Tuesday, April 18, 2006

M & A sideshow

  • Goldman Sachs intends to stop putting its own money to fund hostile takeovers. This follows negative reaction to some of the deals it got involved in, in UK. The merger boom in Europe is near its end, with merger news forming a significant backdrop to daily market movements. I had posted earlier about the increasingly hostile reaction to some of the players involved. Will Goldman end up looking like Citi in Japan ? A few bows won't hurt and can work wonders on arrogance! Goldman played similarly uncomfortable roles on multiple sides of the NYSE/Arca deal, as I noted. Regulators in the US have largely ignored such involvement so far, but I just can't believe that these deals could be free of conflicts of interests.
  • KKR goes to India! Flextronics's largely India-based software unit is being bought by KKR for $900 million, the first of its kind, software-LBO deal, in India. Will not be the last! I had noted increasing takeover activity in India here. Patni Systems (PTI) looks like a sitting duck now, given all the recent deals. And how long will Flextronics stay public - it now makes for a good private-equity takeout target, with the non-core business sold off.
  • Indian interest rates remain unchanged, but reserve requirements have been tightened. This should cool the real-estate market, and the stock market too. Easy credit was partially responsible for the double-bubble.

3 Comments:

At 6:18 PM, Blogger Shayne said...

You have a point with PTI - $4.50/share in cash, the Patni brothers are no spring chickens, the company has no 2nd.-tier of mgmt worth the name, and Gen Atlantic still has a hefty slug that it has to unload - a pvt sale is the easy way out. Hopefully, within 18 months.

 
At 12:04 AM, Blogger Guru said...

With a PEG below 1, this stock is selling cheap mainly because of lack of coverage of the recently listed ADR and (likely) because of the listing being seen as an exit by some anxious dumpers. PTI has a niche, high-margin corner for itself in the outsourcing arena. Someone like Keane or BearingPoint may also like it. I didn't understand the 18 months comment - why that length ?

 
At 4:00 AM, Blogger Shayne said...

PTI has pretty good coverage as a matter of fact - in India, by India-based analysts who get to talk to PTI's operational mgmt on the ground - not much in terms of mgmt. Stateside, although Naren Patni still lives in Boston. Even the ADR holders (including us) call the Mumbai analysts when they need hard info. In fact, it was Merrill's Mumbai-based analyst that triggered the pullback from $25. The US-based analysts still don't know the company well or long enough to comment with any authority. The India-based analysts have an edge because PTI has been listed in Mumbai for almost 2 years before it came over here for the ADR.

18 months? Gen Atlantic needs a liquidity event.

 

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