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Today's Top News1. Goldman Sachs to announce new partners
Goldman Sachs will announce on Wednesday its list of new partners, which will be career-capstone news for the MDs who make it and a crushing blow for those who don't. The cut is getting harder to make, as I've noted that the bank has been thinning the partner ranks. As of now, the bank has about 407 partners, down 31 from February numbers. Some might think that the bank was clearing the decks to make way for a large new class of partners. Others are sure that the bank simply wants to maintain fewer partners for expense control purposes. In any case, Wednesday will be a big day. According to Financial News, the MDs who were passed over will be taken aside by their supervisors and quietly be informed. They can try again in two years. For those who do make the cut, the news will likely be delivered by none other than the CEO, Lloyd Blankfein. One story, when an MD was given the good news by phone, he told the CEO, "Don't tell my wife this but being named partner is the greatest day of my life." The financial benefit of partnership has been significantly reduced. In 2011, partners took home between $3 and $6.5 million in salary. That's a far cry from the days back in 2007, before the financial crisis took hold. But optimists are betting that good times are just around the corner. Partners should enjoy them while they can, because for most partnerships don't last forever. They are expected to keep performing, which is hard. Most are culled at some point. But until then, they are at the pinnacle of success. For more: Related articles:
Read more about: Goldman Sachs, partners
2. Leucadia to purchase Jefferies for $3.6B
About a year ago, Jefferies was swept up in the MF Global saga, as Egan-Jones issued a report cutting the broker dealer's credit rating for what it felt was its over-exposure to European debt. The mere notion that it could follow MF Global was enough to spook investors, and the market promptly tanked the stock. Jefferies fought back adroitly, noting that Egan-Jones failed to take into account some hedges and offsetting positions. The bank then cut its European debt exposure dramatically in an attempt to end the issue. In the end, it survived the controversy, but perhaps it decided it needed a buffer. It has struck a deal with Leucadia for $3.6 billion buyout. In some ways, it seems like a "reverse" deal. Leucadia currently owns about 28.6 percent of Jefferies, but after the deal, Jefferies' shareholders will own 35.3 percent of the new company. "The deal will give Jefferies a deep-pocketed owner as it continues to build out a full-service investment bank. The firm has sought to raise its profile in businesses like mergers advisory in part to provide a counter-balance to its core business of trading stocks and bonds," notes the New York Times. Richard Handler, Jefferies' chairman and CEO, will take over as Leucadia's CEO. Joseph Steinberg, Leucadia's president and co-founder, will become chairman. Ian Cumming, Leucadia's current chairman and CEO, will retire but stay on as a director. Wall Street will likely lose what had become an early warning indicator of big bank quarterly results, as Jefferies released ahead of the other banks, offering valuable insights into industry trends. But perhaps this is what Jefferies needs as it builds toward its goal of becoming a major investment bank. For more: Related articles:
Read more about: Jefferies, merger activity 3. Bullishness creeps back into Bank of America recommendations
Bank of America has been the target of some upbeat recent analyst reports as of late. Ed Najarian, a banking analyst at ISI Group, recently upped his recommendation from hold to buy, arguing that Bank of America will likely be able to expand its stock buyback program and boost its annual dividend. It's now at $0.04 a share, but it seems poised to move up to about $0.20 next year and $0.4 cents by 2015, he wrote to clients, as noted by Bloomberg. That comes on top of a positive report from Atlantic Equities analyst Richard Staite, who recently met with the bank's CFO Bruce Thompson. Staite has reiterated his "overweight" rating for Bank of America and has set forth a $12 price target. The analysts noted that Thompson "expressed confidence that in Q4 there will be a decline in Legacy Asset Servicing costs, that mortgage delinquencies will decline and that the NIM will benefit from lower funding costs." Despite those projections, there's still plenty of skepticism about the bank, especially in the short term. A recent study of analyst recommendations at major brokerage houses has found that Bank of America ranks is the number 26 stock on average, out of the 30 stocks making up the Dow Jones Industrial Average. Within the broader S&P 500, when components were ranked in terms of analyst favorites, Bank of America comes in at number 371. For more: Related articles: Read more about: Bank of America, Stock Analysts 4. How to get fired from an investment bank
Given all the bad press that banks have to endure, you can bet that the top executives will be a lot less tolerant of employees acting badly in public, especially when they are caught on camera. Deal Journal notes that sad case of Olivier Desbarres, the now former head of FX strategy for Asia Pacific excluding Japan at Barclays. Turns out he was caught on videotape throwing quite a tantrum, "an expletive-laced tirade at a construction site adjacent to his home…In the clip, Desbarres is shown clad in polo shirt and sandals. He threatens workers at the site, lambasting them as "animals, Chinese [expletive] animals." He also shouted: "I'm going to go after you. I'm going to burn your [expletive] house down with your [expletive] people in it. I will find your [expletive] family. I can find it very easily, I am a man with resources." He then is shown hurling a sheet of metal into a pit. Construction workers standing out of range on the opposite side of the pit filmed the outburst. Unison Construction, the firm whose workers were threatened, filed a police report after the incident. The Singapore Police Force is reportedly investigating. A former colleague confirmed to Deal Journal that "the banker was shown the door after Barclays executives viewed the clip." In this day and age, it really is safe to assume that over-the-top public behavior will be caught on video. Better to play it safe for the sake of your job. For more: Related articles:
Read more about: Layoffs, jobs 5. Obama victory might encourage more deals
Will the victory by President Obama lead to a spate of more mergers and acquisitions, which would be good news for deal advisors? It just might. Fortune put the question to Bill Lawlor, a M&A attorney with Dechert, who answered that, "Our phones are ringing off the hook. The reason is the expiration of the Bush tax cuts which are, at the margins, pushing deals to get done this year because of expected capital gains tax increases. Not just M&A, but also a rash of dividend recapitalizations in which companies are using cheap debt to borrow and issue massive dividends under the 15% capital gains rates that are now in effect." Are private equity companies interested in generating more dividends? "Yes, it's mostly in financial sponsor deals at this point -- essentially firms that have decided not to sell right now because the differential in capital gains isn't enough to get a deal done, but who still want to take advantage of the current rates. To be honest, I'm surprised we didn't see more of these over the past couple of years, since cheap debt has been around for a while. We've also got a couple in the hopper involving widely-held public companies." There is little doubt that bankers and advisors are prodding clients in this manner. It may be premature to assume that the expiration of the Bush era tax cuts is "fait accompli". It is fair to say, however, that the Obama victory isn't necessarily a bad thing for deal advisors and financial sponsors. For more: Related articles: Read more about: mergers, Barack Obama Also Noted
SPOTLIGHT ON... Hedge fund performance lags, pay rises A report by hedge fund executive search firm Glocap concludes that, "Last year compensation was down overall, particularly for senior investment professionals and for owners of hedge funds. But in 2012 compensation for both categories as well as all categories of employees increased modestly with a 5 percent increase being typical." That may be about right, as hedge funds on average have risen about 3 percent this year. They sorely lag the S&P 500, however, though most funds don't necessarily consider the main stock indexes to be strict benchmarks. Article Company News:
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Tuesday, November 13, 2012
| 11.13.12 | Goldman Sachs to announce new partners
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