Author Archives: Innovator

The Cybersecurity Tipping Point

Now Morgan Stanley joined a growing list of prominent corporate brands to suffer data breaches, after one of his financial advisors stole the information of as many as 350,000 wealth management clients. Many other large companies including Adobe Systems, Automated Data Processing, Citigroup, E*Trade Financial, Fidelity Investments, Home Depot, HSBC, JPMorgan Chase, Nasdaq OMX, Neiman Marcus, Sony, Target and Wal-mart had suffered high-profile cyber security breaches. Who is next? Edgar Perez, author of Knightmare on Wall Street, will discuss what consumers and investors need to learn from these cybersecurity incidents in the United States at Cyber Security World Conference 2015 New York City, on January 9. More information at http://cybersecurityworldconference.com.

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As Canadian M&A Soars on Oil, Goldman Sachs Becomes Top Adviser, edging out JPMorgan Chase, Royal Bank of Canada, Barclays and Citigroup

Mergers and Acquisitions Conference 2015 New York City

Mergers and Acquisitions Conference 2015 New York City

Goldman Sachs was the top investment banking adviser on Canadian mergers and acquisitions in 2014, as oil and gas and cross-border deals drove takeovers to a seven-year high.

According to Bloomberg, Canadian firms were involved in $229 billion worth of transactions through Dec. 29, the highest annual tally since 2007 and up 45 percent from last year, according to data compiled by Bloomberg.

Goldman advised on $61.6 billion worth of those deals, its highest ever in Canada, and narrowly edging out JPMorgan Chase, which advised on transactions valued at $61.3 billion. Royal Bank of Canada slipped to third spot after three consecutive years at No. 1, while Barclays and Citigroup rounded out the top five. The figures and rankings are based on announced date and subject to change as more deals are recorded.

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The New York Times: As Hewlett-Packard and Compaq Show, Mergers and Acquisitions Cycle All About Buy, Divide and Conquer

In the fall of 2001, Hewlett-Packard announced a momentous $25 billion merger with Compaq, as commented by The New York Times.

“This is a decisive move that accelerates our strategy and positions us to win by offering even greater value to our customers and partners,” declared Carly Fiorina, HP’s chairwoman and chief executive at the time, describing how the deal would “create substantial share owner value.”

Thirteen years later, just this fall, Meg Whitman, HP’s current chairwoman and

Mergers and Acquisitions Conference 2015 New York City

Mergers and Acquisitions Conference 2015 New York City

chief executive, undid that deal, splitting the company in two. “It will provide each new company with the independence, focus, financial resources and flexibility they need to adapt quickly to market and customer dynamics.”

Eerily mirroring Ms. Fiorina’s words, she said the divorced companies “will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders.”

So which was the right decision? The merger or the spinoff?

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Goldman Sachs’s David Kostin on Why 2015 Could be Better than We Think

According to CNBC, Goldman Sachs already appears to be having second thoughts on its tepid forecast for 2015.

The firm’s clients believe Goldman is overestimating how much interest rates will rise in the years ahead, strategist David Kostin said in his weekly report that summarized recent meetings with market pros.

Kostin has projected the Federal Reserve‘s target funds rate to hit 3.9 percent by the end of 2018. Fund managers, though, believe slow global growth and low inflation will keep the U.S. central bank in only modest hiking mode, translating to just a 2 percent funds rate in that span.

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According to The Wall Street Journal, J.P. Morgan Discussions Nearly Ended in a Lawsuit

J.P.  Morgan Chase

J.P. Morgan Chase (Getty Images)

According to The Wall Street Journal, in the end, it was J.P. Morgan Chase & Co. that blinked.

A day before J.P. Morgan Chief Executive James Dimon and Attorney General Eric Holder tentatively agreed to a record $13 billion settlement Friday, the Justice Department notified the bank it would file a civil lawsuit in six days and seek a large amount of damages from the largest U.S. lender by assets, according to people close to the talks.

The warning helped spur the bank closer to an agreement, even though the pact didn’t provide the bank what it wanted—protection against a continuing criminal probe of past mortgage-bond sales.

The historic agreement, which is being watched from Wall Street to Washington, isn’t finalized. The parties are still negotiating final terms.

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Microsoft To Buy Nokia’s Device Business in Deal Worth $7.17 Billion

Microsoft To Buy Nokia’s Device Business in Deal Worth $7.17 Billion

Nokia devices (http://www.gsmarena.com)

All Things D’s Ina Fried reports that Microsoft announced late Monday that it is buying the majority of Nokia’s cell phone unit for 3.79 billion Euros ($5.0 billion) and spending another 1.65 billion Euros ($2.18 billion) to license Nokia’s patent portfolio for a total of 5.44 billion euros ($7.17 billion).

Once the deal is done, a number of Nokia executives will join Microsoft including Stephen Elop, a former Microsoft executive seen as among the top contenders to replace CEO Steve Ballmer. Also set to join Microsoft are Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber.

For now, Elop is stepping aside as Nokia CEO to become executive VP of devices and services. Nokia Chairman Risto Siilasmaa will serve as interim CEO.

“For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter,” said Siilasmaa “After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders.”

The move is a clear sign that Microsoft believes it can and must succeed in the phone business and that it cannot afford to leave the success in the hands of a partner–even one like Nokia that had bet its future on Microsoft’s phone software.

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BOOK REVIEW: Trading firms would do well to heed lessons in testing and crisis management from Knightmare on Wall Street

Trading firms would do well to heed lessons in testing and crisis management

Trading firms would do well to heed lessons in testing and crisis management

What a book! Who knew that a trading error at a Jersey City firm could end up being so interesting? One year ago, the mother of all electronic trading debacles scared Wall Street, when sophisticated trading outfit Knight Capital erroneously launched thousands of orders that led it to accumulate an impossible $7 billion position.

After catastrophic incidents like the Flash Crash, the failed Facebook IPO led by Nasdaq OMX, and BATS, the IPO that just couldn’t get off the ground despite all the brainpower behind, this time was supposed to be different. Yet, as author Edgar Perez details, hubris and failed crisis management procedures made this incident particularly painful to shareholders and employees, who didn’t know if the company could survive.

It is interesting to read about the true reasons for top executives not to take decisive action when their CEOs are not present. It was less and less about investors and shareholders, and more about fear, egos, fees and prestige. Nasdaq? Knight? Next?

If the reader is not intensely interested in financial markets, he or she will likely not make it through this book. If the reader skips CNBC or FOX Business Network or Bloomberg TV when flipping through the channels, then this book probably isn’t for him or her. It would be very interesting, but the reader probably won’t make it to the juicy chapters.

Perez makes a compelling case about the need for trading firms to rethink their technology management. Does anyone on Wall Street will ever really learn anything from this debacle? While all eyes are focused on SEC’s new regulations that force companies to show the impossible, the next trading debacle is probably lurking around, ready to storm Wall Street at a time when nobody will expect it.

The book goes into great detail when it analyses the backstories of the main characters involved in the company starting with founders Ken Pasternak and Walter Raquet, CEO Tom Joyce (known as T.J. since his Harvard days) and vulture bidders Daniel Coleman from GETCO and Vincent Viola from Virtu. While other books lose many people early, Perez whets readers’ appetites early by hitting the ground running in chapter one focusing on the chaos that ensued Knight’s infamous trades at the opening.

Perez does a tremendous job in making the histories of all of the people and companies involved as easy to digest as possible; peg orders are arguably not an easy concept to explain. Again – excellent book, but readers have to invest some time slogging through the first 25% of the book to get back to the action. As soon as Joyce comes back to the office after surgery and realizes the extent of the challenges ahead, all hell breaks loose and things start to get very exciting again.