Investment Banks, Hedge Funds, and Private Equity

2018·21.91 MB·English

by  David P. Stowell

Cover image Page: i
Title page Page: ii
Table of Contents Page: iii
Copyright Page: iv
Dedication Page: v
Preface Page: xi
Acknowledgments Page: xvii
Section I. Investment Banking Page: xvii
Chapter 1. Overview of Investment Banking Page: 3
Postcrisis Global Investment Banking Firms Page: 4
Other Investment Banking Firms Page: 7
Investment Banking Businesses Page: 7
Investment Banking Division Page: 10
Trading Division Page: 16
Asset Management Division Page: 19
Chapter 2. Regulation of the Securities Industry Page: 21
Introduction Page: 22
US Regulations Page: 22
Recent Developments in Securities Regulations Page: 33
Securities Regulations in Other Countries Page: 41
Chapter 3. Financings Page: 47
Capital Markets Financings Page: 47
Financing Considerations Page: 52
Financing Alternatives Page: 53
Fees to Bankers Page: 66
Distribution Alternatives Page: 67
Shelf Registration Statements Page: 68
“Green Shoe” Overallotment Option Page: 68
International Financings Page: 70
Chapter 4. Mergers and Acquisitions Page: 71
The Core of Mergers and Acquisitions Page: 73
Creating Value Page: 74
Strategic Rationale Page: 75
Synergies and Control Premium Page: 76
Credit Ratings and Acquisition Currency Page: 76
Regulatory Considerations Page: 78
Social and Constituent Considerations Page: 78
Role of Investment Bankers Page: 79
Other Merger and Acquisition Participants Page: 79
Fairness Opinion Page: 79
Legal Issues Faced by Boards Page: 80
Acquisitions Page: 81
Due Diligence and Documentation Page: 82
Breakup Fee Page: 83
Alternative Sale Processes Page: 84
Cross-Border Transactions Page: 86
Tax-Free Reorganizations Page: 87
Corporate Restructurings Page: 88
Takeover Defenses Page: 90
Risk Arbitrage Page: 90
Valuation Page: 91
M&A Litigation Topics Page: 110
Chapter 5. Trading Page: 117
Sales and Trading Page: 118
Equity Trading Page: 123
Fixed Income, Currencies, and Commodities Trading Page: 129
Market-Making Examples Page: 136
Proprietary Trading Page: 139
New Nonbank Financial Institutions Page: 139
International Trading Page: 140
Risk Monitoring and Control Page: 141
Value at Risk Page: 141
Chapter 6. Asset Management, Wealth Management, and Research Page: 145
Asset Management Page: 145
Wealth Management Page: 148
Research Page: 150
Chapter 7. Credit Rating Agencies, Exchanges, and Clearing and Settlement Page: 157
Credit Rating Agencies Page: 157
Exchanges Page: 162
Dark Pools Page: 168
Over-the-Counter Market Page: 169
Clearing and Settlement Page: 171
Chapter 8. International Banking Page: 175
Euromarkets Page: 175
Japan’s Financial Market Page: 177
China’s Financial Market Page: 179
Emerging Financial Markets Page: 184
Global Initial Public Offering Market Page: 189
American Depository Receipt Page: 194
International Financial Reporting Standards Page: 195
International Investors Page: 196
Chapter 9. Convertible Securities and Wall Street Innovation Page: 201
Convertible Securities Page: 201
Wall Street Innovation Page: 209
Nikkei Put Warrants Page: 210
Accelerated Share Repurchase Program Page: 216
Chapter 10. Investment Banking Careers, Opportunities, and Issues Page: 221
Investment Banking Page: 222
Trading and Sales Page: 225
Private Wealth Management Page: 227
Asset Management Page: 228
Research Page: 228
Principal and Credit Investments Page: 229
Other Investment Banking Functions Page: 229
Investment Banking Opportunities and Issues Page: 230
Section II. Hedge Funds and Private Equity Page: 238
Chapter 11. Overview of Hedge Funds Page: 241
Leverage Page: 243
Growth Page: 245
Composition of Investors Page: 249
Industry Concentration Page: 250
Performance Page: 251
2008 Slowdown Page: 255
Market Liquidity and Efficiency Page: 258
Financial Innovation Page: 258
Illiquid Investments Page: 259
Lock-Ups, Gates, and Side Pockets Page: 259
Comparison With Private Equity Funds and Mutual Funds Page: 260
High Water Marks and Hurdle Rates Page: 261
Public Offerings Page: 261
Fund of Funds Page: 263
Chapter 12. Hedge Fund Investment Strategies Page: 265
Equity-Based Strategies Page: 267
Macro Strategies Page: 270
Arbitrage Strategies Page: 270
Event-Driven Strategies Page: 276
Summary Page: 285
Chapter 13. Shareholder Activism and Impact on Corporations Page: 291
Shareholder-Centric Versus Director-Centric Corporate Governance Page: 292
Activist Hedge Fund Performance Page: 295
Activist Hedge Fund Accumulation Strategies Page: 298
CSX Versus TCI Page: 299
Changing Rules That Favor Activists Page: 302
Daniel Loeb and 13D Letters Page: 303
Bill Ackman Versus McDonald’s, Wendy’s, Ceridian, Target, MBIA, and Valeant Page: 305
Summary Page: 307
Chapter 14. Risk, Regulation, and Organizational Structure Page: 309
Investor Risks Page: 309
Systemic Risk Page: 313
Regulation Page: 316
Organizational Structure Page: 320
Chapter 15. Hedge Fund Issues and Performance Page: 323
Hedge Fund Performance Page: 323
Fund of Funds Page: 328
Absolute Return Page: 329
Transparency Page: 329
Fees Page: 330
High-Water Mark Page: 331
Searching for Returns Page: 332
Merging of Functions Page: 333
International Hedge Fund Initiatives Page: 333
Benefits Revisited Page: 334
Future Developments Page: 335
Forecasts for Hedge Fund Industry Page: 336
Chapter 16. Overview of Private Equity Page: 339
Characteristics of a Private Equity Transaction Page: 341
Target Companies for Private Equity Transactions Page: 341
Private Equity Transaction Participants Page: 343
Structure of a Private Equity Fund Page: 344
Capitalization of a Private Equity Transaction Page: 345
Assets Under Management Page: 346
History Page: 348
Financing Bridges Page: 349
Covenant-Lite Loans and Payments-in-Kind Toggles Page: 350
Club Transactions and Stub Equity Page: 351
Teaming Up With Management Page: 352
Private Investment in Public Equities Page: 357
Leveraged Recapitalizations Page: 357
Secondary Markets for Private Equity Page: 358
Fund of Funds Page: 359
Private Equity Goes Public Page: 360
Private Equity Exhibits Page: 361
Chapter 17. LBO Financial Model Page: 369
Determining Cash Flow Available for Debt Service and Debt Sources Page: 371
Determining Financial Sponsor Internal Rate of Return Page: 373
Determining Purchase Price and Sale Price Page: 373
Leveraged Buyout Analysis Example Page: 374
Leveraged Buyout Analysis Postcredit Crisis Page: 390
Chapter 18. Private Equity Impact on Corporations Page: 393
Private Equity–Owned Companies: Management Practices and Productivity Page: 394
Private Equity–Owned Company Failures Page: 395
Private Equity Purchase Commitment Failures Page: 396
Private Equity Portfolio Companies Purchased During 2006–07 Page: 397
Private Equity Value Proposition for Corporations Page: 413
Corporate Rationale for Completing Private Equity Transactions Page: 414
Private Equity as an Alternative Model of Corporate Governance Page: 415
Private Equity Influence on Companies Page: 417
Chapter 19. Organization, Compensation, Regulation, and Limited Partners Page: 419
Organizational Structure Page: 419
Compensation Page: 422
Regulations Page: 426
Limited Partners Page: 428
Chapter 20. Private Equity Issues and Opportunities Page: 433
Private Investments in Public Equities Page: 434
Equity Buyouts Page: 434
Distressed Assets Page: 435
M&A Advisory Page: 435
Capital Markets Activity Page: 437
Hedge Fund and Real Estate Investments Page: 437
Boom and Bust Cycles Page: 438
Annex Funds Page: 438
Asia–Pacific Private Equity Page: 439
European Private Equity Page: 440
Private Equity Initial Public Offerings Page: 441
Comparison of Private Equity Firms Page: 442
Profile of the Carlyle Group Page: 447
Future Issues and Opportunities Page: 448
The New Landscape Page: 454
Section III. Case Studies Page: 454
Investment Banking in 2008 (A): Rise and Fall of the Bear Page: 457
Investment Banking in 2008 (B): A Brave New World Page: 481
Freeport-McMoRan: Financing an Acquisition Page: 497
The Best Deal Gillette Could Get? Procter & Gamble’s Acquisition of Gillette Page: 515
A Tale of Two Hedge Funds: Magnetar and Peloton Page: 533
Kmart, Sears, and ESL: How a Hedge Fund Became One of the World’s Largest Retailers Page: 551
McDonald’s, Wendy’s, and Hedge Funds: Hamburger Hedging? Hedge Fund Activism and Impact on Corporate Governance Page: 571
Porsche, Volkswagen, and CSX: Cars, Trains, and Derivatives Page: 595
The Toys “R” Us LBO Page: 605
Cerberus and the US Auto Industry Page: 627
H. J. Heinz M&A Page: 643
Quintiles IPO Page: 669
Index Page: 691