…or just the domestic white-elephants - like a dozen empty and unused or grossly underutilized soccer stadiums, or the newly proposed golf course bonanza - from which the usual suspects can siphon off their vig?

Probably more of this second bad option. “National” projects tend to be focused on placating the masses and their fear of job insecurity.

And, really, “vigorish”? That I know this word makes me feel old.

I expect a lot of pension money to be frittered away on “national” projects.

You mean like bankrolling the mandarinate’s off-shore detours and frolics, (personal) offshore asset purchases? or just the domestic white-elephants - like a dozen empty and unused or grossly underutilized soccer stadiums, or the newly proposed golf course bonanza - from which the usual suspects can siphon off their vig?

You are right, the Korean tax payers (and perhaps even retirement funds?) foot most of the risk on this one.

There soon will be very large impact on the market from Korean pension funds. Not just the National Pension Plan (Korean Social Security), which now reportedly has US$200 billion in assets under management, but also supposedly “private” pension funds.

By 2012 NPS expects to be managing US$300 billion. Recently the NPS announced a partnership with Morgan Stanley for management of all this money. But because it’s “national” money, expect strong government pressure to “invest” this in “national” projects. We already can see warnings on this in the recent news reports that NPS will be protecting Woori and/or other so-called strategic companies from the hated foreign speculators.

And they will grab for more. In 2005, the severance-pay provision of the Labor Standards Act were rolled into the new “Retirement Benefit Guarantee Act”, which establishes for the first time a company’s option to set up defined-benefit and defined-contribution pension plans, which will be about 8% of the total wage bill. That will be a lot of money piling up. Since the pension funds will be managed under the supervision of the FSS and Ministry of Labor (MOLAB especially is not known for its business savvy), can anyone expect independence will be allowed to the managers?

I expect a lot of pension money to be frittered away on “national” projects.

Multiples of EBITDA (or adjusted earnings/profit) is the price tag / market rate in the M&A world. You may pay over the price tag in a bidding war for whatever reason, be it strategic or otherwise, but the benchmark is the multiple of EBITDA. The reasoning being that you are constrained by how much a business throws off in cash, because that cash needs to be used to pay off the debt that you incurred to purchase said business. Again, all leveraged buyouts 101 stuff.

That’s one thing that’s looked at.

But other things, such as exit p/e, exit p/b, etc. are important.

Anyway, as you know things are different whether it’s simply a leveraged buyout, or a strategic acquisition, as here. Which is why EBITDA is perhaps not the most important consideration and bigger is not necessarily better.

But who knows? Doosan may have overpaid. Time will tell.

There is no way in hell Infracore can buy either Cat or JD. It would require Infracore to provide equity that they don’t have and to take on debt that they couldn’t possibily sustain by themselves. By order of magnatude, Infracore is $15 billion sales and Cat is over $40 billion.

Nonrecourse financing, huh? It’s not easy to get that. Regardless, if this deal goes south, then KDB will have to try and peddle this company to make up the finacing, which would be $4.2 billion! It would have to be a real dog for you to HAVE TO liquidate it and you are not going to get $4.2 billion for a dog. You are right, the Korean tax payers (and perhaps even retirement funds?) foot most of the risk on this one.

I have to admit, those midget Bobcat movers and excavators would work rather nicely in the small spaces of Korea, Japan and China. I don’t know how good Infracore’s distribution in China is, but if you can sell those little Bobcats in China, then that would be HUGE.

# 15,

Multiples of EBITDA (or adjusted earnings/profit) is the price tag / market rate in the M&A world. You may pay over the price tag in a bidding war for whatever reason, be it strategic or otherwise, but the benchmark is the multiple of EBITDA. The reasoning being that you are constrained by how much a business throws off in cash, because that cash needs to be used to pay off the debt that you incurred to purchase said business. Again, all leveraged buyouts 101 stuff.

# 16

Infracore, in the short term, overpaid. The only way this deal makes sense is if Bobcat’s sales and profits rise at least 30% in the next 5 years, otherwise, it may be an albatross around Doosan’s neck, sucking up free cash flow that can otherwise be used to fund growth and new product development. Almost 14x is way ABOVE market for a captial goods manufacturer. All investment bankers thought this deal would trade for around 10x or $3.2 billion. $4.9 billion valuation took all the professionals by suprise.

#17,

Yeah, I got AST confused with Maxtor. I was an undergrad (maybe even my freshman year?) in college back when Samsung bought AST. Domestic M&A (my area) rarely focus on consumer electronics anymore. U.S. firms have conceded much of that (and their razor thin margins) to Asian manufacturers.

First of all, the history of Korean M&A is pretty sad. Samsung buys disk drive maker AST and LG buys Zenith. Both acquisition targets were dogs because they had crappy products and crappy financials.

AST Research was not a “disk-drive maker.” (I’m guessing computers is not your industry sector.) AST was a PC manufacturer which formerly was one of the stars of the industry and was even briefly in the Fortune 500.

Perhaps you’re thinking of Maxtor. I heard Samsung destroyed Maxtor but I don’t know the history on that one. Maybe “destroyed” means “defeated”.

But you’re right about the past Korean acquirors being garbage-pickers. Sometimes the asset is just garbage and is cheap for a reason.

Even rumors of takeover talks regularly push prices up by 20% or more in a day.

Since Doosan only paid a multiple of 14x earnings, that should mean that the Goldman players weren’t all that good, or that the price was reasonable (and I’m sure the Goldman fellas are good).

Korea’s banks: indeed they do have a problem, just like China’s, Japan’s, Russia’s and the Mid-east banks - they have waaaay to many US dollars hanging around getting less and less valuable. A little 5 billion investment doesn’t even add up to their exchange losses in the last month. You can’t blame them for trying to spend some of their hoard buying up overseas assets, can you? At least it’s Bobcat, and not Sudanese oilfields like the Chinese buy.

However, Bobcat isn’t worth what Caterpillar and John Deere are because it’s MUCH smaller (by a magnitude of 15 to 20!). Bigger is better in the M&A world.

What?

Anyhoo, a lot more likely went into their valuation than simply EBITDA multiples and revenue.