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The keynote panel at The Deal's M&A Outlook 2008 conference featured three of Wall Street's top dealmakers: Bruce Wasserstein, chairman and CEO of Lazard and chairman of The Deal LLC; Leon Black, founder of Apollo Management; and Martin Lipton, a partner at Wachtell, Lipton, Rosen & Katz, who sat down with The Deal's editor in chief Robert Teitelman to discuss the state of M&A.
What is the M&A outlook? Lazard's Wasserstein framed the discussion with a deeper look at just what is meant by "M&A." "M&A is not a single business,; it's a series of businesses," said Wasserstein. "The world has changed; what's going on in businesses in India or Russia is very different from what's happening in New Jersey." "The M&A business will be OK, but it will be different. It has morphed into something new," he continued. "There will be more recaps, more investments, more cross-border. Some industries will boom; some will see split ups, asset sales." The fragmentation of the business world creates dangers, but just as many opportunities. "Everyone has a horror story to tell," said Wasserstein. "But with most of these discussions, it has to be taken into consideration that individual facts don't make a pattern. ... If things are so bad, why is the Dow where it's at? For people in the industry, the lesson is to keep your eyes open and look for change. "Changes within industry create an increasing velocity for deals," he continued, citing the utility industry, once thought of as a stodgy predictable industry that is now at the forefront of major technological changes as companies enter solar, wind and other types of alternative energy. Corporate governance and activist shareholders The panelists also discussed the issue of corporate governance in the age of Sarbanes-Oxley. "On a public policy basis when you go to boards, my personal concern is that so much is about procedure, most of the time is going through procedures and spent checking boxes rather than discussing strategy," said Wasserstein. "It's not about making sure we've checked the boxes. As a CEO, I think like with any new innovation we've injected a level of formalism into things." Still, Wasserstein said that things should begin to change as companies look at their long-term prospects. "Some of these companies have real strategic necessities," he continued. "Most of these companies have basements full of studies on everything they haven't acted on; there's a huge backlog of demand on things strategics haven't done." "It all comes back to long-term success of the enterprise," Wasserstein said. While management considers the long-term direction of their companies, they're also dealing with ever-increasing pressure from activist shareholders. Lipton said that the shareholder rights movement is one of the major drivers in creating pressure on companies to do transactions. "Pressure for changing the company, doing a deal, has not abated in the current market," he said."That kind of activity continues without regard to the financing capabilities of private equity firms," but it is perfect for the well-capitalized strategic buyers as "times like this create opportunities for all kinds of transactions." — George White and Carolyn Murphy Categories Deal Video
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