Student Activism Can Change the World
May 30th, 2008 | Posted by innovForty years ago, in May, 1968, protests, demonstrations, and marches—not all of them peaceful—put students at the University of California, Berkeley, at the forefront of the antiwar, free speech, and civil rights movements. Today, Cal Berkeley is again in the vanguard as a new generation of student activists emerges to help address some of the most pressing social issues of our era: energy efficiency, Third World poverty and disease, and sustainable housing, among others. The quiet activism pursued by today’s activists may not generate as many headlines as the actions of their well-known predecessors, but they may ultimately have greater impact as they mobilize the edge to transform the core.
A key catalyst for this new generation of student activism is Tom Kalil, special assistant to the chancellor for science and technology at UC Berkeley. Kalil, formerly an official in President Bill Clinton’s White House, has the specific charter of helping foster initiatives on the edge of multiple academic disciplines, including information technology, nanotechnology, and biology.
Kalil has two tightly linked aspirations. First, to transform academic institutions by mobilizing engaged and empowered students. Second, to transform society by taking on some of the most challenging social problems and connecting resources across a variety of edges to come up with innovative and high-impact solutions. From Kalil’s perspective, tackling difficult social problems like environmental pollution, inadequate health care, and sustainable development will be much more successful if the energy and creativity of engaged students can be unleashed.
To achieve these aspirations, Kalil has fostered three related initiatives. First, in 2006, he helped launch the Big Ideas contest at Berkeley in collaboration with the student government and various research centers across Berkeley’s campus. With seed funding provided by Pierre Omidyar’s Network Enzyme Program and support from companies such as AT&T (T), the contest has become an annual event, offering students $170,000 in prizes to come up with creative ideas for tackling “grand challenges.”
Second, Kalil helped organize the Big Ideas @ Berkeley Marketplace, an online forum, to increase the visibility of promising ideas and connect specific student projects with interested alumni and potential donors to make tax-deductible donations and in-kind contributions.
Third, he has gathered resources to help mentor, coach, and inspire student leaders. Kalil always asks students what they would do if they were no longer limited by their resources, which encourages them to think on a larger scale. He also works with a large network of individuals and institutions, both on and off campus, to help with strategic planning, fundraising, and recruiting additional partners.
These three initiatives create an effective funnel to move ideas. The Big Ideas contests bring to the surface creative ideas and engaged student leaders. The online marketplace and Kalil’s support network then connect these ideas and leaders with the resources and help required to amplify them.
These attempts to mobilize and support the edge are beginning to yield significant results. Initially, the impact has been greatest within the academic institution. A number of student-led initiatives have been mobilized and have focused resources across traditional disciplinary and institutional boundaries on the campus.
One example—backed by Kalil—is the Berkeley Energy & Resources Collaborative (BERC), a student-led initiative designed to connect academic resources focused on cleantech. This 700-member collaborative brings together students and professors from such diverse disciplines as law, chemistry, engineering, and business, and builds bridges into the larger San Francisco Bay Area cleantech entrepreneurial community.
In addition to organizing an annual Energy Symposium, the student leaders of this collaborative have also persuaded Berkeley faculty to launch a new Center for Energy & Environmental Innovation (CEEI).
The collaborative and CEEI are supporting student-led initiatives to design and offer new interdisciplinary courses at Berkeley addressing such topics as “energy and infrastructure project financing” and “energy, sustainability, and business innovation.” These initiatives are particularly exciting because UC Berkeley and the Lawrence Berkeley National Lab have joined forces to become the “Bell Labs” of clean energy research, and have started major new research programs such as the $500 million Energy Biosciences Institute, and other efforts in photovoltaics and zero-energy-use buildings. By attracting students interested in becoming cleantech entrepreneurs, BERC will help accelerate the transition of energy technologies from the lab to the marketplace.
The Big Ideas contests have also promoted the adoption of a new form of collaboration invented by students, known as “idea labs.” These idea labs, organized by the students themselves, bring together graduate students with shared interests in such areas as photovoltaics, green-collar jobs, and energy efficiency. For example, the photovoltaics idea lab is accelerating the pace of academic research by bringing together 30 graduate student researchers in nine different labs across campus to share early results and explore implications for future research.
The Berkeley campus sets the stage for broader social impact. One example of early impact is an initiative led by Berkeley engineering students to develop a water filter to help residents of slums in Mumbai battle the spread of diarrheal diseases. Collaborating with women’s groups in Mumbai, Berkeley students have designed an innovative “point of use” system for water treatment that costs under $10 and can be made with local materials. The Berkeley students have already begun to engage Indian MBA students to develop a plan for marketing, distribution, and scale-up of production.
The students quickly realized technology innovation was only a small part of the need. Over time, the Berkeley students have helped recruit volunteers from local Mumbai colleges to support water-quality testing initiatives and the design and delivery of educational programs. These educational programs are delivered through street plays and local women’s self-help groups in the most hard-hit areas, to build awareness of the link between contaminated water and dysentery.
The students have also had to negotiate with authorities such as slum lords, government representatives, and local leaders and organizations. The need to face these very practical issues regarding widespread adoption and use of the technology has broadened student awareness of the range of disciplines and expertise required to achieve real results. It has also taught them crucial lessons about how to have influence without authority, in part by mobilizing the edges rather than directly confronting core power structures.
The intense experiences of these students as they encountered these challenges on site in Mumbai not only strengthened their commitment and engagement, but helped catalyze broader support for their initiatives. Impressed by the experiences of these and other student leaders interested in safe drinking water, the newly established Blum Center for Developing Economies has agreed to provide more than $600,000 for the Mumbai project and other initiatives on safe drinking water—using technologies such as ultraviolet light to kill pathogens and low-cost electrochemistry to remove arsenic from drinking water in Bangladesh.
More than 100 other student-led innovation initiatives in such areas as microclinics for disease management, commercialization of nanotechnology research, telemicroscopy for disease diagnosis, efficient cookstove design for refugee camps in Darfur, and new financing mechanisms for investment in energy efficiency are well under way and illustrate the broad scope of innovation.
What does all of this mean for business executives? After all, these are students working on difficult social problems. What lessons can business executives take from these edge innovation programs?
To transform the core, start at the edge. For many executives, when core business activities require fundamental change, the strong instinct is to embark on massive organizational changes. These organizational transformations rarely succeed. An alternative path is to start on the edge and move back into the core over time. By engaging the edge first, it is often possible to find innovative leaders with energy and passion to try new approaches. Inertial forces are weaker on the edge because there are fewer entrenched interests.
Demographic edges are a deep source of energy and creativity. New generations of workers are coming into companies wanting to make a difference. Innovation and change critically depend on tapping into this energy and creativity. Senior executives need to find more effective mechanisms to connect with the younger generation within their workforce and inspire them with the opportunities for achieving change.
Innovation is not just about ideas, it is about impact. Too often, discussions on innovation focus narrowly on idea-generation. From our experience, idea-generation is rarely the bottleneck. Survey any large company and you’ll find a multitude of big ideas are percolating at various levels of the organization. The key is how to make these ideas more visible, how to mobilize support for the most promising ideas, and how to scale the development and deployment of the ideas.
Achieving results requires making connections across multiple edges. Enormous resources are available to drive innovation, but they are fragmented and isolated within various disciplinary and institutional silos. A common theme of the innovation initiatives led by Berkeley students has been the need to inventory relevant resources and find creative ways to connect these resources. The challenge has been to move well beyond the academic institution itself and find creative ways to connect with entrepreneurial talent in companies and nongovernmental organizations (NGOs) of various types around the world. By bridging the edges that define our daily lives, we may indeed change the world.
What The $600 Stimulus Package Gets You
May 29th, 2008 | Posted by stockThe stimulus bill was signed February 13, 2008, 106 days ago, when gas was $2.960 a gallon (EIA, regular). The intent was to jump start the economy with additional spending. Today, gas is averaging $3.937 per gallon. The increased cost of food and fuel in those 106 days has significantly reduced the impact of the program. Yesterday (Wednesday) Dow Chemical announced a 20% increase in product, effective this Sunday. They are not alone in passing along increased costs, and they are not alone in having their margins suffer.
Back in February several argued that the rebates didn’t address the problem. That is was like giving an addict another fix. Now some are ‘discussing’ Stimulus II, which may be rebates, incentives, or even controls, mostly because the economy needs it. What the addict needs is treatment.
As for what the $600 can get you now, it covers the additional cost (in those 106 days) of 614 gallons. It could also pay for the gas for a one-way trip from NY to LA, if you get at least 18.4 MPG and the price doesn’t change.
Add your own – winner gets a year’s subscription to the S&P Stock Guide
I decide the winner; all decisions are arbitrary and final
Where is the stock market going? Tough question of course.
After a difficult October-through-March, stocks rallied in April. In May – with one day left – stocks have held on to those gains.
Two views of the state of the stock market caught my eye today. They mostly contradict each other:
Jay Collins of DT Trading in Chicago says: “I still am sticking with the line that we are in a longer term bear market, and in the very early stages of it, as the easy credit period will take years to unwind, not months, and am currently in one of the periodic bounces that will happen within the bear move.”
Alexander Young of Standard & Poor’s (which, like BusinessWeek, is owned by the McGraw-Hill Companies) notes “the S&P 500 remains well off its March 10 lows of 1270.” Young doesn’t dismiss the trouble ahead, especially worries over consumer spending in the second half of the year, but he says earnings outside the financial sector are healthy and overseas revenues remain strong. Therefore, he predicts, the “March 10 lows will hold, and the current uptrend will continue, [though] we think it will remain choppy until more evidence of economic and EPS stabilization surfaces.”
In other words, Collins is skeptical of the recent rebound, and seems to believe it was a sucker’s rally. Young, however, is calling the bottom, doubting stocks can fall further than their March lows.
There’s a third possibility, however, which would make both Collins and Young at least partly right. Stocks could limp along in a narrow range here for months. With inflation looming, the financial crisis persisting but the economy limping along slowly, stocks could stay above their March 10 lows but not get anywhere near their October heights. The key question: How long are we going to end up waiting for a catalyst that really pushes this market in one direction or another?
May 29th, 2008 | Posted by stockWhere is the stock market going? Tough question of course.
After a difficult October-through-March, stocks rallied in April. In May – with one day left – stocks have held on to those gains.
Two views of the state of the stock market caught my eye today. They mostly contradict each other:
Jay Collins of DT Trading in Chicago says: “I still am sticking with the line that we are in a longer term bear market, and in the very early stages of it, as the easy credit period will take years to unwind, not months, and am currently in one of the periodic bounces that will happen within the bear move.”
Alexander Young of Standard & Poor’s (which, like BusinessWeek, is owned by the McGraw-Hill Companies) notes “the S&P 500 remains well off its March 10 lows of 1270.” Young doesn’t dismiss the trouble ahead, especially worries over consumer spending in the second half of the year, but he says earnings outside the financial sector are healthy and overseas revenues remain strong. Therefore, he predicts, the “March 10 lows will hold, and the current uptrend will continue, [though] we think it will remain choppy until more evidence of economic and EPS stabilization surfaces.”
In other words, Collins is skeptical of the recent rebound, and seems to believe it was a sucker’s rally. Young, however, is calling the bottom, doubting stocks can fall further than their March lows.
There’s a third possibility, however, which would make both Collins and Young at least partly right. Stocks could limp along in a narrow range here for months. With inflation looming, the financial crisis persisting but the economy limping along slowly, stocks could stay above their March 10 lows but not get anywhere near their October heights. The key question: How long are we going to end up waiting for a catalyst that really pushes this market in one direction or another?
How to Stand Out? Try Authenticity
May 28th, 2008 | Posted by innovExecutives ask one question on an almost weekly basis: “How can I differentiate my company in the marketplace?” My reply to every president, chief executive officer, or vice-president of marketing is always the same: “Why do you want to be different?” We are swimming in an overabundance of products and services. “Different” is no longer a differentiator. What is? Creating an authentic relationship with your customers.
Authenticity in business is a distinctly 21st century concept made relevant by a confluence of factors. The public’s trust of businesses and institutions is in steep decline. Consumers’ media savvy has pulled back the wizard’s curtain on insincere marketing ploys that are only surface-sexy. Reality TV and online personae and avatars have redefined our sense of reality, bringing the question of what is real into mainstream dialogue. And advances in manufacturing and technology have made available a proliferation of product and service offerings from around the globe, overwhelming consumers with options. The Internet has also empowered those consumers to create an unprecedented peer network that critiques companies and allows users to find exactly the product they want.
Consumers seek meaning and a brand they can trust. They are busy at work on Web 2.0 platforms creating ways to cut through the noise in search of products and services that resonate with integrity and transparency; in a word, authenticity. That quest for authenticity is a call to action for any company intending to be relevant in the 21st century.
As the marketplace has shifted, so too must design. A single, beautifully designed product is nothing more than a beautiful object without the focused intent of a company that has taken the time to understand three things: the deep-seated desires of its customers, its own DNA, and the sweet spot where the two overlap.
What is the right approach for innovation chiefs to take? First, take a step back before introducing just another product. Decide who is your true tribe and what makes the most sense for those customers and your company at a particular time. Push the pause button, dig deeper, and reconsider what it would take to make your customers truly love who you are as a brand.
Back in 2001, Umpqua, a regional bank in Oregon founded to provide loggers and farmers a banking alternative, approached Ziba, my design company, to help redefine the banking experience. Instead of getting to work designing right away, we had to discover what banking meant to Umpqua’s customers. What were their attitudes about banking in general? How did community banks like Umpqua, with its 65 branches, fit into that picture? How did large commercial banks fit into that same picture? With the convenience of online banking and ATMs, what would motivate customers to go into a bank in the first place?
Next, Umpqua had to understand its own culture. What did Umpqua believe in? What was it good at? What did it stand for? What could it stand for?
After researching these questions thoroughly, Umpqua found its customers were craving intimacy. They were tired of the impersonal service they received from regular banks and suspicious of financial institutions in general. While other banks were competing with a convenience strategy centered around the Internet and ATMs, Umpqua identified an opportunity to provide customers with a “slow banking” experience that was both inspirational and encouraging. This translated into comfort and personal service—a hotel/retail metaphor with a modern-craftsman aesthetic.
The result was a flagship store in Portland’s Pearl District that delivered an unprecedented banking experience tailored to the specific needs of Umpqua’s customers and the unique expression of Umpqua’s DNA. It also happened to make Umpqua a lot of money. The first week the store was open in April, 2003, it generated $1 million in deposits.
Nine months into the first year, the new store had a record $50 million in deposits. Since then, Umpqua has rolled out stores based on this template in other cities in Oregon, and created a smaller version for smaller neighborhoods.
Customers will forgive brands with which they feel an authentic bond. Starbucks (SBUX) is the story du jour of a company whose strategy went from grassroots to gimmicky somewhere between the original handful of stores in 1982 and the more than 15,000 in 43 countries today. By its own admission, the company lost sight of who it was and what their customers wanted.
However, CEO ‘s process of recovery from this potential brand disaster is what makes this story so compelling. Schultz chose the path of integrity: He publicly admitted Starbucks’ role in its own decline and invited others to participate in the company’s recovery. Transparency is a requirement for companies striving for authenticity. And, from his public admissions all the way to the launch of the social networking site mystarbucksidea.com—which invites customers to submit store improvement ideas—Schultz has embraced this concept in spades.
Now, instead of the media focusing on the dilution of the brand, the press and the blogosphere report on how Starbucks rediscovered its DNA. While the future remains to be seen, my bet is on it recovering gracefully.
The women’s clothing store Anthropologie is another modern, authentic success story—with a twist. Anthropologie’s retail environment is an artful rendition of a French market that creates a mood of discovery and whimsy. While the merchandise is a unique mix of found objects from around the globe, the store is as close to a genuine French flea market as is the French bread sold at Safeway (SWY). However, customers have been known to spend over an hour in a store and close to $80 a visit.
Anthropologie has made an art of the authentic relationship. The company’s customer is not a roughly sketched demographic. Nor does it expect to sell to everyone with a one-size-fits-all approach. Anthropologie has dug deep into the subtleties and nuances of the psychographic profile of a specific type of thirtysomething married woman. Anthropologie outlets are an extension of her adventurous, bohemian-chic self that doesn’t get much play when she’s juggling a career and kids. Connections like these accounted for growth of 18% in the fourth quarter of 2007 in an overall disappointing quarter for the women’s apparel sector. Not bad for a company that doesn’t advertise.
This is what it means to forge an authentic relationship with your customers. It’s not the kind of relationship that lasts for only one season or that comes on suddenly because your product is cheaper or more beautiful than another’s. It’s the kind of relationship that emerges because you offer something that caters to an essential desire and makes your customers feel they can be themselves. It’s the kind of relationship that allows for mistakes and creates a bond of loyalty. And having established an authentic bond doesn’t mean you can rest on your laurels. People change, trends change, and you must always be willing to reinvent yourself as both your company and your customers evolve.
If you follow this approach, your true tribe will love and reward you for it, then spread the word on Yelp.com, Epinions, Twitter, Digg, Amazon.com (AMZN), and so on. It is hard work. It takes courage and a willingness to give up trying to be everything to everybody. But in this day and age, your tribe demands it—and your business depends on it.
Private Equity Shaking off the Dust?
May 28th, 2008 | Posted by stockBefore Memorial Day, I wondered if the long weekend would produce any big new M&A deals. Maybe, I thought, the stock market would begin to see the fruit of some potentially positive trends for the mergers-and-acquisitions market. Would the weak dollar, relatively cheap valuations and more corporate buyers offset the credit crisis and the dearth of private equity buyers?
Well, Tuesday arrived and there wasn’t much to say. A few deals but nothing major — hardly, as those dealmaking lawyers might say, dispositive. In the background, InBev continues to sniff around Anheuser-Busch (BUD) and other U.S. brewers. And BW colleague Gene Marcial reports negotiations over Yahoo (YHOO) are intensifying. So the M&A market still has plenty of chances to prove itself — or fall flat on its face.
There was one other, little noticed M&A story that is worth watching though: Private equity players Blackstone Group (BX) and Apollo Management are considering buying Chemtura (CEM), the Wall Street Journal reports. With a market capitalization of $2 billion, it’s a small-to-medium size firm, so it doesn’t present the same credit challenges of big M&A deals. But still, could this be an early sign that private equity is starting to get back in the swing of things?
Shigeru Miyamoto: I’ve Changed as a Designer
May 28th, 2008 | Posted by innovThe New York Times has published a glowing article on the “Walt Disney of the digital generation,” Nintendo’s video game legend Shigeru Miyamoto. The piece details his start in the video game business, his recent work (such as Wii Fit) and how he’s changed.
Although Miyamoto’s name has become one of the few in the video game industry to actually reach the mainstream (he came in first on the Time 100), the creator of Mario and Donkey Kong isn’t one to seek out the spotlight. All he cares about is that Nintendo thrives. “What’s important is that the people that I work with are also recognized and that it’s the Nintendo brand that goes forward and continues to become strong and popular,” he said when asked about comparisons to Walt Disney. He added, “And if people are going to consider the Nintendo brand as being on the same level as the Disney brand, that’s very flattering and makes me happy to hear.”
Miyamoto also reflected on how he’s changed as a designer in recent years. “I would say that over the last five years or so, the types of games I create has changed somewhat,” he said. “Whereas before I could kind of use my own imagination to create these worlds or create these games, I would say that over the last five years I’ve had more of a tendency to take interests or topics in my life and try to draw the entertainment out of that.”
Certainly with games like Pikmin (inspired by his love of gardening), Nintendogs (inspired by his family getting a dog) or Wii Fit (inspired by his own recent weight obsession), his change in game design philosophy is quite evident.
Clearwire merger: IPO buyers lose, insiders win
May 27th, 2008 | Posted by stockMoney-losing wireless broadband provider Clearwire (Symbol: CLWR) announced a convoluted deal to merge with a similar unit of Sprint Nextel (S) this morning. Although the press release (PDF)and numerous media stories made frequent reference to a mythical price of $20 a share, Clearwire shares closed today at $16.22. How can that be?
There’s a simple explanation — well, it’s simple because it’s all so darn complex. Unlike a regular merger, where shareholders get a price for their stock, this is a complex restructuring that doesn’t pay anyone cash but rather gives them shares in a newly formed company with the same name and ticker symbol. Each shareholder gets one share in new stock for each share of old stock.
But the new bigtime investors like Comcast (CMCSA) and Time Warner Cable (TWC) get a different deal. Their investments will be valued in new shares at between $17 and $23, depending on how new Clearwire shares trade in 15 randomly selected trading days out of the 30 trading days just prior to 90 days after the deal closes. If the new shares trade outside the range, the new investors would face an immediate profit or a quick loss. The market’s currently betting that the new shares will trade at the low end minus a discount for the delay in closing the deal of about 9 to 12 months.
You’ll notice that even in the unlikely event that new Clearwire’s shares take off, the ranged merger price will never match the company’s IPO price of $25 from last March. Anyone who bought at the IPO, which we tried to warn you about back then, is a validated loser now.
Of course, it’s a much different equation for the big companies and insiders that provided initial funding for Clearwire. As the company’s IPO prospectus explained last year, those insiders, including Intel (INTC), Motorola (MOT) and Craig McCaw, paid an average of $11.35 for their shares. So the merger agreement provides a guaranteed win for them.
May 23rd, 2008 | Posted by stockCould an American icon be gulped down like an ice-cold lager on a warm summer day? The news Friday is that InBev (INTB), the huge Belgian beer company, may be making a $46 billion bid for Anheuser-Busch (BUD), the U.S.’s largest brewer. FT Alphaville reports the deal is still in the planning stages; InBev hasn’t yet approached Anheuser’s board and its chief executive August Busch IV, but may offer $65 per share, a 23% premium over Thursday’s closing price. (Anheuser wouldn’t comment on the reports.)
I have a few thoughts on the deal: First, this a sign of the changing times in the beer business. Second, don’t get too excited: This might not happen. Third, the fact that a $46 billion deal is being contemplated at all by InBev is a good omen for investors and financial markets.
1. Changing times.
This deal has been rumored for quite a while, however the rumors used to have Anheuser-Busch buying its European rival, not the other way around. Consolidation has been a running trend in the beer industry for years. Companies like SAB Miller and InBev (the combination of Interbrew and AmBev) have used acquisitions to share distribution, get access to fast-growing foreign markets and buy up hot new brands.
Beer sales in the U.S. have been stagnant, and that’s hurt Anheuser-Busch, with its strong domestic focus. Sales of its core brands dropped 1.4% in the first quarter. American consumers are shifting from traditional mass-produced beer toward so-called craft beers or microbrews. Also, they’re drinking less beer and more wine and premium spirits.
Now, InBev is larger than Anheuser and in a position to do what Anheuser couldn’t do. By buying the St. Louis-based brewery, InBev would make break it out of its domestic trap, placing it as part of a broader, global company.
2. It might not happen.
Bud shares were up 7% at midday on Friday, to just above 56. That’s a good bounce, but the stock is far from the 65 bid that InBev is reportedly planning. That’s a sign that investors definitely don’t think this deal is a sure thing.
Yes, the deal makes some sense when it comes to geography and product mix; Anheuser already distributes InBev’s brands, which include Stella Artois and Beck’s, in the U.S.
But FT Alphaville says InBev is expecting reluctance from the CEO, Busch, whose family started the company 148 years ago.
Gimme Credit analyst B. Craig Hutson suspects Bud management might not be willing to cede control of the business. “There are too many impediments to a deal,” he wrote after reports surfaced Friday. The transaction size is very large, making it difficult to accomplish, he says. And the cultures of the two firms are “vastly different.”
3. Investors can celebrate this deal.
The mergers-and-acquisition provided a boost to the stock market through much of 2007, but the credit crunch killed many potential M&A deals. Buyers couldn’t get financing. As I wrote recently, companies with strong balance sheets are finding credit markets loosen up a bit, while private equity firms remain sidelined. That and the recent drop in stock valuations give an advantage for corporate buyers to pick up bargains without a lot of competition. Will they seize the opportunity? InBev obviously is.
A wave of foreign acquirers of U.S. companies might unnerve some Americans, but it would undoubtedly lift stock prices.
FT Alphaville says InBev has obtained a $50 billion financing package already from JP Morgan (JPM) and Santander (SBP). That much capital is another sign the credit markets are loosening, although the cash-generating and recession-resistant beer business is a relatively good bet for creditors.
When I was investigating the M&A environment recently, some were surprised that more foreign buyers weren’t taking advantage of the weak dollar. The recent decline in the U.S. dollar, especially against the euro, prices many U.S. assets attractively in foreign currency. However, Howard Lanser, an investment banker at R.W. Baird said he was surprised to see little crossborder M&A activity. “Even though the dollar is weak, there are still lingering concerns about the U.S. economy in general.”
This $46 billion deal, if it happens, is a vote of confidence in the U.S. economy, a good sign of the health of the credit markets, and yet more evidence that the M&A market is waking up from the dead.
(Thanks to BW colleague Adrienne Carter for her insights on the beer industry.)
May 23rd, 2008 | Posted by stockBig merger-and-acquisition deals are often announced on Mondays because the closed markets on Saturday and Sunday provide a quiet period to wrap up complex deals.
The U.S. stock market is closed on Monday for Memorial Day, and that gives Wall Street investment bankers and corporate lawyers an extra day to put together some big M&A deals.
After today’s reports of preparations for a $46 billion bid for Anheuser-Busch (BUD), I’m interested see how many M&A deals emerge on Tuesday.
Thanks to the credit crunch and the U.S. economic slowdown, the M&A has slowed markedly. But there’s speculation corporations — if not private equity firms — might be again hunting for acquisition targets.
Will we see more cross-border deals, in which foreign companies take advantage of the weak dollar to gobble up U.S. firms at a discount? So far, foreign buyers seem wary of the U.S.’s uncertain economic outlook.
For comparison’s sake, I went back in time to look at the headlines on the Tuesday after Memorial Day 2007. At the time, M&A mania was reaching its peak.
On that Tuesday a year ago: The Royal Bank of Scotland launched a $95.6 billion hostile bid for ABN Amro Holdings. Genzyme Corp. (GENZ) agreed to buy Bioenvision for $345 million. URS Corp. (URS) offered $2.6 billion for Washington Group International. And a partnership, which included Lehman Brothers (LEH) announced a deal to buy Archstone-Smith Trust for $22.2 billion.
That was a busy weekend for Wall Street’s M&A teams. We’ll see if this year comes anywhere close. If it does, stocks could get a nice lift. If it doesn’t, at least New York’s bankers and lawyers got to enjoy their Memorial Day barbecues.
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