M&A activity, either private equity or strategic, is an indicator that we track broadly. Obviously, and on the margin, if M&A activity is increasing it is bullish for equities. It goes without saying that there has been very limited M&A activity in Q4 2008 and, in fact, M&A globally as of December 22nd was “down 29 percent from the full year 2007.” This week we have seen activity perk up with the IndyMac Bancorp acquisition by a private equity consortium and an announced divestiture by the New York Times.

After closing its doors in July after a $1.3 billion run on deposits over 11 days, IndyMac Bancorp is now close to being sold by the government vis-à-vis the FDIC to private equity firms J.C. Flowers & Co. and Dune Capital Management, and hedge fund Paulson & Co. The deal would be the first of its kind involving an unregulated firm buying a bank-holding company. According to various reports, the deal will include 33 branches, its reverse-mortgage unit and a $176 billion loan-servicing portfolio, with an announcement coming as soon as tomorrow.

In another deal, the New York Times, one of many beleaguered newspaper companies, is strapped for cash, faced with a poor advertising environment and tightened credit markets. With net debt at ~$1.13 billion at the end of the third quarter and a 60% drop in its stock price year-to-date, the Company is looking to raise cash to meet a reported ~$400MM debt repayment in May 2009. The deal according to Barclays Capital could be worth as much as $166.3 million. Earlier this month, the Company said a sale-leaseback of its headquarters building would raise as much as $225 million.

While these are only two deals, they are two notable announcements in a quarter which saw almost no major asset sales. The willingness of buyers to commit capital, in the case of the IndyMac deal, and sellers willing to move prize assets, in the case of the New York Times, could be an early sign that the M&A market is starting to become “unstuck”.

Daryl G. Jones
Managing Director

Matthew Hedrick
Analyst

RESEARCH EDGE, LLC
111 Whitney Avenue
New Haven, CT 06