Surging mergers and acquisitions trigger a boom in investigations
Filed under: Economy, Investing, Hewlett-Packard, Pfizer, Berkshire Hathaway
It's hard to ignore the fact that mergers-and-acquisitions activity has jumped dramatically recently. Although we're not even halfway through November, 214 deals have already been announced for a total deal value of $67.1 billion according to Thomson Reuters. By far the biggest one was Berkshire Hathaway's (BRK.A) $44 billion deal for railroad company Burlington Northern Santa Fe (BNI). Others include Hewlett-Packard's (HPQ) deal to buy 3Com (COMS) for $2.7 billion, which was announced late Wednesday, and the $5.2 billion deal by private-equity firms TPG Capital and the CPP Investment Board for IMS Health announced on Nov. 5. If the trend continues, deal flow could easily surpass January, when the $68 billion Pfizer/Wyeth (PFE) deal was announced, pushing deal activity to $86.6 billion.
But along with the increased deal activity is coming an increase in shareholder lawsuits, or at least investigations into whether each company's board of directors did the right thing in approving the respective deals. When the Berkshire Hathaway/Burlington Northern deal was announced on Nov. 3, the Dallas-based Kendall Law Group wasted little time in announcing its investigation of the deal. That same firm is also investigating several other recent smaller deals, including Peet's (PEET) deal to purchase Diedrich Coffee (DDRX) and the IMS Health deal.
Indeed, at least six law firms are investigating the IMS Health deal, despite the fact that the news caused the stock to increase by 22% and the company touted a 50% increase over where the stock was trading on Oct. 16, which was when speculation over a potential deal began to percolate.
While it's true that each time there's an uptick in M&A activity, there's also often a corresponding uptick in investigations and lawsuits -- after all, without any deal announcements, there's nothing to investigate -- the rush to announce an investigation seems different this time around. Adding fuel to the fire is that while the market is up overall, some companies continue to struggle. 3Com, for example, has never been able to get its stock anywhere near the level where it was trading in 2000, during the run-up to the last tech bubble.
Greg Nespole, a partner at Wolf, Haldenstein, Adler, Freeman and Herz, a New York City law firm that has announced investigations of several recent deals, including Burlington Northern and IMS Health, said there are several factors behind the increased interest by attorneys like him. "There's lots of dry powder out there -- money sitting on the sidelines -- and people are becoming antsy to spend it," Nespole says. "Private-equity firms, in particular, are trying to buy before the prices get too high."
When it comes to deal-making, among the things that trigger alarm bells for Nespole are all-cash deals where a controlling shareholder owns the company and the company will be taken private following the deal. Nespole cited Station Casinos, which went private in 2006 and filed for bankruptcy earlier this year, as a prime example. While Wolf, Haldenstein initially announced plans to investigate Berkshire Hathaway, Nespole says the firm's investigation so far has caused him to believe that it's not really worth challenging the deal by filing a lawsuit. "Berkshire is paying a reasonably strong price and the deal is good for the economy and good for the people who work for Burlington Northern."
Judging by the number of investigations already launched, many of Nespole's colleagues in the shareholder litigation space simply don't agree.
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Reader Comments (Page 1 of 1)
11-13-2009 @ 6:30PM
Frank Fitton said...
When we think of mergers and acquisitions of course we always think of these mega type deals. These however are the minority. A lot of mergers and acquisitions are just small business owners buying competitors.
As a small business your best choice for expansion is to buy another business. Make it one of your competitors and the ramifications will be dual force. You will be growing your own business while at the same time getting rid of one of your competitors.
Anyone interested in the buying of a business should check out http://www.businessbuyeradvocate.com/ . It is a great blog full of must have knowledge for anyone thinking about taking the plunge. It’s frequented by quite a few experts in various aspects of the field that can help you with any questions you might have or perspective you might need.
Buying a business very well could be the most important decision you ever make in your life. You have to make sure you buy the right business the right way.
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11-16-2009 @ 3:58PM
Dereck Dodson said...
You can bet it has something to do with this:
The "REAL TRUTH"
The World Fortune has "Appropriated", "Garnished", and "Consumed" the entire Finance Industry Worldwide in a Maryland District Court Case with the FDIC regulation "No failing Bank can Merge with another failing Bank".
There are no Civilian "Taxpayer Dollars" involving "Base Financing" in any World Fortune Government Owned Corporations or Businesses. There are only "World Fortune Owner Tax Dollars". The World Fortunes Government Owned Corporations and Businesses pay Taxes to the 99th Percentile Worldwide. Don't be mislead by the Media's articulation and terminology. "Tax Diversion Operations" are the only reason the World Economy is breathing any life right now. The Government will "shrink and dissolve" until Private World Fortune Corporations organized with Colleges and Universities run all Federal, State, County, and City Operations effectively killing dirty politicians "Red Tape".
Every Investment Bank (including CIT and US Bank), Bank, Credit, Loan, and Finance Company lost the ability to use my money, therefore all Monetary Collection Accounts from all my World Fortunes Government-owned Corporations and Businesses have been "Levied" and are being routed to my Garnishment Payments.
All the lies being told by Media Reporters and Columnists are the total cause of all the "holdup". Government Regulatory Agencies are at fault for not utilizing the "Truth in Media Act" that Congress spent all that time passing.
The World Fortune is moving to completely end "World Poverty" and the "ponzi schemers" are attempting to "bribe and blackmail" their way into a blockade of this with their criminal "political figureheads".
The Maryland District Court Cases can be Tracked on the world wide web at:
Courts.State.MD./District under "Case Search"
Case Number.: 0502-0007498-2008
CACH LLC (Bank Of America) vs Dereck T. Dodson
0502-0035887-2007
Chase Bank USA, NA vs Dereck T. Dodson
0502-0002668-2009
Wharton Enterprises (Advanta Bank) vs Dereck T. Dodson
All cases are awarded "In favor of Defendant", "Dismissed with Prejudice", and Deleted.
The Finance Industry was already "Privately Owned" by me and will pay out this Appropriation and Garnishment forever under this Court Ruling.
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