Neiman Marcus successfully sold itself to a private equity consortium led by TPG/Warburg for $5.1 billion through a tightly controlled auction process. By carefully selecting bidders, structuring bidding groups, using a standardized merger agreement, and including seller-friendly deal protections, Neiman Marcus was able to achieve a high sale price despite factors that normally would have depressed bids. The short timeframe and Neiman Marcus' strong control and management of the sale dynamics allowed it to capture substantial value for its shareholders.
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions ...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the Bankruptcy Code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. For 2021, professionals must also understand the impact that the economic programs enacted under the CARES Act may have on purchasing such assets. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2021/
The ReVision Group, Fisher Auctions, and N5R implemented a successful sales strategy for the Oasis Condominium project in Fort Myers, Florida that involved an intensive pre-auction sales program followed by an auction. Nearly 3,000 people visited during the pre-auction period and 53 units sold for $10 million at the auction. They found an eager market by starting with an auction instead of using it as a last resort. The excitement from the auction process helped lead into ongoing sales. The combination of the groups' expertise resulted in a very successful initial sales period at Oasis.
Buy-Sell Agreements for Investment Management Firms: An Ounce of Prevention i...Mercer Capital
If you are an owner of an investment management firm and have not reviewed your buy-sell agreement recently, you’re not alone. Buy-sell agreements are frequently the most forgotten corporate document in the file. No one thinks about buy-sell agreements until a triggering event, and then it becomes the only thing they think about. Partners are often surprised by the language in the contract they signed many years before, and too often a serious dispute breaks out between partners over what the words in the agreement mean, or were intended to mean. The purpose of this whitepaper is to equip ownership to understand the consequences of their buy-sell agreements before a controversy arises, and to make informed decisions about the drafting or re-drafting of the agreement that promote the financial health and sustainability of their firm.
Organizational Behavior: Conflict management & Negotiation: Exploring the Ti...Jacob Khan
Jacob Khan explains why executives should negotiate and resolve conflicts of interest through collaboration, compromising, and accommodating. The paper has recommendations and draws on the PealJam and Ticketmaster case.
The document outlines the four basic types of corporate ownership transfer transactions: mergers and acquisitions, divestitures and asset sales, joint ventures and alliances, and going public or private. It provides details on each type, including that mergers and acquisitions are the most common and can involve one large company purchasing a smaller target company, and divestitures help eliminate underperforming assets to create value for shareholders. Joint ventures represent a relationship between two companies to undertake a specific activity, while going public or private involves a company changing its ownership structure between public and private.
Syndicated Patent Deals = Supercharging the buying and selling of patents by ...Fas (Feisal) Mosleh
The syndicated buying of patents to achieve strategic business goals. By Feisal Mosleh, patent and IP strategist, ex HP Director, Patent sales, IP group. This article lays out the framework that many companies have used and are using to buy IP assets in an aggregated manner to maximize their benefits.... Some of the world’s largest corporations joined forces to acquire patent portfolios in the high-profile Nortel and Novell deals. Consortium buying also has advantages for small and mediumsized entities looking to purchase or sell patents...
Vine Valuations Inc. provides business valuation services with offices in Hamilton, Burlington, and Kitchener. The document discusses business valuation methods and exit planning strategies. It notes that business valuation is critical for exit planning and maximizing wealth from a business sale. The valuation approach depends on the unique characteristics of each business and involves considering factors like profit history, market conditions, and future potential.
Representing Asset Purchasers in Bankruptcy (Series: Bankruptcy Transactions ...Financial Poise
Representing an asset purchaser in a bankruptcy proceeding presents unique benefits and challenges for a professional business advisor. Companies considering acquiring assets out of bankruptcy must understand more than the simple concept of acquiring the target assets “free and clear,” under the Bankruptcy Code. As such, professionals advising these companies must understand and be able to counsel their clients regarding various matters, such as the benefits and drawbacks of serving as a “stalking horse,” asset purchaser; drafting and negotiating the terms of an asset purchase agreement and sale order with the bankrupt debtor and other parties involved in the bankruptcy proceedings; strategies for acquiring assets at auction or by alternative means; and seeking bankruptcy court approval of a proposed transaction. For 2021, professionals must also understand the impact that the economic programs enacted under the CARES Act may have on purchasing such assets. This webinar focuses on understanding these concepts and addressing best practices for advanced reorganization practitioners and advisors.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/representing-asset-purchasers-in-bankruptcy-2021/
The ReVision Group, Fisher Auctions, and N5R implemented a successful sales strategy for the Oasis Condominium project in Fort Myers, Florida that involved an intensive pre-auction sales program followed by an auction. Nearly 3,000 people visited during the pre-auction period and 53 units sold for $10 million at the auction. They found an eager market by starting with an auction instead of using it as a last resort. The excitement from the auction process helped lead into ongoing sales. The combination of the groups' expertise resulted in a very successful initial sales period at Oasis.
Buy-Sell Agreements for Investment Management Firms: An Ounce of Prevention i...Mercer Capital
If you are an owner of an investment management firm and have not reviewed your buy-sell agreement recently, you’re not alone. Buy-sell agreements are frequently the most forgotten corporate document in the file. No one thinks about buy-sell agreements until a triggering event, and then it becomes the only thing they think about. Partners are often surprised by the language in the contract they signed many years before, and too often a serious dispute breaks out between partners over what the words in the agreement mean, or were intended to mean. The purpose of this whitepaper is to equip ownership to understand the consequences of their buy-sell agreements before a controversy arises, and to make informed decisions about the drafting or re-drafting of the agreement that promote the financial health and sustainability of their firm.
Organizational Behavior: Conflict management & Negotiation: Exploring the Ti...Jacob Khan
Jacob Khan explains why executives should negotiate and resolve conflicts of interest through collaboration, compromising, and accommodating. The paper has recommendations and draws on the PealJam and Ticketmaster case.
The document outlines the four basic types of corporate ownership transfer transactions: mergers and acquisitions, divestitures and asset sales, joint ventures and alliances, and going public or private. It provides details on each type, including that mergers and acquisitions are the most common and can involve one large company purchasing a smaller target company, and divestitures help eliminate underperforming assets to create value for shareholders. Joint ventures represent a relationship between two companies to undertake a specific activity, while going public or private involves a company changing its ownership structure between public and private.
Syndicated Patent Deals = Supercharging the buying and selling of patents by ...Fas (Feisal) Mosleh
The syndicated buying of patents to achieve strategic business goals. By Feisal Mosleh, patent and IP strategist, ex HP Director, Patent sales, IP group. This article lays out the framework that many companies have used and are using to buy IP assets in an aggregated manner to maximize their benefits.... Some of the world’s largest corporations joined forces to acquire patent portfolios in the high-profile Nortel and Novell deals. Consortium buying also has advantages for small and mediumsized entities looking to purchase or sell patents...
Vine Valuations Inc. provides business valuation services with offices in Hamilton, Burlington, and Kitchener. The document discusses business valuation methods and exit planning strategies. It notes that business valuation is critical for exit planning and maximizing wealth from a business sale. The valuation approach depends on the unique characteristics of each business and involves considering factors like profit history, market conditions, and future potential.
Case 1 Capital Mortgage Insurance Corporation (A)Frank Randall .docxtidwellveronique
Case 1: Capital Mortgage Insurance Corporation (A)
Frank Randall hung up the telephone, leaned across his desk, and fixed a cold stare at Jim Dolan.
OK, Jim. They’ve agreed to a meeting. We’ve got three days to resolve this thing. The question is, what approach should we take? How do we get them to accept our offer?
Randall, president of Capital Mortgage Insurance Corporation (CMI), had called Dolan, his senior vice president and treasurer, into his office to help him plan their strategy for completing the acquisition of Corporate Transfer Services (CTS). The two men had begun informal discussions with the principal stockholders of the small employee relocation services company some four months earlier. Now, in late May 1979, they were developing the terms of a formal purchase offer and plotting their strategy for the final negotiations.
The acquisition, if consummated, would be the first in CMI’s history. Furthermore, it represented a significant departure from the company’s present business. Randall and Dolan knew that the acquisition could have major implications, both for themselves and for the company they had revitalized over the past several years.
Jim Dolan ignored Frank Randall’s intense look and gazed out the eighth-floor window overlooking Philadelphia’s Independence Square.
That’s not an easy question, Frank. We know they’re still looking for a lot more money than we’re thinking about. But beyond that, the four partners have their own differences, and we need to think through just what they’re expecting. So I guess we’d better talk this one through pretty carefully.
Company and Industry Background
CMI was a wholly owned subsidiary of Northwest Equipment Corporation, a major freight transporter and lessor of railcars, commercial aircraft, and other industrial equipment. Northwest had acquired CMI in 1978, two years after CMI’s original parent company, an investment management corporation, had gone into Chapter 11 bankruptcy proceedings. CMI had been created to sell mortgage guaranty insurance policies to residential mortgage lenders throughout the United States. Mortgageinsurance provides banks, savings and loans, mortgage bankers, and other mortgage lenders with protection against financial losses when homeowners default on their mortgage loans.
Lending institutions normally protect their property loan investments by offering loans of only 70 percent to 80 percent of the appraised value of the property; the 12331234remaining 20 to 30 percent constitutes the homeowner’s down payment. However, mortgage loan insurance makes it possible for lenders to offer so-called high-ratio loans of up to 95 percent of a home’s appraised value. High-ratio loans are permitted only when the lender insures the loan; although the policy protects the lender, the premiums are paid by the borrower, as an addition to monthly principal and interest charges.
The principal attraction of mortgageinsurance is that it makes purchasing a home possible for many m ...
Charles Schwab versus Andrew Cuomo Charles Schwab started th.pdfstandly3
Charles Schwab versus Andrew Cuomo Charles Schwab started the company that bears his
name on an exceedingly small scale in 1963; his only product at the time was an investment
advisory newsletter that was distributed to just 3,000 subscribers. Personal brokerage services
were added in 1971, and then pushed along by a constant stream of innovations-discounted fees
in 1975, computerized trades in 1978, 24-hour operations in 1980, and impartial investment
recommendations from start to finish-his firm grew very rapidly. In 2009 it provided 7.5 million
customers with individual brokerage accounts, served 1.5 million participants in corporate
retirement programs, employed 12,500 persons, and had a widespread reputation for serving
clients well. That reputation was brought into direct conflict with the Attorney General of the State
of New York, Andrew Cuomo, by a suit over auction rate securities. Auction rate securities are an
innovative form of investment-grade bonds, where the interest rates are set by periodic auctions.
Most bonds, both corporate and municipal, have an interest rate that is set at the time of issuance,
and that interest rate lasts throughout the life of the bond. Auction rate bonds do not have a set
rate. Instead, the bonds are ranked by investment quality (AAA to C+), and existing holders and
potential investors submit bids for the number of bonds within each quality rank they wish to
repurchase (the existing holders) or newly purchase (the potential investors) and the minimum
interest rate they are willing to accept as a condition of that purchase. Those interest rates are
then ranked from low to high, and the highest interest rate at which all of the bonds within a given
quality ranking will be purchased (in finance this is known as the "market clearing rate") become
the rate for those bonds. For most auction rate securities, this bidding process was to be held at
the end of each month, with settlement the next day, and interest to the prior holders to be paid at
the same time. These auction rate securities became very popular with both corporate and
municipal ssuers because they seemed to add the flexibility of short-term bonds to the steadiness
f long-term securities. Individuals were attracted by the interest rates that so clearly eflected actual
market demand and the periodic opportunities to get their money backwhenever they wished. By
early 2008 , the auction mate security market had grown to pare than $200 billion. Because of the
dual need to submit new bids each month and to proberage firms or investment houses to manage
the auidual purchasers relied on their What went wrong? February 2008 marked the start of the
rate securities they held. gedy, there were no bidders at the regularly. the start of the credit crunch
crisis. Sudthe interest rates became zero, the market valucs bocamed auctions, and so essentially
peable to dispose of their auction rate securities. became zero, and the holders were cers
throughout the co.
This document discusses a short sale transaction involving an investor, Paulina, who acted as both the buyer and seller of a property. Working with negotiators Brian Kissinger and Catherine Kaufer, they were able to purchase the property for $550,000 after negotiating the price down from $700,000 and $185,000 owed on the first and second mortgages respectively, realizing a $194,847 profit within 54 days. The document then provides an overview of important considerations and strategies for negotiating successful short sales.
Lehman Brothers Inc. was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States, with about 25,000 employees worldwide.
MDK GLOBAL ADVISORS SAY NEIMAN MARCUS SELLS FOR $6 BILLIONMDK Global Advisors
MDK Global Advisors analysts reported that Neiman Marcus, a luxury retail chain, agreed to be sold for $6 billion to a group led by Ares Management and a Canadian pension plan. The private equity owners of Neiman Marcus, including TPG and Warburg Pincus, had been looking for a buyer ahead of an IPO planned for later in the year. The sale of Neiman Marcus is the latest deal in the luxury retail industry, following Hudson Bay's $2.4 billion purchase of Saks Fifth Avenue earlier in the year. Ares Management has experience investing in consumer companies and said it plans to invest meaningfully in Neiman Marcus to ensure its long-term leadership in luxury retail.
This document provides an overview of short sales in the real estate market. It discusses that with the flattening of home prices, some homeowners owe more on their mortgages than their homes are worth, making a short sale necessary. A short sale occurs when the proceeds from a home sale are insufficient to fully pay off all liens and closing costs. The document outlines some of the complex issues that can arise in a short sale transaction, including tax, credit, and legal concerns. It also notes that creditors have significant control over the short sale process and may be slow to consent since they are accepting less repayment than owed. Professional guidance is recommended to navigate the multiple considerations in a short sale.
business borrowing corporate is a source of fund for corporate to get capital...MengsongNguon
This chapter discusses various forms of business borrowing, including corporate bonds, asset-backed securities, bank loans, and commercial mortgages. It examines factors that influence the amount businesses borrow from financial markets. Some key points covered include the characteristics and innovations of corporate debt instruments, the securitization process for asset-backed securities, major investors in corporate debt, and the significant growth in business borrowing levels in recent decades.
13-1 IntroductionThe Galleon Group was a privately owned hedge fCicelyBourqueju
13-1 Introduction
The Galleon Group was a privately owned hedge fund firm that provided services and information about investments such as stocks, bonds, and other financial instruments. Galleon made money for itself and others by picking stocks and managing portfolios and hedge funds for investors. At its peak, Galleon was responsible for more than $7 billion in investor income. The company’s philosophy was that it was possible to deliver superior returns to investors without employing common high-risk tactics such as leverage or market timing. Founded in 1997, Galleon attracted employees from prestigious investment firms such as Goldman Sachs, Needham & Co., and ING Barings. Every month the company held meetings where executives explained the status and strategy of each fund to investors. In addition, Galleon told investors that no employee would be personally trading in any stock or fund the investors held.
In 2009 Raj Rajaratnam, the head of Galleon, was indicted on 14 counts of securities fraud and conspiracy, as well as sued by the Securities and Exchange Commission (SEC) for insider trading. He and five others were accused of using nonpublic information from company insiders and consultants to make millions in personal profits. Rajaratnam’s trial began in 2011, and although he pleaded not guilty, he was convicted on all 14 counts, fined over $158 million in civil and criminal penalties, and is currently serving an 11-year sentence.13-2 Raj Rajaratnam
Rajaratnam, born in Sri Lanka to a middle-class family, received his bachelor’s degree in engineering from the University of Sussex in England. In 1983 he earned his MBA from the University of Pennsylvania’s Wharton School of Business. With a focus on the computer chip industry, he meticulously developed contacts. He went to manufacturing plants, talked to employees, and connected with executives who would later work with Galleon on their companies’ initial public offerings.
In 1985 the investment banking boutique Needham & Co. hired Rajaratnam as an analyst. The corporate culture at Needham & Co. profoundly influenced Rajaratnam and his business philosophy. George Needham was obsessive about minimizing expenses, making employees stay in budget hotel rooms and take midnight flights to and from meetings. The company also urged analysts to gather as much information as possible. They were encouraged to sift through garbage, question disgruntled employees, and even place people in jobs in target industries. Analysts went to professional meetings, questioned academics doing research and consulting, and set up clandestine agencies that collected information. At Needham & Co., Rajaratnam developed an aggressive networking and note-taking research strategy that enabled him to make accurate predictions about companies’ financial situations.
Rajaratnam rose rapidly through the ranks at Needham to become president of the company by 1991. Rajaratnam’s personality also began to impact the company’s cu ...
13-1 IntroductionThe Galleon Group was a privately owned hedge fChantellPantoja184
The Galleon Group was a hedge fund firm founded in 1997 that managed over $7 billion for investors. Its head, Raj Rajaratnam, was convicted in 2011 of 14 counts of securities fraud and conspiracy for insider trading. He had received nonpublic information from company insiders and consultants and used it to make illegal trades. Rajaratnam was sentenced to 11 years in prison and paid over $158 million in penalties. Another figure involved was Rajat Gupta, a former McKinsey & Co. head who was convicted of providing insider tips to Rajaratnam, including about a Goldman Sachs investment. He received two years in prison and paid $24.9 million in penalties. Both Rajaratnam and Gupta
Page 858488 A.2d 858 (Del. 1985)Alden SMITH and John W.docxalfred4lewis58146
Page 858
488 A.2d 858 (Del. 1985)
Alden SMITH and John W. Gosselin, Plaintiffs Below,
Appellants,
v.
Jerome W. VAN GORKOM, Bruce S. Chelberg,
William B. Johnson,
Joseph B. Lanterman, Graham J. Morgan, Thomas P.
O'Boyle, W.
Allen Wallis, Sidney H. Bonser, William D. Browder,
Trans
Union Corporation, a Delaware corporation, Marmon
Group,
Inc., a Delaware corporation, GL Corporation, a
Delaware
corporation, and New T. Co., a Delaware corporation,
Defendants Below, Appellees.
Supreme Court of Delaware.
January 29, 1985
Submitted: June 11, 1984.
Opinion on Denial of Reargument: March 14, 1985.
Page 859
[Copyrighted Material Omitted]
Page 860
[Copyrighted Material Omitted]
Page 861
[Copyrighted Material Omitted]
Page 862
[Copyrighted Material Omitted]
Page 863
Upon appeal from the Court of Chancery. Reversed
and Remanded.
William Prickett (argued) and James P. Dalle Pazze,
of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington,
and Ivan Irwin, Jr. and Brett A. Ringle, of Shank, Irwin,
Conant & Williamson, Dallas, Tex., of counsel, for
plaintiffs below, appellants.
Robert K. Payson (argued) and Peter M. Sieglaff of
Potter, Anderson & Corroon, Wilmington, for individual
defendants below, appellees.
Lewis S. Black, Jr., A. Gilchrist Sparks, III (argued)
and Richard D. Allen, of Morris, Nichols, Arsht &
Tunnell, Wilmington, for Trans Union Corp., Marmon
Group, Inc., GL Corp. and New T. Co., defendants
below, appellees.
Before HERRMANN, C.J., and McNEILLY,
HORSEY, MOORE and CHRISTIE, JJ., constituting the
Court en banc.
HORSEY, Justice (for the majority):
This appeal from the Court of Chancery involves a
class action brought by shareholders of the defendant
Trans Union Corporation ("Trans Union" or "the
Company"), originally seeking rescission of a cash-out
merger of Trans Union into the defendant New T
Company ("New T"), a wholly-owned subsidiary of the
defendant, Marmon Group, Inc. ("Marmon"). Alternate
relief in the form of damages is sought against the
defendant members of the Board of Directors of Trans
Union,
Page 864New T, and Jay A. Pritzker and Robert A.
Pritzker, owners of Marmon. [1]
Following trial, the former Chancellor granted
judgment for the defendant directors by unreported letter
opinion dated July 6, 1982. [2] Judgment was based on
two findings: (1) that the Board of Directors had acted in
an informed manner so as to be entitled to protection of
the business judgment rule in approving the cash-out
merger; and (2) that the shareholder vote approving the
merger should not be set aside because the stockholders
had been "fairly informed" by the Board of Directors
before voting thereon. The plaintiffs appeal.
Speaking for the majority of the Court, we conclude
that both rulings of the Court of Chancery are clearly
erroneous. Therefore,.
Real Estate Investment: Tips for Navigating a Bankruptcy RE Sale ProcessCBIZ, Inc.
When forced to liquidate, a retail debtor company’s real estate portfolio is often the most significant non-operating asset that will be sold to pay creditors. Opportunities for real estate value investors abound, but prospective buyers must be aware of nuances specific to bankruptcy sales in pursuing such potential deals.
The document summarizes three cases related to international finance:
1) The collapse of Baring Bank due to rogue trader Nick Leeson's unauthorized speculative trading which accumulated over $1.2 billion in losses. Recommendations include improved oversight and investigation of large funding requests.
2) The potential use of weather derivatives by an electric utility to hedge revenue from temperature dependent demand. A proposed weather swap with Enron is described.
3) The failed merger of Vivendi Universal and Seagram due to huge debt levels and poor cash management after Vivendi's acquisition spree in media and telecom.
Antitrust seminar at 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
China 2015 -- China's Shifting LandscapePeter Fuhrman
This document summarizes the unique approach Chinese companies take to mergers and acquisitions (M&A). It notes that Chinese companies pursue M&A for similar reasons as others, but have no cash to acquire other businesses. As a result, Chinese companies have developed convoluted methods to "buy now, pay later," such as suspending stock trading to inflate share prices to raise acquisition funds. The document also highlights some successful M&A deals by foreign companies in China, such as Nestle, and argues global firms are well positioned to take advantage of consolidation opportunities in China.
This document discusses low-income housing solutions for developing markets, focusing on examples in Kenya, India, and Sri Lanka. It proposes a real estate investment trust (REIT) model where low-income communities form a trust, issue shares to investors, and use the funds to develop high-quality, affordable housing. The Sri Lanka example transformed 675 shanty homes into an apartment complex, generating profits to regenerate surrounding neighborhoods. The REIT model provides financing from investors, develops and manages housing, and allows tenants to eventually own homes, transforming slum communities.
The document provides details about Goldman Sachs' role in creating and profiting from three major financial bubbles over the last century. It describes how Goldman contributed to the Great Depression by creating investment trusts that formed a "daisy chain of borrowed money." It also discusses Goldman's leading role in the Internet bubble of the late 1990s, taking many unprofitable companies public through practices like laddering and spinning. Finally, the document examines Goldman's creation and marketing of the Abacus CDO in 2007, which profited Goldman's clients at the expense of others due to a lack of transparency around its structure.
Evolution of value investing - all roads lead to Graham and DoddsvilleGeorge Gabriel
The document discusses the evolution of value investing from its origins with Benjamin Graham to modern applications. It makes three key points:
1. Benjamin Graham is considered the father of value investing, developing its principles in the 1930s through books like Security Analysis and The Intelligent Investor. Warren Buffett has been very successful applying Graham's approach.
2. Value investing involves buying assets for less than their intrinsic worth. Modern value investors like Buffett have adapted Graham's framework to today's markets by considering different components of a company's total value, like future earnings potential.
3. There are six levels or components of a company's value that investors may recognize to different degrees, from net assets to intangibles
Goldman Sachs provided a summary of its risk management practices and position in the residential mortgage market during the financial crisis. It states that it did not have a significant net short position in 2007-2008 and lost $1.7 billion due to its mortgage-related products. It also notes there was internal debate about shorting positions and uncertainty around the housing market collapse. Goldman Sachs worked to reduce its risk exposure by selling positions and trying to achieve a balanced portfolio.
The major credit rating agencies, Moody's, Standard & Poors, and Fitch, bear a heavy burden of responsibility for the financial meltdown. It was their seal of approval that enabled Wall Street to develop a multi-trillion-dollar market for bonds resting on a foundation of tricky loans and bubbly housing prices. Institutional investors around the world were seduced into buying these high-risk securities by credit ratings that made them out to be as safe as the most conventional corporate and municipal bonds.
Activist Shareholders Flex Their MusclesDaniel Del Re
Activist shareholders are increasingly putting pressure on corporate boards to make changes and accept deals. One example is Harbinger Capital Partners, which owned 20% of NorthWestern Energy and pushed for a quick sale to another company. NorthWestern's board rejected the initial bid as too risky and low, angering Harbinger. However, the board conducted an auction which attracted higher offers from other suitors. They ultimately accepted a higher cash bid, satisfying all shareholders. While activist investors don't always get their way, this case shows that boards can succeed by remaining flexible, considering all options, and prioritizing the best long-term outcome for shareholders overall.
SATTA MATKA DPBOSS KALYAN MATKA RESULTS KALYAN MATKA MATKA RESULT KALYAN MATKA TIPS SATTA MATKA MATKA COM MATKA PANA JODI TODAY BATTA SATKA MATKA PATTI JODI NUMBER MATKA RESULTS MATKA CHART MATKA JODI SATTA COM INDIA SATTA MATKA MATKA TIPS MATKA WAPKA ALL MATKA RESULT LIVE ONLINE MATKA RESULT KALYAN MATKA RESULT DPBOSS MATKA 143 MAIN MATKA KALYAN MATKA RESULTS KALYAN CHART KALYAN CHART
Case 1 Capital Mortgage Insurance Corporation (A)Frank Randall .docxtidwellveronique
Case 1: Capital Mortgage Insurance Corporation (A)
Frank Randall hung up the telephone, leaned across his desk, and fixed a cold stare at Jim Dolan.
OK, Jim. They’ve agreed to a meeting. We’ve got three days to resolve this thing. The question is, what approach should we take? How do we get them to accept our offer?
Randall, president of Capital Mortgage Insurance Corporation (CMI), had called Dolan, his senior vice president and treasurer, into his office to help him plan their strategy for completing the acquisition of Corporate Transfer Services (CTS). The two men had begun informal discussions with the principal stockholders of the small employee relocation services company some four months earlier. Now, in late May 1979, they were developing the terms of a formal purchase offer and plotting their strategy for the final negotiations.
The acquisition, if consummated, would be the first in CMI’s history. Furthermore, it represented a significant departure from the company’s present business. Randall and Dolan knew that the acquisition could have major implications, both for themselves and for the company they had revitalized over the past several years.
Jim Dolan ignored Frank Randall’s intense look and gazed out the eighth-floor window overlooking Philadelphia’s Independence Square.
That’s not an easy question, Frank. We know they’re still looking for a lot more money than we’re thinking about. But beyond that, the four partners have their own differences, and we need to think through just what they’re expecting. So I guess we’d better talk this one through pretty carefully.
Company and Industry Background
CMI was a wholly owned subsidiary of Northwest Equipment Corporation, a major freight transporter and lessor of railcars, commercial aircraft, and other industrial equipment. Northwest had acquired CMI in 1978, two years after CMI’s original parent company, an investment management corporation, had gone into Chapter 11 bankruptcy proceedings. CMI had been created to sell mortgage guaranty insurance policies to residential mortgage lenders throughout the United States. Mortgageinsurance provides banks, savings and loans, mortgage bankers, and other mortgage lenders with protection against financial losses when homeowners default on their mortgage loans.
Lending institutions normally protect their property loan investments by offering loans of only 70 percent to 80 percent of the appraised value of the property; the 12331234remaining 20 to 30 percent constitutes the homeowner’s down payment. However, mortgage loan insurance makes it possible for lenders to offer so-called high-ratio loans of up to 95 percent of a home’s appraised value. High-ratio loans are permitted only when the lender insures the loan; although the policy protects the lender, the premiums are paid by the borrower, as an addition to monthly principal and interest charges.
The principal attraction of mortgageinsurance is that it makes purchasing a home possible for many m ...
Charles Schwab versus Andrew Cuomo Charles Schwab started th.pdfstandly3
Charles Schwab versus Andrew Cuomo Charles Schwab started the company that bears his
name on an exceedingly small scale in 1963; his only product at the time was an investment
advisory newsletter that was distributed to just 3,000 subscribers. Personal brokerage services
were added in 1971, and then pushed along by a constant stream of innovations-discounted fees
in 1975, computerized trades in 1978, 24-hour operations in 1980, and impartial investment
recommendations from start to finish-his firm grew very rapidly. In 2009 it provided 7.5 million
customers with individual brokerage accounts, served 1.5 million participants in corporate
retirement programs, employed 12,500 persons, and had a widespread reputation for serving
clients well. That reputation was brought into direct conflict with the Attorney General of the State
of New York, Andrew Cuomo, by a suit over auction rate securities. Auction rate securities are an
innovative form of investment-grade bonds, where the interest rates are set by periodic auctions.
Most bonds, both corporate and municipal, have an interest rate that is set at the time of issuance,
and that interest rate lasts throughout the life of the bond. Auction rate bonds do not have a set
rate. Instead, the bonds are ranked by investment quality (AAA to C+), and existing holders and
potential investors submit bids for the number of bonds within each quality rank they wish to
repurchase (the existing holders) or newly purchase (the potential investors) and the minimum
interest rate they are willing to accept as a condition of that purchase. Those interest rates are
then ranked from low to high, and the highest interest rate at which all of the bonds within a given
quality ranking will be purchased (in finance this is known as the "market clearing rate") become
the rate for those bonds. For most auction rate securities, this bidding process was to be held at
the end of each month, with settlement the next day, and interest to the prior holders to be paid at
the same time. These auction rate securities became very popular with both corporate and
municipal ssuers because they seemed to add the flexibility of short-term bonds to the steadiness
f long-term securities. Individuals were attracted by the interest rates that so clearly eflected actual
market demand and the periodic opportunities to get their money backwhenever they wished. By
early 2008 , the auction mate security market had grown to pare than $200 billion. Because of the
dual need to submit new bids each month and to proberage firms or investment houses to manage
the auidual purchasers relied on their What went wrong? February 2008 marked the start of the
rate securities they held. gedy, there were no bidders at the regularly. the start of the credit crunch
crisis. Sudthe interest rates became zero, the market valucs bocamed auctions, and so essentially
peable to dispose of their auction rate securities. became zero, and the holders were cers
throughout the co.
This document discusses a short sale transaction involving an investor, Paulina, who acted as both the buyer and seller of a property. Working with negotiators Brian Kissinger and Catherine Kaufer, they were able to purchase the property for $550,000 after negotiating the price down from $700,000 and $185,000 owed on the first and second mortgages respectively, realizing a $194,847 profit within 54 days. The document then provides an overview of important considerations and strategies for negotiating successful short sales.
Lehman Brothers Inc. was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States, with about 25,000 employees worldwide.
MDK GLOBAL ADVISORS SAY NEIMAN MARCUS SELLS FOR $6 BILLIONMDK Global Advisors
MDK Global Advisors analysts reported that Neiman Marcus, a luxury retail chain, agreed to be sold for $6 billion to a group led by Ares Management and a Canadian pension plan. The private equity owners of Neiman Marcus, including TPG and Warburg Pincus, had been looking for a buyer ahead of an IPO planned for later in the year. The sale of Neiman Marcus is the latest deal in the luxury retail industry, following Hudson Bay's $2.4 billion purchase of Saks Fifth Avenue earlier in the year. Ares Management has experience investing in consumer companies and said it plans to invest meaningfully in Neiman Marcus to ensure its long-term leadership in luxury retail.
This document provides an overview of short sales in the real estate market. It discusses that with the flattening of home prices, some homeowners owe more on their mortgages than their homes are worth, making a short sale necessary. A short sale occurs when the proceeds from a home sale are insufficient to fully pay off all liens and closing costs. The document outlines some of the complex issues that can arise in a short sale transaction, including tax, credit, and legal concerns. It also notes that creditors have significant control over the short sale process and may be slow to consent since they are accepting less repayment than owed. Professional guidance is recommended to navigate the multiple considerations in a short sale.
business borrowing corporate is a source of fund for corporate to get capital...MengsongNguon
This chapter discusses various forms of business borrowing, including corporate bonds, asset-backed securities, bank loans, and commercial mortgages. It examines factors that influence the amount businesses borrow from financial markets. Some key points covered include the characteristics and innovations of corporate debt instruments, the securitization process for asset-backed securities, major investors in corporate debt, and the significant growth in business borrowing levels in recent decades.
13-1 IntroductionThe Galleon Group was a privately owned hedge fCicelyBourqueju
13-1 Introduction
The Galleon Group was a privately owned hedge fund firm that provided services and information about investments such as stocks, bonds, and other financial instruments. Galleon made money for itself and others by picking stocks and managing portfolios and hedge funds for investors. At its peak, Galleon was responsible for more than $7 billion in investor income. The company’s philosophy was that it was possible to deliver superior returns to investors without employing common high-risk tactics such as leverage or market timing. Founded in 1997, Galleon attracted employees from prestigious investment firms such as Goldman Sachs, Needham & Co., and ING Barings. Every month the company held meetings where executives explained the status and strategy of each fund to investors. In addition, Galleon told investors that no employee would be personally trading in any stock or fund the investors held.
In 2009 Raj Rajaratnam, the head of Galleon, was indicted on 14 counts of securities fraud and conspiracy, as well as sued by the Securities and Exchange Commission (SEC) for insider trading. He and five others were accused of using nonpublic information from company insiders and consultants to make millions in personal profits. Rajaratnam’s trial began in 2011, and although he pleaded not guilty, he was convicted on all 14 counts, fined over $158 million in civil and criminal penalties, and is currently serving an 11-year sentence.13-2 Raj Rajaratnam
Rajaratnam, born in Sri Lanka to a middle-class family, received his bachelor’s degree in engineering from the University of Sussex in England. In 1983 he earned his MBA from the University of Pennsylvania’s Wharton School of Business. With a focus on the computer chip industry, he meticulously developed contacts. He went to manufacturing plants, talked to employees, and connected with executives who would later work with Galleon on their companies’ initial public offerings.
In 1985 the investment banking boutique Needham & Co. hired Rajaratnam as an analyst. The corporate culture at Needham & Co. profoundly influenced Rajaratnam and his business philosophy. George Needham was obsessive about minimizing expenses, making employees stay in budget hotel rooms and take midnight flights to and from meetings. The company also urged analysts to gather as much information as possible. They were encouraged to sift through garbage, question disgruntled employees, and even place people in jobs in target industries. Analysts went to professional meetings, questioned academics doing research and consulting, and set up clandestine agencies that collected information. At Needham & Co., Rajaratnam developed an aggressive networking and note-taking research strategy that enabled him to make accurate predictions about companies’ financial situations.
Rajaratnam rose rapidly through the ranks at Needham to become president of the company by 1991. Rajaratnam’s personality also began to impact the company’s cu ...
13-1 IntroductionThe Galleon Group was a privately owned hedge fChantellPantoja184
The Galleon Group was a hedge fund firm founded in 1997 that managed over $7 billion for investors. Its head, Raj Rajaratnam, was convicted in 2011 of 14 counts of securities fraud and conspiracy for insider trading. He had received nonpublic information from company insiders and consultants and used it to make illegal trades. Rajaratnam was sentenced to 11 years in prison and paid over $158 million in penalties. Another figure involved was Rajat Gupta, a former McKinsey & Co. head who was convicted of providing insider tips to Rajaratnam, including about a Goldman Sachs investment. He received two years in prison and paid $24.9 million in penalties. Both Rajaratnam and Gupta
Page 858488 A.2d 858 (Del. 1985)Alden SMITH and John W.docxalfred4lewis58146
Page 858
488 A.2d 858 (Del. 1985)
Alden SMITH and John W. Gosselin, Plaintiffs Below,
Appellants,
v.
Jerome W. VAN GORKOM, Bruce S. Chelberg,
William B. Johnson,
Joseph B. Lanterman, Graham J. Morgan, Thomas P.
O'Boyle, W.
Allen Wallis, Sidney H. Bonser, William D. Browder,
Trans
Union Corporation, a Delaware corporation, Marmon
Group,
Inc., a Delaware corporation, GL Corporation, a
Delaware
corporation, and New T. Co., a Delaware corporation,
Defendants Below, Appellees.
Supreme Court of Delaware.
January 29, 1985
Submitted: June 11, 1984.
Opinion on Denial of Reargument: March 14, 1985.
Page 859
[Copyrighted Material Omitted]
Page 860
[Copyrighted Material Omitted]
Page 861
[Copyrighted Material Omitted]
Page 862
[Copyrighted Material Omitted]
Page 863
Upon appeal from the Court of Chancery. Reversed
and Remanded.
William Prickett (argued) and James P. Dalle Pazze,
of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington,
and Ivan Irwin, Jr. and Brett A. Ringle, of Shank, Irwin,
Conant & Williamson, Dallas, Tex., of counsel, for
plaintiffs below, appellants.
Robert K. Payson (argued) and Peter M. Sieglaff of
Potter, Anderson & Corroon, Wilmington, for individual
defendants below, appellees.
Lewis S. Black, Jr., A. Gilchrist Sparks, III (argued)
and Richard D. Allen, of Morris, Nichols, Arsht &
Tunnell, Wilmington, for Trans Union Corp., Marmon
Group, Inc., GL Corp. and New T. Co., defendants
below, appellees.
Before HERRMANN, C.J., and McNEILLY,
HORSEY, MOORE and CHRISTIE, JJ., constituting the
Court en banc.
HORSEY, Justice (for the majority):
This appeal from the Court of Chancery involves a
class action brought by shareholders of the defendant
Trans Union Corporation ("Trans Union" or "the
Company"), originally seeking rescission of a cash-out
merger of Trans Union into the defendant New T
Company ("New T"), a wholly-owned subsidiary of the
defendant, Marmon Group, Inc. ("Marmon"). Alternate
relief in the form of damages is sought against the
defendant members of the Board of Directors of Trans
Union,
Page 864New T, and Jay A. Pritzker and Robert A.
Pritzker, owners of Marmon. [1]
Following trial, the former Chancellor granted
judgment for the defendant directors by unreported letter
opinion dated July 6, 1982. [2] Judgment was based on
two findings: (1) that the Board of Directors had acted in
an informed manner so as to be entitled to protection of
the business judgment rule in approving the cash-out
merger; and (2) that the shareholder vote approving the
merger should not be set aside because the stockholders
had been "fairly informed" by the Board of Directors
before voting thereon. The plaintiffs appeal.
Speaking for the majority of the Court, we conclude
that both rulings of the Court of Chancery are clearly
erroneous. Therefore,.
Real Estate Investment: Tips for Navigating a Bankruptcy RE Sale ProcessCBIZ, Inc.
When forced to liquidate, a retail debtor company’s real estate portfolio is often the most significant non-operating asset that will be sold to pay creditors. Opportunities for real estate value investors abound, but prospective buyers must be aware of nuances specific to bankruptcy sales in pursuing such potential deals.
The document summarizes three cases related to international finance:
1) The collapse of Baring Bank due to rogue trader Nick Leeson's unauthorized speculative trading which accumulated over $1.2 billion in losses. Recommendations include improved oversight and investigation of large funding requests.
2) The potential use of weather derivatives by an electric utility to hedge revenue from temperature dependent demand. A proposed weather swap with Enron is described.
3) The failed merger of Vivendi Universal and Seagram due to huge debt levels and poor cash management after Vivendi's acquisition spree in media and telecom.
Antitrust seminar at 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
China 2015 -- China's Shifting LandscapePeter Fuhrman
This document summarizes the unique approach Chinese companies take to mergers and acquisitions (M&A). It notes that Chinese companies pursue M&A for similar reasons as others, but have no cash to acquire other businesses. As a result, Chinese companies have developed convoluted methods to "buy now, pay later," such as suspending stock trading to inflate share prices to raise acquisition funds. The document also highlights some successful M&A deals by foreign companies in China, such as Nestle, and argues global firms are well positioned to take advantage of consolidation opportunities in China.
This document discusses low-income housing solutions for developing markets, focusing on examples in Kenya, India, and Sri Lanka. It proposes a real estate investment trust (REIT) model where low-income communities form a trust, issue shares to investors, and use the funds to develop high-quality, affordable housing. The Sri Lanka example transformed 675 shanty homes into an apartment complex, generating profits to regenerate surrounding neighborhoods. The REIT model provides financing from investors, develops and manages housing, and allows tenants to eventually own homes, transforming slum communities.
The document provides details about Goldman Sachs' role in creating and profiting from three major financial bubbles over the last century. It describes how Goldman contributed to the Great Depression by creating investment trusts that formed a "daisy chain of borrowed money." It also discusses Goldman's leading role in the Internet bubble of the late 1990s, taking many unprofitable companies public through practices like laddering and spinning. Finally, the document examines Goldman's creation and marketing of the Abacus CDO in 2007, which profited Goldman's clients at the expense of others due to a lack of transparency around its structure.
Evolution of value investing - all roads lead to Graham and DoddsvilleGeorge Gabriel
The document discusses the evolution of value investing from its origins with Benjamin Graham to modern applications. It makes three key points:
1. Benjamin Graham is considered the father of value investing, developing its principles in the 1930s through books like Security Analysis and The Intelligent Investor. Warren Buffett has been very successful applying Graham's approach.
2. Value investing involves buying assets for less than their intrinsic worth. Modern value investors like Buffett have adapted Graham's framework to today's markets by considering different components of a company's total value, like future earnings potential.
3. There are six levels or components of a company's value that investors may recognize to different degrees, from net assets to intangibles
Goldman Sachs provided a summary of its risk management practices and position in the residential mortgage market during the financial crisis. It states that it did not have a significant net short position in 2007-2008 and lost $1.7 billion due to its mortgage-related products. It also notes there was internal debate about shorting positions and uncertainty around the housing market collapse. Goldman Sachs worked to reduce its risk exposure by selling positions and trying to achieve a balanced portfolio.
The major credit rating agencies, Moody's, Standard & Poors, and Fitch, bear a heavy burden of responsibility for the financial meltdown. It was their seal of approval that enabled Wall Street to develop a multi-trillion-dollar market for bonds resting on a foundation of tricky loans and bubbly housing prices. Institutional investors around the world were seduced into buying these high-risk securities by credit ratings that made them out to be as safe as the most conventional corporate and municipal bonds.
Activist Shareholders Flex Their MusclesDaniel Del Re
Activist shareholders are increasingly putting pressure on corporate boards to make changes and accept deals. One example is Harbinger Capital Partners, which owned 20% of NorthWestern Energy and pushed for a quick sale to another company. NorthWestern's board rejected the initial bid as too risky and low, angering Harbinger. However, the board conducted an auction which attracted higher offers from other suitors. They ultimately accepted a higher cash bid, satisfying all shareholders. While activist investors don't always get their way, this case shows that boards can succeed by remaining flexible, considering all options, and prioritizing the best long-term outcome for shareholders overall.
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The Most Inspiring Entrepreneurs to Follow in 2024.pdfthesiliconleaders
In a world where the potential of youth innovation remains vastly untouched, there emerges a guiding light in the form of Norm Goldstein, the Founder and CEO of EduNetwork Partners. His dedication to this cause has earned him recognition as a Congressional Leadership Award recipient.
AI Transformation Playbook: Thinking AI-First for Your BusinessArijit Dutta
I dive into how businesses can stay competitive by integrating AI into their core processes. From identifying the right approach to building collaborative teams and recognizing common pitfalls, this guide has got you covered. AI transformation is a journey, and this playbook is here to help you navigate it successfully.
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Best Competitive Marble Pricing in Dubai - ☎ 9928909666Stone Art Hub
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Discover the Beauty and Functionality of The Expert Remodeling Serviceobriengroupinc04
Unlock your kitchen's true potential with expert remodeling services from O'Brien Group Inc. Transform your space into a functional, modern, and luxurious haven with their experienced professionals. From layout reconfiguration to high-end upgrades, they deliver stunning results tailored to your style and needs. Visit obriengroupinc.com to elevate your kitchen's beauty and functionality today.
NIMA2024 | De toegevoegde waarde van DEI en ESG in campagnes | Nathalie Lam |...BBPMedia1
Nathalie zal delen hoe DEI en ESG een fundamentele rol kunnen spelen in je merkstrategie en je de juiste aansluiting kan creëren met je doelgroep. Door middel van voorbeelden en simpele handvatten toont ze hoe dit in jouw organisatie toegepast kan worden.
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Cover Story - China's Investment Leader - Dr. Alyce SUmsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
2. 12 Harv. Negot. L. Rev. 235
Harvard Negotiation Law Review
Winter 2007
Note
CASE STUDY: SELLING NEIMAN MARCUS
Bryce Klempner, Dharini Mathur, Lerato Molefe, Jen Reynolds, Tony Uccellinid1
Copyright (c) 2007 Harvard Negotiation Law Review; Bryce Klempner; Dharini Mathur; Lerato Molefe; Jen Reynolds; Tony
Uccellini
On May 2, 2005, the Neiman Marcus Group (“Neiman”) announced that it had accepted an acquisition proposal by a
corporate vehicle controlled jointly by two large private equity firms, Texas Pacific Group and Warburg Pincus
(“TPG/Warburg”). At the time of the sale, Neiman was the “crown jewel” of the luxury industry:1 the company’s stock was
trading at an all-time peak; its management team was widely admired; and its financial health was excellent, with investment-
grade credit and little debt.2 It was an expensive time to purchase such a high-quality asset; indeed, with a final price tag of
$5.1 billion, the leveraged buyout ended up commanding far more money than analysts in both the private equity and retail
industries had expected.3
What is remarkable about this deal is not simply that the company obtained such a high final price - a price that many
industry insiders believed to be at, if not above, the top of its value range - but *236 that it did so with a common value
auction that employed tight controls and seller-friendly deal protections within a relatively compressed timeframe. In theory,
all these factors should have pushed the price down, not up.
Neiman chose to sell after the Smith family, the company’s controlling shareholders, decided to liquidate.4 The Smiths were
by no means desperate to sell, but they wanted to take advantage of the favorable market conditions for the retail and luxury
sectors.5 To that end, Neiman developed a rigorously controlled sale and auction that took place over several months. During
that time, Neiman closely managed the bidding process from start to finish - all the way from handpicking the initial
invitations to pressuring prospective bidders into “clubs” of Neiman’s choosing. Even the agreement’s deal protections -
provisions which have traditionally served as safeguards for the buyer - tilted in Neiman’s favor: the deal’s sliding reverse
breakup fee, for example, effectively prevented any last-minute buyer’s remorse.
The Neiman Marcus case thus presents one very successful solution to a common negotiation puzzle: how can a motivated
seller extract maximum value, on its own terms, in a short timeframe? An answer can be found through close examination of
the auction mechanics, deal protections, and risk management utilized in the Neiman acquisition. The story of how Neiman
Marcus was able to pull off this auctioneering feat is an instructive and compelling example of successful, sophisticated deal
design and implementation.
This case study first sketches the factual background and details of the deal. It then outlines the case’s central puzzle and
considers other possible solutions and additional considerations within the context of negotiation dynamics and the modern
private equity industry. The Neiman deal may be exceptional in many ways, but it nonetheless provides an interesting case
study in managing complex auction dynamics in a seller’s market.
*237 The Making of a Deal
For the Smith family, Neiman Marcus represented a large portion of their dynastic wealth. The Smiths had initially invested
in Neiman as friendly acquirors, or “white knights,” in 1984, and the company became part of the larger Smith family
conglomerate. Due to a series of mergers and tax-free spin-offs subsequent to the investment, along with periods of bad
market conditions, the family had had little opportunity to exit the investment completely on favorable terms.6 However,
because a tax obstacle raised by a previous restructuring had just expired,7 and because retail businesses were selling well,
mid-2005 appeared a propitious time for the Smith family to sell the company - and they were therefore very eager to do so.8
Neiman’s board of directors started evaluating the company’s alternatives. Business was good, and accordingly the company
was not desperate to sell. The other alternatives, however - namely, recapitalization or a strategic merger - were not attractive
3. to the board because of the unique qualities of the Neiman brand and the controlling shareholder family. Recapitalization
would have involved taking on significant debt, but the shareholders would not have been comfortable assuming such a debt
load, and the company was unwilling to compromise its capital investment program or its corporate image.9 A strategic
merger might have been more appealing, but at the time the only possible partner was Saks Fifth Avenue, which was busy
with other transactions and whose merger with Neiman would *238 have been likely to trigger Hart-Scott-Rodino review.10
Because retailers were in vogue among financial buyers and the luxury market was especially robust, selling the company to
a financial buyer seemed like the best way to achieve the interests of the Smiths and other Neiman stakeholders.11
In January 2005, Neiman hired Goldman Sachs to draw up a list of possible financial bidders for the company.12 Although
management was interested in exploring all strategic possibilities, they wanted to bring financial bidders into the process
early, so that they could bring potential buyers up to speed on the property.13 Several private equity firms expressed
preliminary interest in moving forward, and Neiman set up a series of informational meetings throughout the next few
months. Neiman’s banker, Goldman Sachs, offered financing to the bidders (“stapled financing,” so called because the “pre-
baked financing package is ‘stapled’ to the target company and sanctioned by the seller”14), which gave the bidders a
common floor for negotiating their own third-party financing arrangements.15
*239 The preliminary discussions and due diligence period lasted from February until April. During this time, Goldman was
also lining up the sale of Neiman’s private-label credit card unit, a significant but non-core asset.16 The auction of the credit
card division proceeded alongside the auction for the rest of the company, so that part of Goldman’s updates to the Neiman
bidders included the progress on the credit card sale.17 The proceeds of the sale would flow directly to the winning bidder.18
In March, Goldman arranged the bidders into bidding consortiums, commonly known as “clubs.”19 At the beginning of the
process, Neiman asked the bidders to sign confidentiality agreements that precluded any club formation without Neiman’s
consent.20 Without signing the confidentiality agreements, potential bidders would not be given access to Neiman’s
confidential internal documents, essential to the due diligence of any financial buyer. The company was not averse to club
formation, however; in fact, Neiman and Goldman knew from the beginning that no single private equity firm would be
willing to risk as much of its own capital as would be necessary for the non-debt portion of the purchase price.21 To
maximize the competitiveness of the auction, Neiman wanted to promote the formation of as many bidding clubs as possible,
while also ensuring that each club had the resources to fund the equity portion of the deal. Neiman *240 and Goldman
therefore decided to limit the club size to a maximum of two firms. After consultation with potential bidders as to their
preferences and research on which firms had worked well together in the past,22 Goldman assembled the following pairs:
TPG/Warburg, the Blackstone Group and Thomas H. Lee Partners (“Blackstone/Lee”), Kohlberg Kravis Roberts and Bain
Capital (“KKR/Bain”), and Apollo Management and Leonard Green (“Apollo/Green”). Only two of these clubs made it to the
finish line: Apollo/Green dropped out before bidding commenced, and although KKR/Bain did bid, they were out of serious
contention before the final round.23
As the auction neared, Neiman sent a draft merger agreement to each club and requested comments. Upon receiving the
markups, Neiman decided which changes were acceptable and merged them into a master “homogenized contract,”
containing certain non-negotiable terms, for all the bidders to use in the auction process.24 This homogenized contract
featured stringent deal protections and, notably, did not contain a “financing out,” a standard provision that enables buyers to
walk away from the deal should the financing fall through.
In late April, Neiman asked for bids from the clubs. TPG/Warburg’s bid of $100 per share was the highest, with
Blackstone/Lee in second place and KKR/Bain a distant third. After a weekend of negotiation on some of the deal terms,
Neiman announced that TPG/Warburg had won the auction with an offer of $5.1 billion. That summer, HSBC purchased the
credit card concern for $640 million,25 and in November, Neiman’s shareholders approved the sale to the TPG/Warburg club.
The Puzzle
Several aspects of this deal make it especially striking that Neiman fetched such a high price.26 First, Neiman was a well-
managed, *241 high-performing company, so a financial buyer would be unable to extract much marginal value via
governance improvements.27 To the extent that private equity firms add value to their portfolio companies through
operational upgrades, the lack of any evident problems to fix could have made Neiman a less appealing investment.28
Moreover, the luxury market was so inflated at the time that buying Neiman would be expensive relative to its expected
value, causing a decrease in the rate of return on the investment.
Second, the absence of strategic buyers - retailers or others who might be able to recognize synergies with Neiman’s existing
operations - meant that there was little private value potential in this sale. In basic auction theory, there are two types of value
that can be recognized by bidders: common and private. Common value properties will command similar prices across buyers
because their value is well defined and widely understood; commodities such as pork bellies, for example, are common value
items. Private value properties will vary in value, because those buyers who perceive unique synergies or affinities - a fan of
4. Impressionist art bidding on a Monet, for example - will make higher offers than those buyers who are less idiosyncratically
interested.29 Strategic bidders typically recognize more private value than financial bidders will, because they can imagine
how the new property will fit into their preexisting business infrastructure; financial bidders, with no “business” other than
investment, usually cannot realize these kinds of synergies and are only interested in common value. In Neiman’s case, there
were only non-strategic financial buyers,30 so any private value “premium” would not apply.31
*242 Third, as discussed above, due to the size of the deal it was inevitable that private equity funds would team up into clubs
to raise the needed capital,32 thereby reducing the number of bidders and possibly depressing the size of final bids in the
auction.33 Club deals have become increasingly common in large public transactions, and there is considerable interest in
how well they can absorb the risks inherent in teaming up to tackle complex, long-term projects.34 The challenge of
managing different time horizons, divergent institutional priorities, and disparate internal structures could, conceivably, make
it difficult to recognize the full value of their joint investment.35 Goldman’s decision to exercise control over the pairings
would seem to invite such mismatches and organizational clashes.
Fourth, key provisions of the merger agreement - the reverse breakup fee and the lack of a financing out - shifted deal risk to
the buyers, even in areas traditionally the responsibility of the sellers.36 Although some buyers view reverse breakup fees as
essentially “options” on the deal,37 in this case, the reverse breakup fee was too onerous to permit such an interpretation.38
Moreover, because *243 Goldman offered stapled financing to all the bidders from the beginning, the clubs knew that they
would not be able to claim that they were unable to find sufficient backing.
In spite of all this, Neiman sold itself at an above-average premium (34% above its share price at announcement of the sale
process, and nine times its cash flow), defying speculation by competitors, analysts, and other bidders alike.39 How did
Neiman manage to achieve such a high price on its own terms and timeline, without any apparent concessions to the buyers?
The Answer
Neiman’s tight auction controls, seller-friendly deal protections, and short timeframe ultimately did not, as intuition or
conventional wisdom might suggest, paint the company into a corner. On the contrary, these three elements actually enabled
the company to harness pro-seller market trends and capture substantial value. First, Neiman’s firm control of the process
allowed the company to regulate crucial deal dynamics - including who bid, with whom, and on what terms - while
eliminating uncertainties that may have depressed the final price. Second, Neiman’s cutting-edge deal protections ensured
that the deal would not fall through or be subject to retrading at the last moment. Third, Neiman was in the right place at the
right time: good timing, intelligent market analysis, and just plain luck contributed to its success.
Closer examination of the negotiation puzzle in the Neiman context, then, reveals unexpected synchronicities between puzzle
and answer. For Neiman, the same factors that might theoretically have destroyed value - control, protection, and timing -
turned out to be the very reasons the company commanded such an impressive price.
1. Controlling the Process.
From the beginning, Neiman’s advisors orchestrated every aspect of the auction.40 In January, Neiman invited specific
financial *244 bidders to the table to begin negotiations before announcing the sale process to the general market.41 This
minimized the risk of information leaks and allowed the management team and its advisers to concentrate their efforts on the
parties most likely to offer a premium bid. The subsequent public announcement42 that Neiman was investigating “strategic
alternatives” ensured that the process did not miss any interested buyers and that Neiman was fully in compliance with its
Revlon duties, which require companies to seek the maximum value for stockholders in a sale of the company.
Inviting the participants was the first step; the second was to make sure that they worked together well, but not too well -
bidder collusion is always a concern in the auction context. Neiman’s bankers at Goldman directed the formation of bidding
consortiums - “a series of forced marriages,” in the words of one participant43 - to ensure a competitive bidding process that
resulted in higher bids.44 Pre-partnering certain bidders can forestall anti-competitive pairings in which bidders band together
to eliminate competition (as in the March 2005 buyout of SunGard Data Systems45), leading to a lower final price.46 Since
the formation of bidding consortiums was a foregone conclusion given the size of this deal, the confidentiality agreements
served to prevent bidders from voluntarily forming teams without consent. This allowed Neiman to ensure that the resulting
teams were the right size (that is, precisely two private equity firms each) and would complement each other well.47
Another important element of Neiman’s control of process was its insistence that bidders work from a homogenized contract
that left *245 little room for last-minute retrades, creative departures, or tradeoffs.48 The pre-negotiated homogenized
contract, coupled with a short, two-day timeframe for final negotiations, helped prevent an eleventh-hour attempt by the
5. winning bidders to renegotiate terms once they learned that they had prevailed in the auction.49
Moreover, Neiman’s arrangement of a separate and concurrent sale of its credit card business was a key tactical move. The
credit card business was a valuable asset that could command a high price if sold to strategic buyers in the financial services
industry, because synergies with their existing retail credit businesses promised to create significant private value.50 A
financial buyer of Neiman’s entire business would likely divest the credit card division soon after a buyout to reduce
transaction debt, and therefore, would discount its value due to the uncertainty of the price it would fetch in a sale. By
orchestrating the concurrent sale of the credit card business, Neiman was able to ensure that the unit’s full fair market value
would devolve to its shareholders, decreasing uncertainty for financial bidders and pushing up final offers for the company.51
2. Protecting the Deal.
To ensure that the deal would be consummated, Neiman included a variety of contractual protections to incentivize the
parties. Before starting the auction process, the board installed “golden parachutes,” or lucrative severance agreements, for
key management personnel, in an attempt to ensure that management was fully committed to completing the auction process.
Having the golden parachutes in place reassured management that their jobs would be secure regardless of the outcome of the
auction. Although golden parachutes are often viewed as an anti-takeover measure, in this case *246 they provided
reassurance to both the company and its potential buyers that the management team - which was, after all, one of the
company’s greatest strengths - would remain in place.52
In addition, Neiman’s lawyers negotiated unusual contractual clauses to safeguard the deal for the seller. Traditional
leveraged buyout (“LBO”) deal protections tend to place the onus largely on the sellers, giving buyers a higher level of
confidence that the sellers will not continue to look elsewhere for a higher price. In this case, however, the traditional deal
protections were supplemented by uncommon terms that focused on the buyers’ commitments.53 Most notably, the deal
featured a “two-tier” reverse breakup fee of unprecedented scale, which broke new ground by completely omitting a
financing out provision that might enable the buyers to abandon the deal.54
Generally, reverse breakup fees impose predetermined costs on the buyers should they decide not to follow through on their
agreement to purchase the company. In Neiman’s case, the reverse breakup fee imposed on the winning bidders a penalty of
$140.3 million (about 3% of the enterprise value of the sale) if the deal fell through because the financing did not materialize.
This was only the second time such a fee had ever been imposed in the LBO of a public American company.55 Neiman
improved on the first use, however, by adding a second tier: the fee jumped to $500 million (almost 10% of enterprise value)
if the deal did not close for reasons other than financing.56 This second tier was so punitive that it essentially forced *247 the
winning bidders to abandon any notion that they might use the reverse breakup fee as a real option on the company.57 Apart
from giving comfort to the Neiman board that there would be no dramatic last-minute bust-up,58 the lack of a financing out
also eliminated the natural temptation on the part of the winning bidder to ratchet down the final price by claiming difficulty
in obtaining debt financing necessary to consummate the merger and threatening to invoke the financing out clause.59
Instead, the buyers’ only notable out would be a tightly drafted material adverse change (“MAC”) clause - and the buyers
were well aware that the threshold for adverse events to qualify as a MAC is extremely high in Delaware courts.60
Why would bidders as sophisticated as TPG and Warburg agree to terms that seem so skewed towards the sellers? In their
own words, they were “very comfortable with the process.”61 They negotiated MAC clauses with the banks providing debt
financing that mirrored almost perfectly the MAC clause in the sales agreement, so they were “very confident that their banks
would show up.”62 Second, Neiman was negotiating from a position of strength: it was a highly-respected company and there
was significant interest in the auction. In short, TPG/Warburg really wanted the company and believed that they would be
able to close the transaction, so they were willing to accept fairly restrictive deal protections. Finally, to mitigate the buyers’
financing risk, Neiman’s bankers at Goldman Sachs offered potential buyers “stapled financing” for the deal.63 This creates
for buyers a convenient negotiation floor vis-à-vis other potential *248 sources of leverage, because their financing is
guaranteed.64 Moreover, stapled financing may enable buyers to bid more boldly by guaranteeing the availability of financing
on certain terms.
3. Being in the Right Place at the Right Time.
There are a number of intangible factors that facilitated this particular deal and may, in fact, have been unique to it. An
equally motivated seller in a less auspicious context might not be as successful as Neiman, even if it followed the same
formula.
This deal arrived at a particularly opportune time in both the private equity65 and luxury retail industries.66 The depressed
state of the US economy since the early 2000s and the passage of the Sarbanes-Oxley Act made going private an attractive
option for many public companies.67 As a company with an excellent management team and targeted marketing strategy,
6. Neiman was reluctant to risk the breakup of the team and disruption of its long-term strategy. At the same time, private equity
was booming, and funds were overflowing.68 With a strong brand, well-defined retail concept, experienced management
team, affluent customer base, and readily saleable consumer credit card business, Neiman was an ideal - if expensive -
acquisition target. The luxury retail sector had proven itself one of the most resilient to economic shocks and industry
fluctuations. It fell *249 together perfectly: investors were looking for opportunities, and Neiman was ready to sell.69
Fortunately for the company, market conditions remained favorable throughout the sale process.
It also seems likely that the careful matchmaking among potential bidders added significant marginal advantage to those
clubs that worked well together, while disadvantaging those that did not. A dysfunctional pairing could easily impair the
process of raising large amounts of debt and preparing a strategy to realize returns over a number of years: disagreements
could arise over a number of critical areas, including the balance of power, distribution of fees, investment time horizon,
institutional competencies, and governance issues.70 That TPG and Warburg Pincus proved able to work together well was no
doubt the result of careful pairing by Goldman Sachs - but, to a certain extent, it was also a stroke of luck.
Another factor contributing to Neiman’s successful sale process was simply the quality of the company’s brand, management,
and infrastructure. Neiman sold itself from a position of strength; had the company failed to get its reservation price, it simply
would have walked away from the auction process. Similarly, had the company been less appealing, the buyers may not have
acquiesced to as many of Neiman’s demands. Clearly, having something worthwhile to sell makes the sale much easier.
Conclusion
Controlling the process and protecting the deal were two strategies that played out particularly well in the Neiman deal. It is
still too early to tell if some of the deal terms utilized in this transaction signal a trend in the industry. The reverse breakup fee
and the diluted financing out have only been used in two other private equity deals in the United States - SunGard and Hertz -
both of which *250 were, like Neiman, very attractive properties. For less attractive properties, it may be difficult for sellers
to install these provisions without giving concessions in price or other provisions.
Nonetheless, the Neiman Marcus acquisition is a compelling study in leveraging bargaining power, negotiating dynamics,
and controlling auction outcomes. So how does a motivated seller extract maximum value, quickly? The answer is a
combination of factors, including, most prominently, the ability to control the process and guarantee the deal’s completion. In
the end, this negotiation was both atypical and successful - a sophisticated approach that met the needs of all the parties
involved.
Footnotes
d
1
Harvard Law School, J.D. expected 2007; Harvard Law School, LL.M. 2006; Harvard Law School and Fletcher Divinity
School, J.D./MALD 2006; Harvard Law School, J.D. expected 2007; Harvard Law School, J.D. expected 2007; respectively.
We thank our professor, Guhan Subramanian, for his advice and guidance throughout this project.
1 Bill Dreher & Caroline Costin, Crown Jewel for Potential Sale or Secondary (Deutsche Bank Company Bulletin), Mar. 16,
2006 at 3.
2 See id.; see also Neiman Marcus Group, Proxy Statement (Form 14-A), at 18 (July 18, 2005) [hereinafter Proxy Statement];
Interview with Walter Salmon, Professor, Harvard Bus. Sch., in Cambridge, Mass. (Mar. 20, 2006) [hereinafter Salmon
Interview].
3 See, e.g., Dennis K. Berman et al., Neiman Marcus Nears $5 Billion Deal - Texas Pacific, Warburg Bid Trumps Rival Equity
Firms; A Long Term Luxury Play, Wall St. J., May 2, 2005, at A3; Dennis K. Berman et al., Today’s Bids for Neiman Marcus
May Be Dampened by Soft Market, Wall St. J., Apr. 29, 2006, at C4; Jonathan Birchall & James Politi, Neiman Marcus Sold
for $5.1bn, Fin. Times, May 3, 2005, at 27 (noting criticism that “the deal was struck at the top of the market [and] the buyers
might struggle to make money from their investment”); Nat Worden, Neiman Marcus Is Sold, TheStreet.com, May 2, 2005,
http://www.thestreet.com/markets/natworden/10221095.html (quoting the chairman of a retail consulting and investment
banking firm as saying that “it looks to me like [Neiman is] at the very top of the cycle, and that’s a bad time ... to buy the
company”).
4 Although the family never publicly stated that they were interested in selling off their Neiman stake, industry insiders and
analysts nonetheless speculated that the family wanted to move on. See, e.g., Dreher, supra note 1 (“We had been anticipating a
secondary of the Smith family shares”); Deborah Weinswig, Charmaine Tang & Tina Hwang, NMGA: Evaluating Strategic
Alternatives - What Next?, (Citigroup/Smith Barney), Mar. 2, 2005, at 9 (“Richard Smith, 81, has been the center of industry
discussion that he has been interested in monetizing this stake in Neiman Marcus.”).
5 Salmon Interview, supra note 2 (noting that the family’s decision to sell did not happen in a time-constrained “corridor or
7. window” but rather at the “first opportunity”).
6 See Neiman Marcus Group, Inc., Preliminary Proxy Statement (Form 14A), at 11 (Jul. 8, 1999) [hereinafter 1999 Proxy], for
the background to the 1999 Neiman spin-off from Harcourt General.
7 See id. at 10, describing the limitations that the tax-free distribution may impose on Neiman and the indemnity Neiman
provided to Harcourt General for taxes that became payable by Harcourt General due to actions by Neiman Marcus. See also
Bernard Wolfman & Diane M. Ring, Federal Income Taxation of Corporate Enterprise 584-85 (4th ed. 2005) (discussing the
two- to five-year restrictive window created by §§ 355(d)-(e) for changes of control following a tax-free spin-off under § 355).
After 2004, Neiman was beyond the long end of the restrictive window and therefore had very little risk of violating § 355 for
the Harcourt General spin-off in a change of control. Robert Willens, Two-Class Stock Spinoffs Leave Vulnerable Castoffs, The
Daily Deal, Nov. 23, 1999. Revenue Ruling 69-407 mentions the “permanent realignment of voting control” requirement of §
355, which means that the two classes of stock cannot be recombined for five years, making sale options more complicated.
8 Note that the clearing of the tax issues was, at most, a necessary condition to a sale, not a sufficient one. During 2000-03, the
Smiths would likely not have been eager to sell even without the tax limitations, because the company’s stock price was
depressed.
9 Salmon Interview, supra note 2.
1
0
Id.
1
1
Id. (observing that the “wind was at the back” of the luxury retail market in early 2005); see also, e.g., Tracie Rozhon, In a
Shopping Frenzy: Investors, Flush with Cash, Go After Retail Chains, N.Y. Times, Apr. 14, 2005, at C2 (noting that “[t]he
retailing industry [was] gripped by frenzy” to sell); Tracie Rozhon, To Cash in on Luxury, Think of Selling the Store, N.Y.
Times, Feb. 9, 2005, at C1 (stating that Neiman Marcus would be, according to one expert, “a coveted but expensive prize ...
for a financial trophy hunter”) (internal quotations omitted).
1
2
Proxy Statement, supra note 2, at 20.
1
3
Id. Apart from Saks, LVMH and Nordstrom were also rumored to have an interest in a potential purchase, but none found the
resources necessary to mount a serious bid. Neiman also wanted to be careful not to compromise its luxury retailer profile - not
all of these potential strategic buyers had the right image. Salmon Interview, supra note 2. Moreover, Neiman was keen to
minimize the possibility of information leaks and competitive risks of sharing information with competitors. See generally
Ellen Byron, Neiman Marcus May Be up for Sale, Wall St. J., Mar. 17, 2005, at A3; Is Nordstrom Interested in Buying Neiman
Marcus?: Seattle Company Is Mum on Speculation, Seattle Post-Intelligencer, Mar. 17, 2005, available at http://
seattlepi.nwsource.com/business/216303_nieman17.html.
1
4
Successfully Managing Private Equity Conflicts of Interest, CapitalEyes (Bank of America), http://
www.bofabusinesscapital.com/resources/capeyes/a08-04-238.html (last visited Oct. 15, 2006). Stapled financing simply means
that the bank advising the target company also arranges for the potential buyer’s financing. Therefore, the buyer, in theory, does
not have to seek any additional financing to purchase the company - the target’s bankers have already “stapled” the necessary
financing contracts to the purchase agreement. Buyers often use these contracts as a baseline or BATNA for negotiating with
other third-party lending sources.
1
5
Telephone Interview with James Westra, Partner, Weil, Gotshal & Manges LLP, in Boston, Mass. (Mar. 14, 2006) [hereinafter
Westra Interview]. None of the bidders, including the winning bidders, used Goldman’s stapled financing. However, Goldman
was part of the final financing arrangement. Neiman Marcus, Inc. Annual Report (Form 10-K), at 36 (Sept. 16, 2005).
1
6
The private-label credit card concern had $550 million in receivables. Andrew Ross Sorkin & Tracie Rozhon, Credit Card
Business Draws Bidders to Neiman Marcus, N.Y. Times, Apr. 26, 2005, at C5; see also Tracie Rozhon, Neiman Marcus Deal
Disappoints Investors Looking for a Second One, N.Y. Times, May 3, 2005, at C1. (stating that the credit card concern had been
the subject of intense speculation, because Neiman shareholders were hoping to benefit from both the sale of the company and
of the credit card business).
1
7
Proxy Statement, supra note 2, at 21.
1
8
Rozhon, supra note 16 (quoting one executive as saying that the credit card sale would “serve as the down payment” on the
Neiman purchase).
1 Proxy Statement, supra note 2, at 22.
8. 9
2
0
Telephone Interview with John Finley, Partner, Simpson, Thatcher & Bartlett, in New York, N.Y. (Apr. 3, 2006) [hereinafter
Finley Interview].
2
1
See James Westra, Club Deals, in PLI Corporate Law and Practice Course, Handbook Series No. 6063 (2005), available at WL
1517 PLI/Corp 261 (“When forming a club with a strategic partner, a private equity firm can obtain the benefit of the partner’s
strategic knowledge of the industry or market and often access intellectual property of the strategic partner and the strategic
partner’s good will in the marketplace.”) [hereinafter Club Deals]. In this particular case, it was clear to all parties that the
bidding could approach or top $5 billion. If the equity sponsors had to pay 30% in a $5 billion deal, for example, this would
require putting up about $1.5 billion, significantly more than even the largest private equity firms have shown themselves
willing to risk on a single transaction.
2
2
Telephone Interview with Michael Carr, Managing Director, Goldman Sachs, in New Orleans, La. (Mar. 23, 2006).
2
3
James Politi, Neiman Board Weighs up Rival Buy-Out Offers, Fin. Times, May 2, 2005, at 17; see also Proxy Statement, supra
note 2, at 23. Neiman’s strategy of “pre-partnering” the clubs may have meant that there were “fewer people at the finish line”
at the auction than there would have been if firms had chosen their own clubs. Westra Interview, supra note 15.
2
4
Westra Interview, supra note 15. Even with the homogenized contract, the bidders still made some small changes to the final
version. Id.
2
5
Tracie Rozhon, HSBC to Acquire Neiman Credit Card Unit, N.Y. Times, June 9, 2005, at C4.
2
6
For price comparisons, see note 3, supra.
2
7
See Dennis K. Berman & Henny Sender, Private-Equity Players Turn to Bigger Prey - Lucrative Fees From Transactions Steer
Buyout Firms to Big Deals; Tough Hunt for Valued Targets, Wall St. J., May 12, 2005, at C1; see also 1999 Proxy, supra note 6.
2
8
See, e.g., The Lex Column, Neiman Marcus, Fin. Times, May 3, 2005, at 20 (“Quite how the buyers ... plan to generate the
typical private equity returns from this deal is unclear. It is certainly not a classic turnround [sic] story. Neiman is already in
peak form.”) Note, however, that private equity firms are not looking solely for turnaround challenges, but seek growth
opportunities as well. Westra Interview, supra note 15. A company like Neiman Marcus may offer many such opportunities in
the short and long term. See generally Salmon Interview, supra note 2.
2
9
For a discussion of private and common value in auction theory, see R. Preston McAfee & John McMillan, Auctions and
Bidding, 25 J. Econ. Lit. 699, 704-05 (1987).
3
0
See supra text accompanying notes 10-11.
3
1
Of course, the private equity firms could have their own version of a private value premium, depending on the varying
competencies within the clubs. (Neiman has potential growth in, for example, home furnishings and junior lines; if a bidder had
special access to retailing expertise in these markets, then it might have found some private value in this auction.) Moreover, if
market analysts can be convinced to classify Neiman as a specialty store (rather than as a retailer), Neiman’s value will
increase. Salmon Interview, supra note 2.
3
2
Telephone Interview with Douglas Braunstein, Managing Director & Head of Investment Banking Coverage, J.P. Morgan, in
New York, N.Y. (Mar. 17, 2006) [hereinafter Braunstein Interview]; Finley Interview, supra note 20; Telephone Interview with
David Leinwand, Partner, Cleary Gottlieb Steen & Hamilton, in New York City, N.Y. (Apr. 7, 2006) [hereinafter Leinwand
Interview].
3
3
Barbarians Knocking at Retail’s Gate, Financo Rev., Nov. 2005, at 3, available at
http://www.financo.com/news/review/Financo_Review_-_November_ 2005.pdf. But see Club Deals, supra note 21, at 264
(noting that “some argue that clubs actually push up prices by making additional funds available”).
3
4
See, e.g., So Happy Together?, Corp. Control Alert, Nov. 2005, at 10 (observing that “[o]ther issues can emerge after closing as
private equity players, accustomed to calling the shots ... must share power with other members of a buyout consortium”);
David Stires, LBO Kings Go Clubbin’, Fortune, Apr. 3, 2006, at 29 (“And while clubbin’ is a relatively new phenomenon, the
consensus [is] that this party is just getting started.”)
3
5
See Club Deals, supra note 21, at 268; see also Eileen Nugent, Global Overview: Join the Club, Expert Guides, 2005, available
at http:// www.expertguides.com/default.asp?Page=9&GuideID=135&Ed=43.
9. 3
6
John L. Graham & Bradley C. Vaiana, Rolling the Dice, N.Y.L.J., Nov. 7, 2005, available at
http://www.kslaw.com/library/pdf/rollingdice.pdf (discussing the recent seller-friendly trends of reverse breakup fees and no
financing outs).
3
7
Some buyers think of reverse breakup fees as options on buying the company, because they provide a specified measure of
damages, frequently capped at just a few percent of enterprise value, should the buyer decide against the deal. Westra Interview,
supra note 15.
3
8
Finley Interview, supra note 20.
3
9
TPG/Warburg’s high yield bond financing for the Neiman acquisition did not materialize as planned, but the club was able to
substitute bank debt. See Simona Covel & Tom Sullivan, Neiman Marcus Meets Skepticism: Long-Awaited Deal Sees Some
Resistance as Market for Risky Debt Gets Jittery, Wall St. J., Sept. 29, 2005, at C4; Deal Notes, Corp. Control Alert, Nov. 2005,
at 4 (commenting that the Neiman buyout, “[i]f anything, showed how liberal the bank debt market remains”). The substitution
also included an asset-based revolving facility, bridge facilities, and senior secured notes in addition to the bank debt.
4
0
Finley Interview, supra note 20; Braunstein Interview, supra note 32.
4
1
See Proxy Statement, supra note 2, at 20.
4
2
Press Release, Neiman Marcus Group, The Neiman Marcus Group Exploring Strategic Alternatives (Mar. 16, 2005), available
at www.neimanmarcusgroup.com (follow “News and Events” hyperlink); Neiman Marcus Group, Current Report (Form 8-K),
at 18 (Mar. 16, 2005).
4
3
Braunstein Interview, supra note 32.
4
4
Finley Interview, supra note 20.
4
5
See, e.g., Rob Assal, Consortium Bids: An Overview, Mondaq, Mar. 21, 2006, available at 2006 WLNR 4640314. Whether
SunGard’s single-bidder situation reduced the final price is impossible to know, but the fear that a single consortium will
undermine the auction process worries sellers in a variety of contexts. Compare the practice of tuangou (team purchase), which
is gaining popularity with consumers and confounding retailers in China. James T. Areddy, Chinese Consumers Overwhelm
Retailers with Team Tactics, Wall St. J., Feb. 28, 2006, at A1.
4
6
Braunstein Interview, supra note 32; Finley Interview, supra note 20.
4
7
Finley Interview, supra note 20.
4
8
Commenting on the homogenized contract, Robert Smith (of the Smith family) said that “John [Finley] did a great job handling
the contract management process with each bidding party.” Carlyn Kolker, Dealmakers of the Year, Am. Lawyer, Mar. 2006, at
99, available at http:// www.stblaw.com/content/news/news554.pdf.
4
9
As an example, consider a case in which there are three bidders, one of whom has bid $12 for an asset and two of whom have
bid $10. If the leading bidder gets wind of the lower numbers - a likely occurrence, especially as losing bidders often justify
their loss by suggesting that the winner has overpaid - then the leading bidder has an incentive to drop his bid to $11. These
“retrades” often occur when too much time passes between the bids and the company’s subsequent pre-closing negotiations
with the high bidder. Finley Interview, supra note 20.
5
0
See Sorkin & Rozhon, supra note 16.
5
1
Braunstein Interview, supra note 32.
5
2
Salmon Interview, supra note 2.
5
3
See generally Glenn D. West & R. Jay Tabor, Sungard and Neiman Marcus LBO Transactions - Increased Liability Risk to
Private Equity Sponsors?, Private Equity Alert (Weil, Gotshal & Manges, LLP), June 2005, available at
http://65.214.34.40/wgm/cwgmhomep.nsf/Files/PEAJun05/$file/PEAJun05.pdf. It is believed that these unusual terms were
possible in this deal because Neiman knew it could set the terms. See Itai Maytal & Abigail Roberts, SunGard and Neiman
Deals Debut New Reverse Breakup Fee, Others Could Follow - Analysis, Mergermarket, May 10, 2005,
10. http://www.mergermarket.com/public/default.asp? pagename=editorial_detail&docid=668.
5
4
Typically, in deals involving financial buyers an investment vehicle is set up to consummate the acquisition. In this case TPG
and Warburg formed Newton Acquisition Merger Sub, Inc., for the purpose of the acquisition. For sellers, the prospect of taking
this asset-less “shell” to court should the deal go awry is not attractive.
5
5
The first use of such a fee was in the March 2005 leveraged buyout of SunGard Data Systems by a consortium of seven large
PE firms. Assal, supra note 45.
5
6
See Proxy Statement, supra note 2, § 8.2; Finley Interview, supra note 20; Leinwand Interview, supra note 32.
5
7
Finley Interview, supra note 20. Whether the fee was too punitive (and therefore unenforceable) is not clear, since the deal went
through.
5
8
See Graham & Vaiana, supra note 36.
5
9
Finley Interview, supra note 20. See, e.g., David J. Sorkin & Eric M. Swedenburg, Recent US Deals Depart from Traditional
Financing, Int’l Fin. L. Rev., available at http://www.iflr.com/?Page=17&ISS=21163&SID=605652 (tracking the evolution of
financing provisions in LBOs); Graham & Vaiana, supra note 36.
6
0
See, e.g., IBP, Inc. v. Tyson Foods, Inc., 789 A.2d 14 (Del. Ch. 2001) (detailing difficulty of invoking stringent MAC
provisions).
6
1
Leinwand Interview, supra note 32.
6
2
Id. Because presumably the same adverse event would trigger both the merger MAC and the financing MAC, the buyers could
be comfortable that they would never be in a situation in which one MAC was triggered but the other was not.
6
3
Proxy Statement, supra note 2, at 21. Note that such arrangements are not borne solely of the generosity of bankers - the fees
generated by financing are significant. Braunstein Interview, supra note 32.
6
4
Westra Interview, supra note 15.
6
5
See Berman et al., supra note 3; see also Stanley B. Block, The Latest Movement to Going Private: An Empirical Study, 14 J.
Applied Fin. 36 (2004); Emily Thornton, Going Private, Bus. Wk., Feb. 27, 2006, at 53 (discussing the influx of executives
from public companies into private equity firms).
6
6
See Andrew Dolbeck, Shopping Spree: M&A in the Retail Sector, Wkly. Corp. Growth Rep., Apr. 25, 2005, at 1; KPMG,
What’s Hot in M&A?: Consumer Markets, Dealogic M&A Rev. (Aug. 2005), available at http://
www.altassets.net/casefor/sectors/2006/nz8758.php; see also supra note 11; Glory Days: Private Equity, Economist, Aug. 6,
2005, at 58; Capitalism’s New Kings, Economist, Nov. 27, 2004, at 9.
6
7
See, e.g., Dimitry Herman, Why Are So Many Top Retailers and Consumer Product Companies Going Private?, Back Channel
Media Newsl., May 24, 2005, available at http://
www.backchannelmedia.com/newsletter/story/2481102355/WHY_ARE_SO_MANY_TOP_ RETAILERS_.html; Michael
Rudnick, Seeking Privacy: Some Public Home Furnishings Retailers Are Rushing to Take Advantage of Higher Valuations
Offered by Private Equity Firms, HFN: The Wkly. Newspaper for Home Furnishings Network, Sept. 12, 2005, at 64; Angela
Sormani, Retail is Back in Fashion, Eur. Venture Cap. J., Sept. 1, 2004, at 1 (reviewing European market).
6
8
See, e.g., supra note 11; see also Lauren Foster, FT Report: Business of Luxury, Fin. Times, May 18, 2005, at 3 (“Eager to cash
in on the buoyant market for luxury merchandise, [private equity funds] are prowling round the industry looking for deals.”).
6
9
Choosing the right time to initiate a sale may be more than luck, but enjoying continued favorable market conditions
throughout the auction process is undeniably lucky. See, e.g., Braunstein Interview, supra note 32 (observing that in the
unpredictable environment of M&A practice, it can be “better [to be] lucky than good”); Salmon Interview, supra note 2.
7
0
Braunstein Interview, supra note 32; see also Andrew Ross Sorkin, The Great Global Buyout Bubble, N.Y. Times, Nov. 13,
2005, § 3 (warning that “if the debt market turns against [private equity players] - and it is bound to do so at some point -
potential buyers or public investors may not be willing to pay the same prices”); Club Deals, supra note 21 (laying out
governance considerations and risks for private equity consortiums); So Happy Together?, supra note 34, at 14 (“Some suspect
that many club-backed companies saddled with an unwieldy decision-making apparatus won’t be nimble enough to dodge, or