Wednesday, January 23, 2008
M&A and IPOs market looks gloomy in 2008
--Credit-market turmoil and recession worries have had many investment bankers predicting a steep decline in the volume of mergers and acquisitions in 2008 for months. Now, the steep drop in stock values has them worried about some of last year's deals as well. --Clear Channel Communications Inc., which agreed last year to be acquired by private-equity firms Thomas H. Lee Partners LP and Bain Capital Partners LLC, widened $1.41 to more than $7. The spread on Alliance Data Systems Corp., which Blackstone Group LP agreed to acquire for about $6 billion, rose $1.64 to more than $21. And on the biggest buyout ever, the $33 billion acquisition of Canadian telecom operator BCE Inc. by a Ontario Teachers' Pension Plan-led consortium, the spread widened to more than $8. --The malaise also could upend another pillar of the investment-banking business -- initial public offerings. As stock prices drop, issuers have less incentive to tap the markets and may prefer to wait on the sidelines until conditions improve. --Issuers will get a sense of the appetite for stock this week with the IPO of risk-management specialist RiskMetrics Group Inc., which could raise as much as $266 million. The backlog of traditional IPOs filed in the past six months totals 95 deals valued at $24.5 billion, according to Dealogic. --The market volatility also could spell trouble for IPOs outside of the U.S. Investors in China are worried about a plan by one of China's biggest financial firms, Ping An Insurance Co., to sell over $20 billion of additional shares and debt -- just one of the fund-raising plans investors say has chilled their buying interest.