| News Back Deal With It: Bigger Isn't Always Better for M&A As Smaller Boutique Firms Score Well for Clients By GENE COLTER Staff Reporter of THE WALL STREET JOURNAL Mom-and-pop shops often offer better customer service than the chain-store behemoths. Turns out the same can be true in the decidedly unfolksy business of mergers and acquisitions. Thomson Financial crunched the numbers on hundreds of deals, and smaller investment boutiques drove some of the best deals for clients. Raymond James Financial Inc., for example, snagged average premiums of 77% above the market value of a handful of client companies that were being acquired, versus 41% premiums for companies advised by bankers at Citigroup Inc., the next best performer. On the acquiring side, Wachovia Corp. helped negotiate deals in which clients paid an average of only 6.8% above the target's value. Citigroup again ranked second at 17.8%, followed by Deutsche Bank AG and Credit Suisse Group's Credit Suisse First Boston, both at about 19%. Of course, smaller firms do fewer deals and often work with smaller client companies whose takeover premiums often top those of established companies. And M&A is a much smaller business for the big Street firms, in terms of overall business. Some more balm for the Big Boys: About half the Fortune 500 companies expect to be involved in domestic M&A during the next 12 months, according to a survey by consulting firm Greenwich Associates. Lock and load, Wall Street. The Fourth Dimension Credit-derivatives-market eggheads are renowned for dreaming up incredibly opaque investment products, but it seems some of them also have a humor streak. Making the email rounds of various credit trading desks in London and New York is a spoof of a new kind of collateralized debt obligation, called the CDO4. The product claims to use a four-dimensional risk matrix, thereby creating the most complex product known to man. The fictional CEO boasting about the CDO4 says: "While I cannot even begin to understand the nature of our structured credit team's achievement, rest assured they will be awarded gargantuan bonuses." The emailed note includes a complex schematic of the product that includes references to money parked offshore, "something to confuse you," "blah blah blah" and "kiss your money goodbye." The hoaxy CDO4 plays off a product called CDO-squared, which is essentially the repackaging of CDOs into a new, more complex CDO. Janet Tavakoli, president of Tavakoli Structured Finance Inc. of Chicago, says CDO-squared products have fallen out of favor because they turned out to be a lot riskier than expected. But credit-derivatives mavens keep trying to show off their math skills: products that do a third repackaging of CDOs are known as "Ice Cubes." Ms. Tavakoli says these products have a lot of "cliff" risk (as in, falling off one) and show that some credit wizards may have too much time on their hands. G.I. Jack? He can stop Cobra Commander and his evil minions, but can he help your business understand customer requirements and align important business processes to achieve them? The latest iteration of America's favorite plastic patriot is G.I. Joe: Sigma 6, an ultramodern soldier equipped with the best gear that the military (or parents) can buy. That handle, readers may notice, is the reverse of a famed business-management process focused on improving quality of products and services. Six-Sigma was born in the 1980s at Motorola Corp. and became widely known when Jack Welch used it to root out laggards when he ran General Electric Co. Turns out the folks at Pawtucket, R.I., toy-maker Hasbro Inc. had no idea that their new Joe's name would resonate with business types. "We brainstormed a lot of names that had a cool tech feel and tested them with kids," says Billy Lagor, director of marketing for G.I. Joe. Accounting Adept Ascendant The past five years have brought a boom in post-bubble regulatory actions against companies accused of misstating earnings. Evan Chesler, who was chosen this week as the next presiding partner of law firm Cravath, Swaine & Moore LLP, has been on the front lines. As head of Cravath's litigation department since 1996, Mr. Chesler, 56 years old, was involved in accounting-related civil-fraud cases brought by the Securities and Exchange Commission against clients such as Bristol-Myers Squibb Co., Time Warner Inc. and Xerox Corp. While he also worked on antitrust and intellectual-property cases for major companies, he acknowledges there may be some relationship between what he called "a wave of these public securities problems" and his gaining the top job. His predecessor, Robert Joffe, served since 1999. --With Dennis K. Berman, Dave Kansas and Randall Smith 11-19-2005 Back |