Private Equity Firms Consolidating Wealth into the Hands of a Few

The invisible money power behind private equity firms are the same international bankers that engineered this worldwide banking crisis, with the goal of consolidating the world's wealth into their hands.

M&A Hits $2.2 Trillion as 2011 Looms

December 17, 2010

24/7 Wall St. - Data from Reuters shows that global M&A activity rose to $2.2 trillion in 2010. The 2010 improvement was the first since 2007. Most comments about the news said that 2011 should be an even better year for bankers.

“Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found,” the news service wrote.

The excitement may be overheated.

News outlets which cover M&A reported the same optimistic comments three years ago. Stocks were rising so quickly that shares in public companies could be used to close many transactions.

Private equity funds had access to so much capital that they could finance deals like the $33 billion HCA buyout or the $18 billion Clear Channel transaction. Those deals did not do as well as expected. The recession was part of the cause. The overpayments for the companies, brought on by potential private equity and bank profits, undermined many of the private equity forecasts within two years.

The new cycle of M&A is likely to be helped by two things. The first is historically low interest rates. The second is the rush to buy assets in Asia. IPOs in that region often soar in their first few days of trading. That further encourages bankers to believe that many companies in Asia are undervalued.

It is easy to forget when deals are plentiful that there is a large body of evidence that most mergers and acquisitions do not work. Companies overpay for acquisitions because of overly optimistic forecasts. On the other hand, combining two cultures and two complex sets of operations is often too much for even the most talented executives. Recent M&A in the pharmaceutical industry shows that not all transactions, such as the Pfizer (NYSE: PFE) $69 billion buyout of Wyeth, work. The problems each firm had due to operational difficulties and aging products could not be addressed by a marriage.

The greatest enemy of M&A has always been the economy. Asia appears like a fertile ground for M&A deals, but there are already some cracks in the Chinese economy. Inflation appears to be accelerating. The value of corporate assets may change overnight if China has to apply breaks to its economy. That would bring down the value of many companies in the People’s Republic. Bankers may argue they can seek deals in India and other smaller countries, but China’s problems are not unique to China. Growth in the entire region could be hurt by inflation or an ongoing recession in Europe, Japan, and the US.

Bankers say every year that the number of IPO and M&A transactions will be better in the next year. History show that is not the case.

Hedge Fund Management Pay Moves Back Above $1 Billion Per Man

April 1, 2010

24/7 Wall St. - According to the annual pay survey done by AR: Absolute Return+Alpha magazine and reviewed by The New York Times, the top 25 hedge fund managers made $25.3 billion in 2009.

David Tepper was at the top of the list with a $4 billion pay day. His main fund was up 130% last year. Hedge fund legend George Soros made $3.3 billion, adding to a string of unprecedented good years. Carl Icahn, a perennial member of the group made $1.3 billion. Other big players where back as well, including Steven Cohen, who runs huge fund SAIC and Eddie Lampert, the man who bought a controlling interest in Sears (SHLD) and nearly brought the company to its knees through a series of bad decisions.

The news will likely rattle Washington which has tried to create the image, especially The White House and Democratic lawmakers, that big pay on Wall St. must be vanquished.

Washington’s problem is that, unlike many bank and investment bank CEOs, whose firms received huge sums of money from the TARP to survive and who otherwise might have no jobs at all, the hedge fund managers are beholden to no one other than their own investors. These investment groups are usually made up small groups of sophisticated institutional investors.

A hedge fund manager can lose in one year what he made in the year before. Hundreds of hedge funds closed in 2009, so the risks of running the funds can be extraordinary.

The one move that Washington can do to keep hedge fund management under control is to cap the lending that large banks make to funds that allow them to leverage their bets. These loans are often risky, but they are also often profitable to the institutional divisions of the bank, and curbing them could cost banks money at the bottom line.

For now at least, capitalism has its day in the sun, a day when an individual can make $1 billion and not be bothered by any public shareholders, the government pay czar, or anyone in Washington who is unhappy about the situation.

New Frontier for Dynegy Post-Blackstone

November 23, 2010

24/7 Wall St. - Dynegy Inc. (NYSE: DYN) is one of the country’s largest electric power producers. In August, the company’s board announced an offer from the world’s largest private equity firm, Blackstone Group LP (NYSE: BX), to buy Dynegy for $4.50/share, a premium of more than 60% to the company’s share price at the time. That deal is now dead, as Dynegy’s two largest shareholders, Seneca Capital and Icahn Associates, have refused to sign on.

As part of the deal for Dynegy, Blackstone had agreed to sell four of the company’s power plants to NRG Energy Inc. (NYSE: NRG) for $1.36 billion once Blackstone had completed the acquisition. The sale of the plants to NRG was contingent on a successful acquisition. NRG’s CEO has said that the outlook for power prices has fallen since August, and that NRG would not offer the same price today.

The deal between Dynegy and Blackstone failed primarily on the objections of both Seneca Capital and Icahn Associates, both of which believed that Dynegy was worth more than the $5/share that Blackstone ultimately offered on November 17th in an effort to win over shareholders. Both Seneca and Icahn were holding out for around $7/share.

Dynegy has decided to open a formal process to sift through strategic alternatives and “to solicit proposals from potentially interested parties and carefully review its standalone restructuring alternatives,” according to the company’s press release. Under the terms of the Blackstone deal, Dynegy had 40 days to seek competing bids, and none turned up. Maybe this time will be different, but that seems unlikely.

Dynegy also announced today that it had adopted a new Stockholder Protection Rights Plan under which each current shareholder receives one stock purchase right for each share owned at close of business on December 2, 2010. According to the press release, the board “adopted this short term, narrowly tailored Rights Plan to prevent any person from obtaining control or de facto control of Dynegy without offering a control premium to all Dynegy stockholders.” In other words, Carl, don’t even think about making a solo offer for Dynegy. Icahn has already offered to supply a $2 billion line of credit to Dynegy

Blackstone is scheduled to receive a $16.3 million break-up fee if Dynegy is sold for more than $4.50/share within the next 18 months. Dynegy shares are off about -4.5% this morning, and Blackstone shares are off about -2%. Dynegy shares went from under $3 to above $4.50 after the merger announcement. Shares later on went to above $5.00 as the deal was expected to grow in size. Now that the deal is off, Dynegy shares are still up at $4.93.

Tech/Comm Acquisition Target Updates

October 26, 2010

24/7 Wall St. - Mergers and Acquisitions are still coming in the world of technology and communications. Many deals have been announced in technology that are around the Ciscoization of the data center and around cloud computing and software. We wanted to review several technology and communications companies we have covered as potential M&A targets in the recent past to discuss what the outlook is and what sort of progress has been made at each company. You will notice the Cisco Systems, Inc. (NASDAQ: CSCO) theme throughout this potential tech M&A, but that is merely a sign of the times as tech giants like H-P, IBM, and Dell have gone after IT-management, cloud, storage, and networking operations. We want to evaluate and update the outlook for Brocade Communications Systems, Inc. (NASDAQ: BRCD), Novell Inc. (NASDAQ: NOVL), Premiere Global Services, Inc. (NYSE: PGI), Seagate Technology PLC (NASDAQ: STX) and Western Digital Corp. (NYSE: WDC). We also wanted to see how these compared to the Technology Select Sector SPDR (NYSE: XLK) as the tech/comms key ETF.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) rose as an M&A potential target in late-Summer and shares have held their own despite the thought that many feel a merger here would have to come at too high of a premium for a buyer. This was one of our picks for stocks which could double earlier this year before the cloud and M&A craze came, and the buyout thesis for a low-cost provider in networking and storage was a part of that call.

The company is effectively half Brocade in storage and half Foundry in communications and networking. Shares were at $5.15 on our first go-round, now shares trade around $5.80. The 52-week trading range is $4.64 to $9.45 and the market cap is roughly $2.6 billion. Brocade is not meant to be an earnings report play as shares are often volatile around earnings. The status of a deal is currently “possible, but nothing set on the books.” Analysts also have an average price target of $6.35 for Brocade.

Novell Inc. (NASDAQ: NOVL) has been a long road of excitement that has so far led to nowhere. The pending merger offer and pending auction or divesting plan has been on hold for about a month now,and frankly from the start we expected that Novell would need a higher buyout price to secure shareholder approval. There were reports that Novell was having a hard time selling its NetWare and identity management products because private equity firms would not pay Novell’s asking price.

When the first merger offer came, shares popped to $6.08 from $4.75 on over 140 million shares in a single day in March. Shares have traded as high as around $6.50 but the stock is back to about $6.00. Unfortunately, that is the long road to nowhere. One key issue is that much of Novell’s cash is tied up internationally and cannot be easily accessed in a tax-efficient manner of repatriation. The company had been a potential buyout candidate in the minds of many investors on several occasions over the last 10 to 15 years. Here we are, Novell is small with a $2.1 billion market cap and it is still an independent company with over $1 billion in cash and equivalents if the cash can be tapped.

Premiere Global Services, Inc. (NYSE: PGI) is one we featured earlier in the year as “an easy bolt-on acquisition for any of the larger communications and behind-the-scenes IT players.” Much of its business has been mistakenly considered legacy communications when that is not the case any longer. The company just last week announced the divestiture of its Xpedite Systems to EasyLink for $105 million in cash. Premiere also last week reported third quarter revenues of $142.3 million (including $109.5 million from PGiMeet solutions), earnings from continuing operations of $0.06 EPS and non-GAAP earnings of $0.18 EPS. Guidance was put at revenue from continuing operations of $107 to $109 million, and non-GAAP earnings of $0.09 to $0.11. Shares were at $7.18 before earnings, fell to $6.72 after earnings, and are down to $6.35 now. Shares were at $6.65 and had been down over 30% since the April peak when we covered it in July.

Now the company will effectively be a pure-play on conferencing and enterprise collaboration solutions. The company is going to pay down debt and may repurchase stock along with investing in core communications technology. This divestiture makes Premiere a potential stealth M&A target now that it is easier to analyze, and the company had long been overlooked because of its fax business. The $383 million market cap here could make for an easy integration for any of the larger communications providers that want to keep competing against Cisco.

Seagate Technology PLC (NASDAQ: STX) is one we covered among our dirt cheap value stocks in technology even before the rumors were flying high that the hard drive and storage device maker was considering going private (again). Now shares are up significantly and the valuations are still dirt cheap with a current and forward P/E ratio of under 10. Ditto for rival Western Digital Corp. (NYSE: WDC). Both are attractive on valuations, although Western has a leaner balance sheet,

The difference between Seagate and the others mentioned here is that Seagate IS in talks to go private with a private equity firm. Are flash-drives a threat ahead? Sure, but imagining that neither of these storage leaders will play in the field seems unlikely even if they are not leaders there. There is also a poor earnings trend with no guidance as you would expect from its low valuations. The problem is that the cost of 1 terabyte of external storage is now under the $100 mark, and this is likely to at a minimum keep fears up that margins will decline. Seagate traded nearly at $10 during the August lows and traded up to almost $13 in early October. Now that the buyout talks have been confirmed, shares are now north of $15.00. We have no updates on the merger as of yet, but we continue to see Seagate as likely bait.

Technology Select Sector SPDR (NYSE: XLK) has been on fire rising from under $21 at the end of August to above $24 currently. Keep in mind that the top six components here account for roughly 45% of the entire ETF weighting. The index ETF recently hit a 52-week high that is now technically a 2-year high and you have to go back to early-2008 to get higher share prices now.

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The Rich Continue to Use Government to Cut Out Their Competition

May 4, 2010

LewRockwell.com - One of the scams that the rich use the government for in order to stop less wealthy people from getting richer is to promote the lie that, since venture capital is “riskier” than investing in public securities on the NYSE (another lie), individuals with less than a certain minimum net worth should not be allowed to invest in these “riskier” VC investments.

Bankster puppet Sen. Chris Dodd (D-CT) has inserted into the upcoming financial “reform” bill a clause that would more than double the minimum net worth of a potential venture capital investor from $1 million to $2.5 million, or require an annual salary of $450,000 for the past two years to the current annual salary requirement of $200,000 [the article mistakenly says it is $250,000] for the past two years. (Here is a link to the current minimum net worth regulations.)

Putting aside the libertarian principle that my money is my property -- and, therefore, just like the property of my body, it is up to me to decide what I want to do with it as far as my personal subjective risk is concerned -- an important issue here is that this new rule forcibly prevents people from investing in an area that not only can bring them much higher returns than publicly-traded stocks, but it cuts down the supply of investment funds for smaller, innovative new firms.

These smaller, innovative new firms generally find it much more difficult to raise funds compared to an established big corporation, because the start-up firms’ products have not yet proven themselves in the marketplace.

The bill insert also requires that a start-up firm wait up to four months to get permission from the Bankster-controlled SEC to accept the investment funds. And, get this:

“…this proposed bill also seeks to change the rules for a federal pre-emption [sic] for state regulation. Under the proposed bill, start-ups would be subject to state regulations from the 50 different states. Right now, start-ups & investors are not subject to 50 different state regulators. This would likely lead to more cost & risk for the start-up.”

Yes, this is just what our depressed economy needs now -- even less businesses to employ people and provide new products to improve our lives.

[Thanks to Shelly Roche]

The New World Order’s Obamanation

March 24, 2009

By Redpill8 - ...One of the key benefactors of the bailout-“stimulus” bills is that perennial fixer/war criminal Henry Kissinger—and, as a corollary, his corporate clients (but you intuitively already knew that, didn’t you?). Yes, Obama’s trusted servant, Treasury Secretary Timothy Geithner, worked for three years with Kissinger Associates, supposedly helping Henry research a book. And after this literary stint with Kissinger, the ambitious Geithner went to work at the U.S. Treasury as Under Secretary for International Affairs under Robert Rubin (a Goldman Sachs man) and Lawrence Summers—two key players who help usher in the deregulation of the financial industry by lobbying for the ruination of the Glass-Steagall Act.

Why is this important? Well, it may have to do with the fact the AIG—the company being publicly pilloried today for dolling out millions of dollars in executive bonuses—is a strategic partner with Kissinger Associates, Inc.

In an article entitled Kissinger Associates/Kissinger McLarty Associates, written by John Horne for 9/11review.org, we read:

American International Group, Inc. (AIG), the Blackstone Group L. P., and Kissinger Associates Inc. announced the establishment of a new venture to provide financial advisory services to corporations seeking high-level independent strategic advice. […] The venture will operate globally and will take advantage of the existing relationships between the partners:

• AIG has an ownership interest in Blackstone and is an investor in several of Blackstone’s private equity funds;
• AIG and Blackstone have a joint venture, specializing in restructuring and M&A (mergers and acquisitions) advisory services in selected Asian countries;
• Henry Kissinger chairs both AIG’s International Advisory Board and the advisory boards of several AIG-sponsored Infrastructure Funds.

Is our New World Order jigsaw puzzle beginning to take shape now? Oh, but it gets better…

Timmy’s father, Peter Geithner, fits in miraculously to the mix as he was is a former top official of the Ford Foundation (a NWO front group) who knew Obama’s mother, Ann Dunham-Soetoro, when she was working on “microfinance” programs in Indonesia. Indeed, the elite travel in a very small circles.

The puzzle begins to take shape further when we see how our Secretary of State, Hillary Clinton, and her hubby, Bill, are “life-long friends”with Thomas F. (Mack) McLarty, III, who joined Kissinger Associates, Inc. to form Kissinger McLarty Associates in 1992.

According to Wikipedia: Kissinger Associates (McLarty left the firm in January 2008 to start his own company) specialty is in “assisting its clientele in identifying strategic partners and investment opportunities, and advises clients on government relations throughout the world. It was established in July 1982 after loans had been secured from Goldman Sachs and a consortium of three other banks.”

So, the puzzle is becoming clear to anyone with eyes to see. With a good chunk of the bailout money going to Kissinger-affiliated firms like AIG, JPMorgan Chase, and Goldman Sachs; and with the recent reshuffling of strategic partners (bye-bye Bear Stearns and Lehman Bros, plus the many community banks that have been taken over or shut down because they bought into the toxic mortgage schemes); and with the new investment opportunities that Geithner is now promising Wall Street firms, we see what the financial crisis really is—a well-structured M&A (merging and acquisition) project of the United States of America, which follows perfectly the strategic goals of Kissinger Associates, Inc.

The government will now be taking all its marching orders straight from the central banking-NWO elite as declared by Obama’s new National Security Adviser, Jim Jones, speaking at a function for the Council on Foreign Relations (the CFR is a 'front group' for the international bankers):

“Thank you for that wonderful tribute to Henry Kissinger yesterday. Congratulations. As the most recent National Security Advisor of the United States, I take my daily orders from Dr. Kissinger, filtered down through General Brent Scowcroft and Sandy Berger, who is also here. We have a chain of command in the National Security Council that exists today.”

Of course these relationships between individuals who are in key positions in the Obama administration and shady consulting firms like Kissinger Associates would have no baring on Obama’s agenda? Of course not. He’s his own man, they keep telling us. And, if you believe that, there is some Kool-Aid they would like you to drink. Maybe today’s new Jim Jones will administer it.

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