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2. Can former top execs start fresh on Wall Street?

When FOX Business reported that Nasdaq OMX had been in talks (now apparently over) with the private equity giant Carlyle about an LBO, it underscored the extent to which CEO Robert Greifeld will go to unlock value for shareholders. It's entirely possible that the idea of an LBO will continue to be discussed with a wider range of private equity firms.

At the same time, the fact that the exchange company might be willing to consider an LBO should not be construed as evidence that it has exhausted all possibilities for a transformative merger with another big exchange company. The industry has been ripe for consolidation for years, with investment bankers successfully pressing the case that companies need size and global scope to survive these days.

The NYSE Euronext's failed attempt to merge with Deutsche Bourse and subsequent deal with IntercontinentalExchange attest to that powerfully. For the Nasdaq, the fear has been that it will be left without a dance partner.

Previous attempts to effect a big transformative deal--notably its attempts to merge with the LSE--have so far failed. But there are still a few dance partners out there. For Nasdaq OMX, the urgency to nail down a deal continues to mount. It pretty much has to match NYSE Euronext, or face inevitable competitive disadvantages.

You have to wonder if the company will soon revive talks with other exchange companies, even if they were not fruitful initially. CME comes to mind.

For more:
- here's an article in Financial News

Read more about: lbo, Leveraged Buyout
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By Jim Kim

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3. The real breakthrough in the S&P prosecution

Second acts have been hard to come by for former top executives of the largest banks.

The best example may be Richard Fuld, the former CEO of Lehman Brothers, who tried hard to make a comeback, but couldn't quite seem to manage the trick. He couldn't find a job until little-known Legend Securities hired him two years ago. That gig didn't last very long. Zoe Cruz, former co-president of Morgan Stanley, tried to start a hedge fund, but was forced to shutter it last year.

Will Vikram Pandit and Bob Diamond fare any better in their quest for a new beginning on Wall Street?

As reported by the New York Post, both are bent on starting new companies. Pandit apparently wants to start a private equity fund, while Diamond may be considering a hedge fund. It may be a better time to form an alternative investment start-up. Hedge funds start ups, for example, were hot last year, hitting their highest numbers since 2007. But their status as former top executives will not automatically confer success.

Both will have some explaining to do -- Pandit for his odd forced exit and Diamond for the circumstances that led to his resignation. All in all, limited partners are a bit pickier these days. They will not quickly commit capital to a start-up even one run by a big name, especially one that was dogged by compliance issues.

Still, you don't get to the top without being able to move mountains, so perhaps they will find a way to succeed. It'll be interesting to watch.

For more:
- here's the article

Read more about: Vikram Pandit, Bob Diamond
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By Jim Kim

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4. Will more shareholders oppose Dell buyout?

The government's zeal to prosecute Standard & Poor's, and possibly other credit rating companies, has generated lots of discussion rehashing the sins of investment bank leading up to the financial crisis.

A professor from the Wharton School of Business makes an interesting point the real breakthrough in this prosecution: The government is actually demanding that the company plead guilty to its crimes and admit that it did wrong.

This is a rare move. Previously, the SEC's routine was to allow companies to neither admit nor deny guilt when they settle charges. That has galled many, including Judge Jed Rakoff, who famously questioned the legitimacy of the practice when he reviewed the Citigroup settlement and the Bank of America Merrill Lynch settlement. The SEC is currently contesting Judge Rakoff's rejection of its settlement with Citigroup, and the arguments are quite interesting.

In the face of heavy criticism, the SEC has embraced a new policy, one that no longer allows companies to neither admit nor deny guilt.

From a laymen's point of view, common sense holds that banks wouldn't settle if they weren't willing to admit they had done something wrong. So why not make them own up to it?

The answer has always been that companies are loath to admit crimes in part because they fear the after-effects of such an admission in terms of private law suits. If they were to admit guilt, the suit would land fast and furious. For now anyway, S&P would rather contest the charges than become a test case in the SEC's new policy.

For more:
- here's the item in DealBook

Read more about: Standard & Poor's, Enforcement Action
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By Jim Kim

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5. Opposition to Dell deal intensifies

A well-known asset management firm has decided to formally oppose Dell's proposed $24.4 billion leveraged buyout, which values the company at about eight times earnings. Southeastern Asset Management has a range of options, including a lawsuit and perhaps a proxy fight.

The real issue here is the extent to which other Dell shareholders will rally to the cause. One could argue that the deal will prove unsatisfying to many long-term shareholders, some of whom, like Southeastern Asset Management, no doubt bought the stock at elevated prices. They'll take a bath on their holdings, even though the buyout price offers a tiny bit of a premium, which has sparked criticism. By some estimates, Southeastern Asset Management would take an $800 million capital loss.

That the biggest outside shareholder of Dell aims to agitate against the deal just might prompt others to at least consider the possibility that they are getting the short end of the stick.

It will be interesting to see if the asset manager files a lawsuit, in pursuit of an alternative transaction, such as a leveraged recap. If it does, the suit will likely revive some of the classic objections that private equity firms have long dealt with. In this case, it might highlight the dual role of founder Michael Dell, who's a big shareholders and want to maximize value and the proposed buyout principal, who wants the best deal he can get.

For more:
- here's an overview from Forbes

Read more about: shareholders, lbo
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By Jim Kim

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