M&a
When we commented on share buybacks recently, we alluded to the “bad name” that M&A has received. We mentioned that, on average, M&A “destroys value” as defined by some academic studies and as seen in real life all too often. We’ve now come accross a Strategy & Business article listing “the top-10 M&A fallacies and self-deceptions”, and it’s a good list of reasons why M&A may go wrong, or may not be the best choice. Change a few words and some of the 10 points can be used to consider share buybacks as well.
Nice note yesterday on Dealbook.com regarding some differences between Brazilian and US buyout firms/ practices. The most relevant, of course, is leverage (the lack of it in Brazil). The optimism surrounding Brazil has made some of these firms’ jobs more difficult, and as they highlight, there’s bound to be more competition – from local and foreign firms – as the cost of leverage decreases… The really difficult part is remaining in the sidelines when prices are not attractive, and when there’s a mandate to invest it can be hard to be truly disciplined about it.
Two quick notes. First, a relatively superficial story about Brazil’s pre-salt oil’s potential for changing the country for good – or bad. It’s interesting to see how this story is being told abroad. Second, an interesting story on Jeffrey Kaplan, who for 24 years was involved with M&A – including some of the largest deals such as the HCA LBO. The interview is an interesting inside view on M&A, private equity, even debt markets.
High-profile article on Valor on Thursday about how Laureate Education is ready to invest R$ 1.1 billion in Brazil by 2015 (some US$ 660 million). Understandably, the part most likely to “stick” is the “we will triple enrollment” bit. We’ve been following Laureate since 2002 and even invested in the stock for a while until it was taken private in 2007, so we found the story even more interesting.
Nielsen (of TV ratings fame) is set to make a return to the equity markets merely 4 years after being taken private. The former VNU was one of our international holdings that were LBO’d in the final stages of the booming markets in 2006 and early 2007, along with others. These cycles make for interesting opportunities to reacquaint ourselves with companies we admire in businesses we like, and hopefully our efforts to understand these companies in the past will again pay off.
Kraft’s all-out effort to acquire Cadbury involved a “side deal” in which Nestlé bought Kraft’s frozen pizza division. One company had cash on hand and served as “white knight”, the other had a pressing need and none other than Warren Buffett applying pressure. We think it’s safe to assume that Nestlé got a sweet deal…
Read more about Nestlé benefits from Kraft’s resolve to buy Cadbury
