Case Blog

We have reached the point in ‘08 where we can look back and take stock on the full year and start to look forward to ‘09.  Without question ‘08 has been the most challenging year for the world financial markets since the end of World War II. We have experienced the collapse of Bear Stearns and its purchase by JPMorgan Chase (JPM). We have seen the venerable Lehman Brothers collapse into bankruptcy when no one stepped in to save it. And we saw the news of Lehman’s collapse quickly followed by the legendary Merrill Lynch (MER) agreeing to be acquired by Bank of America (BAC). We also found out what too big to fail means with the rescue of American International Group (AIG).

The world’s credit markets quickly froze on the news of the Lehman Brothers’ failure. After a false start, the U.S. Congress passed TARP and gave the Bush administration some new tools to use to stave off the collapse of the world financial system, brought low by the toxic subprime mortgage market.  With 30 days left of the Bush administration, they have decided to extend a lifeline to General Motors (GM) and Chrysler with loans from the TARP funds, something they resisted for the past 45 days. This will allow the incoming Obama administration some time to determine if a longer-term survival plan for our domestic auto industry is feasible.

Should the newspaper industry also look to the federal government for TARP funds? They certainly seem to be in as much trouble as the auto industry, with the Tribune Company in bankruptcy and the speculation as to who will be next, MediaNews Group or McClatchy (MNI).  I have started to read Michael Wolff’s “The Man Who Owns the News: Inside the Secret World of Rupert Murdoch,” just released by Broadway Books in November. Perhaps we should give Rupert some TARP funds to allow him to further consolidate this challenged industry?

We did not manage to escape ‘08 without one final global financial debacle –  the avuncular Bernie Madoff’s global Ponzi scheme! I trust that we will find the SEC looking to more closely regulate hedge funds as we enter ‘09.

I had lunch earlier this week at Michael’s with Bill Cohan, author of “The Last Tycoons.” Look for his new book “House of Cards” on the collapse of Bear Stearns, which will chronicle these events. It will be published by Random House in March.

As many of you saw yesterday, we decided that it was an excellent time to buy financial information providers and have agreed to acquire Asset International. There will be more to follow on this in the new year as we partner with Charlie Ruffel and his team to extend the reach and accelerate the growth of this 20+ year old company, based in Stamford, Connecticut and London, England.

The first half of ‘09 will continue to be a challenging deal market, but we should start to see some improvement in the 2nd quarter and hopefully the start of a recovery in the 3rd quarter. I do not envision large media deals, with leverage, happening until late in ‘09 or early in ‘10.

Let’s enjoy this holiday break and prepare for a recovery in the second half of ‘09!

As we prepared for Thanksgiving last week on Wednesday afternoon, November 26th, the horrific news from Mumbai of a well-planned terrorist attack reached us and it dominated the news for the next 48 hours.

In July of 2007, I wrote in Private Equity in India: “During my final year with Reed Business, I served as vice chairman, with a focus on establishing new joint ventures or subsidiaries in China, India and Russia. Our team found an excellent partner in Infomedia India LTD, which is listed on the Bombay Stock Exchange. I am writing this as I return from an annual shareholders meeting and a board meeting for Infomedia…During my current visit, I once again enjoyed the comfort of the Taj Mahal Hotel in Mumbai. This 100+ year old hotel knows how to make a guest feel welcome…I highly recommend this outstanding establishment.”

We now know that the Taj, along with the Oberoi Hotel, the central train station and the Chabad House (a Jewish community center also called the Nariman House) were targeted by the 10 terrorists. The human carnage caused by these terrorists intruded on our Thanksgiving weekend to remind us, once again, that there is a dark side to the world.

We have learned that Indian intelligence and the Mumbai police were not well prepared for this attack, in spite of earlier warnings. We have also learned through the interrogation of the one terrorist who survived this suicide mission that the Pakistani group, Lashkar-e-Taiba, which had its roots in Kashmir, was behind this senseless attack.

Secretary of State Rice is shuttling between India and Pakistan in an attempt to ease tensions. She is also delivering a very stern message to the new government of Pakistan President Asif Ali Zardari, that the world will not tolerate terrorist camps operating within Pakistan’s tribal areas and that the government must be committed to rooting out and destroying these hotbeds of terror.  This message has been delivered before, after 9/11 in New York.  President Zardari lost his own wife, Benazir Bhutto, just a short time ago in an assassination plot that originated in these same tribal areas.

I wrote on the evening of the 26th to several of my friends and colleagues in Mumbai. One response stood out, from a sage counsel, Shardul Thacker, ESQ, with whom I shared several outstanding evenings at the Oberoi Club: ” You are so right to conclude Mumbaikers will return to normal life soon, as was done after the two serial bombings, and once again demonstrate to the world that terrorism will never shake the spirit of Mumbai.”