Deal toys are back.
Most of my time in banking was during the Great Deal Toy Drought of '08 through, apparently, 2013, so I missed out on a lot of the fun, described here by Jessica Lindroos of deal toy maker The Corporate Presence:
Ms Lindroos recalls one project that spiralled out of control: the client wanted a rollercoaster, a zoo and lots of different animals. “It ended up looking really cluttered, but the client was adamant and it was something we could produce.”
I did once get a (Lucite) brown paper bag filled with (plastic) groceries for a supermarket deal, so that was something. A financial sociologist explains the appeal of making financial accomplishments seem less abstract, and:
Moreover, he says, they can provide a distraction from the vexed issue of bonuses. “By providing meaning and attributing credit to the overworked bankers involved in a deal, the hope is that less of their personal self-esteem will ride on the bonus.”
Given Europe's recent, porous bonus restrictions, expect to start seeing deal toys that are just (Lucite) brown paper bags filled with cash.
The L.A. Clippers will be a surprisingly interesting M&A deal.
Shelly Sterling has agreed to sell the Clippers to Steve Ballmer for $2 billion, but her estranged ex-husband and co-owner of the team has not signed off on the deal, according to his lawyer. (On the other hand he sent a letter authorizing her to sell? Or something?) But Shelly Sterling may now be solely in charge because Donald Sterling "was found by experts to be mentally incapacitated," I guess shortly after saying a bunch of crazy racist stuff in secret recordings and also in television interviews. You don't usually get these sorts of mad family law issues in corporate acquisitions; it would be weird to buy a $2 billion company -- never mind an NBA team -- without being quite clear on who actually gets to sell it.
Really $10 billion seems like a lot of money for BNP Paribas to pay for sanctions violations, at least compared with most of the other recent big bank fines. "In February, BNP said it was reserving $1.1 billion to cover the expected settlement." "Last week, Bloomberg News reported that prosecutors were seeking more than $5 billion," and an analyst guessed $7 billion. Now the bid/ask is $8 at 10 billion, plus a criminal guilty plea, and I guess they'd better settle this thing quick or it'll keep going up. The other fight is over whether BNP will be temporarily restricted from clearing U.S. dollar transactions, and I have to say that "temporarily" shutting down a bank in the U.S. sure sounds a lot like permanently shutting it down everywhere, but I guess we'll see.
Client loyalty isn't what it used to be.
Morgan Stanley was mandated to lead a bond deal for JBS SA, which was bidding for Hillshire Brands. But then Tyson Foods wanted to bid for Hillshire, and it wanted to pay Morgan Stanley more to finance that deal than JBS was paying it to run its bond deal. So Morgan Stanley signed up to finance (and advise) Tyson's bid. "Officials at JBS, the world’s largest meat producer, were caught by surprise," and fired Morgan Stanley from the bond deal. I can't quite decide how offended I am by this, but at least a little offended, right? Why take someone on as a client if you're going to ditch them when a better offer comes along?
Those restrictions on leveraged lending are working.
In December, Morgan Stanley, Credit Suisse and Goldman Sachs financed KKR's buyout of Brickman Group, at 6.8x leverage. U.S. bank regulators have issued guidelines that sort of cap bank leveraged lending at 6x EBITDA. And when Brickman wanted to do an add-on acquisition this month, its banks said no. So the system worked. And "Jefferies Group LLC, a privately held brokerage whose leveraged finance business is not overseen by the same regulators, has stepped up to lead the financing of Brickman's deal instead." So the ways around the system also worked.
Congressman represents constituents.
Is it at possible that anyone believes this, about Bill Ackman's Allergan referendum?
In a letter dated Tuesday, Rep. Edward Royce (R., Calif.) expressed concerns about the referendum to SEC Chairman Mary Jo White, saying the "strategy being used in this case could make it difficult for shareholders to truly understand what is occurring."
Obviously Allergan is in Royce's district and its PAC gave his campaign money in 2014. I suppose Bill Ackman can't complain but still.
Ackman & Icahn's greatest hits.
Here's a collection of case studies of prominent activist campaigns by Bill Ackman and Carl Icahn. If you like that sort of thing, etc.
Paul Ford writes some perfect internet. Larry Fink has some personal finance advice. Pimco has a Convexity Maven. Kevin Drum has some doubts about "hot hand" research. Italian cops have a Lamborghini. Season 2 of The Wire has a critique of the War on Terror. Calpers is hiring. Here is a paper that assumes high frequency traders submit a lot of fake orders, and then argues that that might be illegal; I don't know. Piketty's response to his critics is pretty good. "10 books specifically chosen to appeal to the tastes and preoccupations of the wealthy." Stanford beats Harvard (not really, come on).
To contact the writer of this article: Matt Levine at email@example.com.
To contact the editor responsible for this article: Tobin Harshaw at firstname.lastname@example.org.