Filed under: Deals, Raising money, Private equity industry

According to research firm Dealogic, the M&A market is in a big-time downward spiral. For November, the U.S. market saw a 71% drop in deal values to $58.1 billion.

If history is any guide, the M&A market is a feast-or-famine business, and the transition can happen fairly swiftly.

Of course, a key factor is the credit crunch. It takes gobs of debt to get deals done, especially for private equity. Also, with an uncertain economy, strategic buyers may also be holding off - even if the valuations look compelling.

Interestingly enough, five of the top 10 deals in November were from foreign-based buyers. With sovereign funds bulging with U.S. dollars, the trend should continue. Even though, some of the latest deals have been minority investments, such as the $7.5 billion Citigroup (NYSE: C) transaction from Abu Dhabi Investment Authority.

However, without the juice from private equity, it’s hard to make a case for a strong 2008 (the average deal size was a measly $127 million in November). So, for M&A dealmakers, they may want to be thinking of getting another career.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Rumors, Raising money, Shareholders, Value and lack thereof, Public or private?

E*Trade(NYSE:ETFC) is recently up $1.75 to $5.34 on the appearance bankruptcy concerns have apparently diminished on expectations of a capital infusion from private equity. It has also been widely speculated ETFC brokerage account unit will be purchased by a money center or Ameritrade(NASDAQ:AMTD). ETFC announced on November 9th it expected to take significant write-downs in Q4 on its asset backed securities. ETFC announced The Securities and Exchange Commission is conducting an informal inquiry of ETFC loan and securities portfolios. ETFC December option implied volatility of 177 is above its 26-week average of 54, according to Track Data, suggesting bigger price fluctuations.

M&A Update: provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Deals, Raising money, Investments, Value and lack thereof

Facebook is reportedly close to making a decision on which sucker, uh, benefactor it will allow to throw millions of dollars at its feet. Talking at the Web 2.0 conference in San Francisco Wednesday, Facebook CEO Mark Zuckerberg told his fan club, um, audience members that the new financing was “almost wrapped up,” while noting that an initial public offering was “years out.”

Though some pundits have suggested that Facebook remain independent and move forward without a partner, in many ways the rationale for taking the money and running, that’s, building the business, makes more sense. Facebook competitors include the formidable News Corp.-owned MySpace.com and Google Inc., which might prove the greatest threat to Facebook.

Continue reading about Facebook at TechConfidential.com.

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Filed under: Raising money

Attention venture capital firms, Ohio would like to invest in YOU! A few years ago, the Buckeye state created a $150 million fund-of-funds to invest in venture firms who would attempt to invest half of the money Ohio put in their funds in the state.

Now the northeastern portion of the say containing Cleveland and Akron is piggybacking on that idea by creating a $50 million fund-of-funds to encourage investment in that region. The NEO Venture Capital Fund will be managed by Buckeye Venture Partners. Ray Leach, CEO of JumpStart Inc., an Ohio business incubator and seed investor, states five or six venture firms have already expressed an interest in participating in the program.

Continue reading about this new fund at TechConfidential.com.

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Filed under: Raising money, Texas Pacific Group, Cerberus Capital, Engagements, Public or private?

Ford (NYSE: F)’s negotiations with the UAW should be over soon. If it gets a deal that looks like the ones the union put together with Chrysler and General Motors (NYSE: GM), the No. 2 automobile company should have labor costs much closer to its Japanese rivals. It might have to put $20 billion into a health-care fund for the union, but the firm has nearly twice that much cash on its balance sheet.

The New York Times has pointed out that the sale of Ford unit Jaguar is going much slower than expected. The paper says: “Ford’s bidding date is now Oct. 30, a person involved in the process said Thursday. That’s a month later than bidders originally thought they would be making offers.” Several private equity firms — including Cerberus Capital Management, Terra Firma, and Texas Pacific Group — as well as India’s Tata Motors are rumored to be interested in the British automobile company and another Ford unit, Rover.

But, taking a step back for a moment, Ford might not sell the Jaguar unit at all. The U.S. company may have needed the money if the UAW payment was going to be onerous. But, the funding of a union benefit plan now seems within Ford’s means. It is entirely possible that the car units were being shopped in case Ford needed the money. Now, it does not.

Ford management should have a look at the fact that if a private equity firm can turn Jaguar around, then a large automobile company should be able to do just as well. If Ford can’t get a premium price for Jag, it should not sell it.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Filed under: Deals, Raising money, Private equity industry, Value and lack thereof

BusinessWeek reports that the value of private equity deals tumbled 68% from the second quarter to the third as a liquidity crisis slashed the availibility of credit that makes such deals possible. While the absence of deals from the business headlines has been obvious, the extent of the damage is now clear.

The statistics are startling. Worldwide, there were just three buyouts of $1 billion or more during September, just 10% of the 30 such deals reported in May. The trend was global, although it was most severe in the U.S. Global M&A in the third quarter slowed to $992.1 billion, down 43%, from $1.7 trillion a year earlier. The third quarter this year was still 24% higher than the volume of $799.5 billion during the third quarter of 2006. U.S. deal volume fell nearly 50% during the third quarter, to $308 billion, down from $606 billion in the second quarter. But U.S. deal volume for the quarter was up 13%, from $274.1 billion a year earlier.

What’s next? If the credit markets can find a way to reprice risk that’s acceptable to private equity firms, acquisition targets, and investors in private equity loans, then the deal business could revive. The recent closing of KKR’s acquisition of First Data recommends that this is possible. Most likely, only the most conservatively structured deals will make it through this tighter credit sieve.

That means deal volume won’t return to where it was, and that investment banks — which have invested so heavily in serving private equity firms — will need to find new ways to make money.

Peter Cohan is president of Peter S. Cohan & Associates. He also instructs management at Babson College and edits The Cohan Letter.

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