portnoys banked on CommonWealth’s unique requirement that shareholders arbitrate all disputes with the company to stymie the two hedge funds. It didn’t work, and the arbitration panel ruled against CommonWealth, clearing the way for the funds to begin a campaign to unseat them. The Portnoys receive an F.
JOS. A. BANK’S BID FOR MEN’S WEARHOUSE Jos. A. Bank made a daring $2.3 billion bid for its bigger men’s clothing rival, teaming up with Golden Gate Capital for a significant equity infusion to make the bid credible. Jos. A. Bank’s management, including its chairman, Robert Wildrick, receive an A for cleverly inviting a counterbid from Men’s Wearhouse by saying a combination of the two made sense no matter the form. Men’s Wearhouse took the bait, dusting off the beloved but seldom-used Pac-Man defense. The only thing to sort out now is which set of shareholders receive a premium and who runs the combined company.
ELAN/ROYALTY/PERRIGO Irish takeover laws limited its defenses, but the Irish pharmaceutical company Elan still earned an A by fending off a $6.7 billion hostile bid from Royalty Pharma in time to put itself up for sale, ending with a much higher $8.6 billion bid from Perrigo. Elan showed that a good defense could be played off fundamentals and not simply a poison pill or other defenses that it could have used in the United States.
ADVANTAGE RENT A CAR/HERTZ GLOBAL HOLDINGS/FRANCHISE SERVICES OF NORTH AMERICA Less than a year after Hertz was forced by the Justice Department to sell Advantage to satisfy antitrust concerns stemming from its acquisition of Dollar Thrifty, Advantage filed for bankruptcy. So much for that remedy, which receives a big fat F.
HEDGE FUND ACTIVISM The hostile raiders of the 1980s have been reborn as hedge fund activists, with all the ego to boot. The successes are stunning and deserve A’s, including Third Point’s involvement with Yahoo and Pershing Square’s dealings with Canadian Pacific; the failures are real and clearly F’s, like Pershing Square and its involvement with J.C. Penney and Edward Lampert’s running of Sears. Still, there is no doubt that this is the biggest trend of the decade, one that is here to stay. It will continue to inspire even as it borders on the absurd, as Third Point and Carl C. Icahn’s machinations with Apple showed. TWITTER I.P.O. Call it the anti-Facebook. Twitter earned an A by simply doing what a company should do in an initial public offering. Don’t get tricky with pricing or numbers or try to push boundaries. Twitter simply sold shares to the public with great success.
RUE21/APAX Apax agreed to buy Rue21, the fashion retailer, including shares held by an older Apax fund. When Rue21 announced a sharp downturn in sales, the markets began to wonder whether the deal made sense and whether Apax would try to walk away. Faced with a tough contract and perhaps a different view of Rue21’s prospects, Apax completed the deal at the initial price. The lenders lost hundreds of millions of dollars while Apax’s old fund cashed out. It remains to be seen how Apax’s new investors will do. The deal highlighted the conflicts when a private equity firm buys a company that it already holds shares in. It’s not an F, but a warning for future private equity deals.
SOFTBANK/SPRINT/CLEARWIRE The boards of Clearwire and SoftBank did good jobs as after some initial hesitancy. Clearwire succeeded in pushing Sprint, a controlling shareholder, to raise its final bid while SoftBank was able to hold together its acquisition of Sprint itself. A’s to both companies.
HONG KONG STOCK EXCHANGE/ALIBABA The Chinese Internet giant Alibaba wants to be just like the technology giants in the United States, including having a share structure that preserves control with management after it completes its heavily anticipated I.P.O. Kudos and an A to the Hong Kong Stock Exchange for standing up to Alibaba and refusing to bend its one-share one-vote rule to accommodate Alibaba’s proposal. Alibaba is instead likely to go where the regulations are weaker: the United States.
NEW YORK STOCK EXCHANGE/INTERCONTINENTAL EXCHANGE An American institution is acquired by a company that didn’t exist 15 years ago and is a creation of technology, showing that technology almost always wins these days.
ATLANTIC COAST FINANCIAL/BOND STREET HOLDINGS The Atlantic Coast board receives an F for agreeing to an acquisition in which 40 percent of the merger consideration would be deposited into an escrow, but it neglected to negotiate an escrow agreement. Public shareholders protested and the escrow was eliminated, but shareholders still did the rare thing of rejecting the deal.
DELL MANAGEMENT BUYOUT A Dell special committee negotiated a model management buyout with all the bells and whistles intended to protect shareholders, even going so far as to reimburse the Blackstone Group $25 million to persuade it to bid. The committee stayed cool throughout a process in which shareholders, including Mr. Icahn, nudged and pushed the committee to consider alternatives. Many shareholders still complained that Dell would have been better off as a publicly traded company. We’re going to defer a complete grade on this deal as we wait to see whether Michael S. Dell can succeed in turning around his company outside of the scrutiny of the public markets, but Mr. Dell still gets an A for putting up more cash to buy out the public shareholders when his financial partner, Silver Lake, wouldn’t. A shake of the head also goes to Mr. Icahn for being his wily self and making what appeared to be a hocus-pocus nonoffer, then offering advice for shareholders to seek appraisal before orgoing the remedy himself.
DOLE MANAGEMENT BUYOUT Dole was taken private by its chief executive, David H. Murdock, for the second time in a turnstile management buyout. The $1.15 billion price was just about adequate and had the endorsement of Institutional Shareholder Services, the big proxy adviser, but one was left to wonder whether this wasn’t the case of a controlling shareholder clearing the field. Indeed, shareholder litigation remains because of Delaware’s penchant to avoid enjoining deals for substantive reasons. Meanwhile, shareholders barely approved the deal with a vote of 50.9 percent of the shares not held by Mr. Murdock, who receives an F.
Happy New Year! Pineapple for all!
