In case you missed any of these catchy tunes last week, it's not too late to boogie down. Grab your headphones, CD player, iPod, speakers, guitar, cowbell, whatever you need -- it's time for the M&A Mix Tape.
"Glamorous" by Fergie, featuring Ludacris and Goldman Sachs
What's more glamorous than a $20 billion buyout fund? Yeah, you read that right, that's "billion" with a "b." After playing patty-cake with the measly $8.5 billion fund it raised in 2005, Goldman Sachs
At Goldman's annual meeting last week, CEO Lloyd Blankfein said the firm was targeting $19 billion to $20 billion and possibly even more for the fund. A fund that size would keep Goldman at the leading edge of the private equity industry -- side by side with its competitor Blackstone, which is targeting a similarly sized fund.
The new fund has a number of implications. First, it means we haven't yet seen a peak in investor appetite for a piece of the private equity pie. While there's still no guarantee that the hoped-for returns from the buyout spate over the last two years will actually materialize, investors seem to be taken by the waves the buyout funds have been making. While we know that Goldman and Blackstone are trying to put together these monster funds, there's likely similar money out there willing to jump at new funds from the likes of KKR, TPG, Silver Lake, Bain, etc.
Thus, as long as big money continues to flow into these funds, we should continue to see headline-grabbing buyouts. The big money for the funds only comes once they've actually invested their money. So we can be pretty sure that once the money is in their hands, wheels will start spinning to get that money invested.
Finally, this is also a reminder that investors don't need to wait for Blackstone to finish with its IPO to invest in one of the top buyout firms on Wall Street. Goldman has been a significant player in the buyout world on multiple fronts. Not only does the firm have its own private equity funds, but it is also a major advisor to other buyout funds as well as takeover targets, and it is a principal investor in its own private equity funds -- $2.5 billion of its last PE fund was Goldman Sachs money.
"Galvanize" by the Chemical Brothers, featuring Chrysler
Elsewhere in private equity land, DaimlerChrysler's
So what does this mean to you, the Foolish reader? If you're a DaimlerChrysler shareholder, the potential to monetize the Chrysler anchor that's been a drag on the overall company might be nice. The fact that there are so many potential players at the table is encouraging. However, looking at the excitement that's been reflected by the stock price recently, I have to wonder just what kind of price investors are expecting.
That's not to say that the parties involved aren't going to make legitimate bids for the unit. Cerberus, for one, has been extremely active in the auto industry, and just recently announced that it's acquiring some assets from Tower Automotive to go along with its outstanding bid for Delphi and its majority interest in GM's GMAC financing arm. I don't doubt the others are serious -- but I do imagine that what they're serious about is trying to buy a distressed asset at a rock-bottom price.
As much as Daimler would probably like to turn around the Chrysler unit itself, my guess is that we're probably looking at a pretty motivated seller. And why not? The Daimler part of the business has been doing its part -- jettisoning Chrysler and being able to focus on what's working will likely bring good future results for shareholders.
Given that Daimler paid a hefty $36 billion for Chrysler back in '98, it'll sure be interesting to see just how much it's going to cost to finally wash its hands of the deal. In my mind, it's also just one more example of how difficult it is to get one of these massive and very high-profile mergers to actually work.
"Enter Sandman" by Metallica and Sam Zell
The Grave Dancer is at it again. After the Tribune
In a great quote from The Wall Street Journal, Zell said: "I've spent my life listening to people explain to me, 'Sam, you don't understand.' I've noticed in the last few years that the number of people who say that to me has decreased. But nonetheless, that has been a constant theme my entire business career. I've always gone left when everybody else has gone right. I bought an awful lot of real estate when people said, 'Sam, you don't understand. It's never going to come back.'" And now he's just crazy enough to go head-on into the ailing newspaper industry.
Zell's bid beat out that of Ron Burkle and Eli Broad, who were probably the front-runners until Zell's last-minute bid. Zell's bid values the company at $8.2 billion and would include $315 million of financing from him. The structure of the buyout includes the use of an employee stock ownership plan (ESOP) and a healthy amount of debt. Tribune's board still has the option to entertain a higher bid, though there is a $25 million break-up fee in place.
Liner notes
There were some harsh words flying around last week about handheld device maker Palm
In some other auto industry news, Goodyear, in an effort to put more focus on its core tire business, agreed to sell its engineered products division to PE investor Carlyle. EPD, as the new company is at least temporarily known, makes products such as conveyor belts and hoses for industrial and defense companies.
And to finish with a deal with some, um, punch, the iconic Ultimate Fighting Championship has reportedly agreed to buy its overseas rival Pride. The price of the deal was not disclosed, but word on the street is that it was in the range of $70 million.
That's it for this album, but be sure to keep tuned in to The Motley Fool for more tunes from the M&A front.
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Fool contributor Matt Koppenheffer is currently ranked 4,864 out of 25,370 Fools participating in The Motley Fool's CAPS service, and he encourages everyone to get heard. He owns shares of Goldman Sachs, but does not own shares of any of the other companies mentioned. The Fool's disclosure policy was formerly a UFC competitor. It went by the name Tank Abbott.
