Eric Schneiderman, Attorney-General for New York, “is preparing to file a lawsuit against Credit Suisse. In the lawsuit, which is expected to be filed this week, Credit Suisse faces claims that it misled investors regarding its due diligence practices on home loans it packaged into bonds… and who lost more than $20bn on mortgage-backed securities… in some cases selling investors loans it knew to be faulty.”
Read the full Financial Times Article
Deutsche Bank research shows “Due diligence teams are wielding greater power at funds of hedge funds and consulting houses across Europe”
“Due diligence has always existed, but it’s the breadth of the team and the level of questioning that’s changed…
Due diligence teams comprised of audit, law and investment specialists, have banned investments for a range of reasons in the past 18 months to two years.
Vetos have been applied where it has been discovered that a self-administered fund was using an unknown audit firm, or that a board had no independent directors.
Weak valuation policies have raised concerns, as have a lack of transparency or even a founder’s failure to invest his own capital in a hedge fund.”
Read the full Financial Times article: Due diligence role in FoHFs expands
“In several instances, Finra examiners have found that firms selling these products failed to conduct reasonable diligence before selling a product.”
“Independent broker-dealers’ shortcomings in due diligence when selling complex, illiquid products have been a focus of Finra exams and fines since the market collapse of 2008.”
The new world of social media is growing faster than most organizations can keep up with, and the rate of social media change is only going to accelerate.
Social media research firm, The Social Habit, has been releasing some fascinating tidbits ahead of their next quarterly report. In the latest example, they surveyed consumers to see how fast they expect companies to respond when those consumers used social media to contact those firms instead of traditional methods. Consumer’s expectations are far faster than most companies can perform, or even realize. How many firms can respond to consumers via social media within 30 or 60 minutes? The survey says 32% and 42% respectively!
To stay ahead of the curve, companies must significantly evolve customer service systems to meet this challenge, not just in improving IT systems, but particularly in changing corporate culture.
“The auction process has lost its automatic claim as the best way to sell a business.”
“Buyers are demanding more tailored information.”
“The timetable and due diligence process – both of which were carefully controlled by the seller in an auction environment, have become more determined by the buyer. This has meant deeper scrutiny and due diligence towards selling companies.”
“Sellers have to rely less on projections of future returns and more on fitting in with the business model of buyers.”
“The general insistence of buyers on longer due diligence processes has particularly assisted Asian bidders – who over recent years have become far more experienced and credible acquirers, but still find that auction dynamics can be at odds with their longer, multilayered decision-making processes.”
“Maybe the era of the auction will return; but it will need a return of confidence, if not exuberance, to allow the seller to adopt such a dominant role. Until then, seller beware – disposing of a business requires more thought and less muscle than it used to.”
by Jonathan Rowley
Joint Head Mergers & Acquisitions, Europe, Middle East & Africa
UBS
Read the Article at Financial Times How M&A Became a Buyer’s Market
Consultancy Cuts Blamed for Rail Bid Mess
“A decision to save £1m in consultants’ fees led to problems that forced the government to scrap the West Coast main line contract, critics have said. The fiasco has left the transport department in crisis and the taxpayer facing costs that could run into hundreds of millions of pounds.”
“At the very least, £40m in bid costs will be returned to the four groups that sought to run the line. But transport experts believe the U-turn could lead to further costs including potential legal action from FirstGroup, compensation claims from those bidding for future franchises, and lower revenues due to less aggressive bids on future rail franchises.”
“It is certainly true that if they had spent some more money on consultants they wouldn’t have made these arithmetical errors. Another person familiar with the franchising process said: ‘Without an outside financial or commercial adviser, they [the department] would be completely outgunned. A bidding company wouldn’t dream of going for a franchise without an adviser’s help.’ ”
Read the Article from Financial Times Consultancy Cuts Blamed for Rail Bid Mess
“Eighty-nine companies now appear on the FCPA corporate investigations list.”
Read the article: The Corporate Investigations List (October 2012)