M&A Industry Weighs Fees Against Size
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Investment banks are in the midst of the annual fight for bragging rights as the biggest dealmakers of the year, but this time the rankings -- a key factor in winning new business -- are under intense scrutiny.
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Marsh and McLennan is looking to collect about $230 million in incentive fees at the heart of a bid-rigging probe. The company says it will put the fees into a separate account to be used as
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Marsh &amp; McLennan Companies Inc., the insurance brokerage giant, is looking to collect about $230 million in incentive fees at the heart of a bid-rigging probe by New York authorities as a way to help fund a possible settlement over the questioned fees.
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The company tightens its forecast on cost concerns.
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(InfoWorld) - While consolidation can be a sign of a mature, slowing market, the M&A activity happening now, especially seen in context of this week's six-year Nasdaq Composite Index high, signals confidence in IT and prospects for growth. High-tech mergers and acquisitions hit a record number last year and the trend continues. Wednesday, Cisco Systems announcedÂ it will make a $135 million acquisition of Reactivity, a maker of XML gateway and security hardware to manage Web services. Tuesday,Â SAP said it would acquire Pilot Software, a supplier of strategy management software, while Wind River SystemsÂ saidÂ it bought FSMLabs' embedded Linux technology for real-time applications. SAP rival Software AG said Wednesday thatÂ it will be focusing on SOA products and services and plans acquisitions to broaden its product portfolio. Companies outside of traditional enterprise IT are also part of the M&A trend. Satellite radio operators Sirius Satellite RadioÂ and XM Satellite Radio Holdings, with total revenue of about $1.5 billion, announced Monday thatÂ they plan to merge. Though different sectors within IT are subject to unique market situations, globalization and trends in financing are the prime forces driving M&A, according to Eric Gebaide, managing director of Innovation Advisors, a New York investment firm. After the "general meltdown" in 2001, it's been hard for small companies, especially those under $75 million in revenue, to go public, Gebaide said. This makes them acquisition targets. "Another factor is the need to start having global solutions," Gebaide said. The globalization of technology is underscored by an Innovation Advisers study, based on using data sourced from Capital IQ, a division of Standard & Poor's, that shows that the total percentage of U.S.-based companies participating in M&A activity continued to decline to 51.6 percent from 57.9 percent in 2005. Overall M&A transactions hit a record last year: The total number of transactions in 2006 was 4,669, exceeding 2005's total of 3,455, and the 2000 total of 2,871 deals at the peak of the dot-com boom, according to Innovations Advisers. But the total amount of dollars spent on M&A last year was less than in 2000: $295.8 billion, while the 2000 transaction total was $490.3 billion. Company valuations are more reasonable now than in 2000. Recent deals show software companies are being valued at two to four times revenue, while service companies are valued at one to two times revenue, Gebaide said. Historically, these numbers are more normal then the valuations of the dot-com boom. Meanwhile, services companies are forecasting solid revenue growth this year -- a sign that users are investing in IT, Gebaide points out. The Nasdaq close on Wednesday, at 2518.42, was the highest in six years. On Thursday it closed up again, at 2524.94. Coming right after earnings season, this is another sign that confidence is high. Although overall global revenue growth in IT is expected to be modest compared to the dot-com boom --- most estimates peg IT growth this year at about 6.5 percent -- the expansion is likely to be more sustainable than it was seven years ago. Though the IT market may not be as exuberant as it was in 2000, many investors are certainly willing to settle for more stable, rational growth. Â
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The debate over whether companies should  treat stock options as an expense draws mixed reactions from Washington area businesses, some of which have a lot to lose if the accounting rule changes.
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A Nasdaq plan to increase listing fees while simultaneously offering more services has enraged some companies and raised antitrust concerns.
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The big money has its sights set on small companies.
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Merger volume hit a record $1.57 trillion in the United States in 2007, according to research firm Thomson Financial, despite a sharp decline in dealmaking at mid-year when credit markets tightened and mergers became more costly to finance.
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Wall Street analysts debate whether year-end Sarbanes-Oxley deadline will sap demand for corporate software systems.
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NEW YORK/LONDON  - Higher interest rates in Europe and growing uncertainty over the cost of borrowing in the United States could slow down parts of the global mergers and acquisitions boom, experts say.
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Insurance brokers, whose images and share prices have both plunged in a fees scandal, will struggle to make up the hundreds of millions
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The real issue users need to keep their eyes on is will these three companies be able to leave well enough alone. How other companies have handled past acquisitions might provide some insight into how these company mergers and their products will fare long term.
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Fidelity Investments recently slashed fees on several of its index funds, knocking their annual expense ratio from 0.19 to 0.10 percent.
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Marsh & McLennan Cos. MMC.N, the  world's largest insurance broker, on Tuesday said it will  reform and stop accepting fees that New York's attorney general  said amounted to bid-rigging.
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New York Stock Exchange members seeking to rent their trading rights outnumber brokers who want them, as profits decline at the world&#39;s biggest stock exchange.
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Merger volume hit a record $1.57  trillion in the United States in 2007, according to research  firm Thomson Financial, despite a sharp decline in dealmaking  at mid-year when credit markets tightened and mergers became  more costly to finance.