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
As our economy evolves, private equity groups, hedge funds, and investment banks compete and cooperate in different ways. Their recent innovations are reported and analyzed by the 3rd edition of David Stowell’s landmark book, which adds three new cases, significantly revisions of most chapters, and updated figures, tables, and exhibits. It captures the actual work that associates and vice presidents do, providing readers with templates for real transactions. Finally, it provides significantly more content about the ways liquidity is supplied in secondary markets, including an overview of high frequency trading/electronic market making, quantitative trading strategies, and the evolution of cash equities from open outcry pits to fully electronic central limit order books.
- Includes a new chapter on China to accompany nine heavily updated chapters
- Integrates three new cases with relevant chapters in the book to create real world applications of chapter teachings
- Employs spreadsheet models to enable readers to create analytical frameworks for considering choices, opportunities and risks described in the cases
