Monthly Archives: August 2015

On Structuring an Earn-out

As you all know, most deals fall apart because companies CEOs/owners (and/or the investors already in the “deal”) are not realistic when placing a value on their respective companies. When there’s a valuation difference between what a buyer thinks a business is worth and what the seller expects to profit, an earn-out can bridge that gap.

 
Here’s a few pointers on how to make a deal that’s good for both parties.

 
What’s the value of your business? That depends on whom you ask. Ask potential buyers, especially when they’re being cautious in tough economic times, and it might not meet your expectations.

 
Negotiating a sale of a privately-held business is never a breeze – and it’s much less so in a down market in which there is little competition among buyers to drive up the multiple. When a seller’s expectations aren’t being met by potential buyers, including an earn-out provision in the acquisition contract can help narrow the price-expectation divide.

 

For More: http://www.blackhawkpartners.com/structuring-earn/

Legal Extraterritoriality As An Assault on Capitalism

Is the federal government trying to subvert American capitalism by pushing for extraterritorial application of American criminal law as a way to induce the flight of capital, and the capital classes, from the United States?

 

Is this theory so radical? Little else explains why federal government lawyers are making certain arguments to defend the fraud convictions of two Wall Street financiers – Ross Mandell and Adam Harrington of Sky Capital — against their appeal. Our government now argues that “criminal statutes have extraterritorial reach so long as the nature of the crime does not turn on where the defendant acts and where restricting the statute to domestic acts would undermine the statute’s purpose.” Appellate Brief For The United States of America, Mandell v. U.S., Docket Nos. 12-1967 and 12-2090, at 34 (emphasis added).

 

You read that right; where the crime occurs is irrelevant, because if our federal government declares the “purpose” of an American law reaches beyond our borders, you can be prosecuted for something you are accused of doing abroad, even if that act is not a crime offshore! Unless American courts reaffirm a recent Supreme Court decision, our Justice Department can stretch the reach of America’s metastasizing criminal law and equally byzantine civil law anywhere on the planet. Extraterrestrials, beware.

For More: http://www.financialpolicycouncil.org/FPCNEW/articledetails.aspx?id=43/Legal-Extraterritoriality-As-An-Assault-on-Capitalism

 

Thank you,

Oil Geopolitics and Iran

There has been much fuss lately as to the huge impact a deal with Iran will have on oil prices globally.

I personally see the near-term impact on oil markets likely to be far less significant than most oil analysts predict, despite Iran’s large natural gas and oil reserves.

The bottom line is that a deal with Iran would likely add only about 500,000 barrels/day to the 90-million-barrel daily oil market over the next 12 months. This would be a non-trivial amount, but clearly not a “game changer”.

The baseline is for prices to return to about $70 for a barrel of Brent Crude in 2016. Additional supply from Iran would knock roughly $5/barrel off expectations – or less than one quarter of a standard deviation. Said another way, additional Iranian output could move prices lower, but many other factors, such as changes in global GDP or the return of Libyan oil, could prove more meaningful over the next year. What’s more, recent trading suggests the market has already priced in much of this risk.

Over the longer term, I believe an increase in Iranian output could be for sure significant. With investment and time, Iran could meet a greater share of global demand for oil and liquefied natural gas (LNG). It also could ship natural gas to Europe via pipeline, challenging Russia’s dominance.

The details of the contracts Iran signs with international oil companies will be telling. Depending on the terms offered to Western companies, other oil producing nations – Iraq, in particular – could feel the pressure. Increased competition for investment would be a material signal that lower prices will endure longer.

I still though believe that the key factor in the global geopolitical game of oil will be China not Iran.

China is today the second largest importer of oil in the world and its appetite for oil is all but insatiable, growing at 8 percent a year. They decided to go with cars instead of sticking with mass transit. Plus, factories that produce cars can easily be converted to military needs. I believe within twenty years they’ll have more cars than the U.S. and that same year they’ll be importing just as much oil as we do. So here’s the deal. They don’t have it. Want to guess where they get it from? Iran. They signed a deal saying if Iran would give them lots of oil, China in return would block any American effort to get the United Nations Security Council to do anything significant about its nuclear program. They’ve been doing a lot of deals with each other ever since. Oh yeah, these two countries are very cozy indeed. Anyway, China gets most of its oil from Iran. And they don’t just need oil—they need “cheap oil” because they sell the least expensive gasoline in the world. I think that’s to keep everybody happy driving all those new cars.

Bottom Line: Iran’s agreement with major world powers to curtail its nuclear program in exchange for the lifting of economic sanctions opens up the world’s fourth-largest oil reserves, second-largest natural gas reserves and an 80 million population to multinationals. But the strict, decades-old U.S. restrictions on doing business with Tehran, which predate the nuclear crisis and relate to other concerns such as terrorism support and human rights abuses, will remain in place.

What will be particularly difficult for American companies is if they are the only ones that are prohibited whereas the rest of the world will be trading. Problematic because every time you’re at a disadvantage relative to your foreign counterparts, you lose market share.

About Those Mad Wall Street Egomaniacs We Call “Masters of the Universe”

Some people grow, other people swell. You’d better figure out who you are. — John Weinberg, Senior partner and chairman, Goldman Sachs, 1976 – 1990

 

Reading on a regular basis the Wall Street Journal on hedge fund managers, two themes emerge: They hate fame and they like to be feared.

 

That is not uncommon on Wall Street, where it’s better to be hated and rich than loved and famous.

 

That is unfortunately the hierarchy in the finance culture today: the more important you are, the less you need to be liked, and the less you need to be seen.

 

At the very top of the Wall Street pyramid are the billionaire hedge-fund managers, masters of the markets who are famous for not wanting fame. Their ability and desire to stay under the radar of the public is a signal of how really important they are. They flee from cameras, flee from being interviewed. Unflattering news, unflattering photos, are either bought with money, or buried via legal action.

 

The distaste of fame often morphs into outright secrecy, especially amongst the hedge-fund set.

 

For More: http://ziadabdelnourfinance.com/about-those-mad-wall-street-egomaniacs-we-call-masters-of-the-universe/

What’s it like to be a Billionaire?

Given the nature of my business, I am often asked by friends how does it feel like to deal with billionaires on a daily basis and what really makes them tick. Understanding after all the billionaires psyche is key in unlocking potential not seen anywhere else.

 
Well for a start…let me tell you that the main thing I realized after starting dealing with billionaires a decade ago is that billionaires tend to be really good at understanding systems of value creation and placing themselves into those systems more effectively than anyone out there.

 
Billionaires tend in fact to view the world as a tangibly fungible place. They see the world and want to move the puzzle pieces entirely around. They look for the faults in the ecosystem and identify massive holes and what could be added to fully capture that value. Then they spend about 10 years maniacally attacking the gap, organizing people, recruiting and generally creating a “cult”. They create a bible so to speak of values and ideas that bundle together in such an appealing way to attract the smartest people around (aka the future millionaires).

 

For More: http://ziadabdelnourblackhawk.com/whats-it-like-to-be-a-billionaire/

Smart v/s Wealthy

While you may think that being smart, motivated, and talented would logically make you wealthy, unfortunately, this is often not the case.

 
Smart and talented people often have a flair for the unusual, complicated, or different. They don’t like to follow the KISS principle (keep it simple, stupid), which is required to make money.

 
So, being smart or talented isn’t going to help you unless you can use those smarts to figure out a way to simplify those tasks that will make you money. This isn’t easy, because it goes against everything that you have ever done and is counter to how you were taught to think. However, it is necessary for a business to succeed and why smarts and talent alone don’t predict entrepreneurial success and hence wealth creation.

 
Too much to lose… and, with the most to lose, a wide range of other options available, and the penchant for more intricate, complex endeavors, don’t be surprised when the person “Most Likely to Succeed” from high school ends up in corporate America and one of the more average students finds success in his or her own business

 

For More: http://www.financialpolicycouncil.org/blogdetails.aspx?id=1103/Smart-v/s-Wealthy

Navigating the Emerging Markets Of Today

As we at Blackhawk Partners see it today, one of the biggest advantages emerging markets have offered investors is a strong growth story

 
Over the past decade, growth in emerging markets has in fact outpaced growth in developed markets by more than double. Growth in gross domestic product (GDP) looks like it will continue to outperform that of developed markets for at least the next five years, according to estimates by the International Monetary Fund.

 
We are often asked why economic growth and stock market performance don’t always directly correlate in a given year, and if that’s the case, does a nation’s GDP growth matter at all when it comes to investing in companies? While it’s true that growth and stock market performance can be divergent at times, there is no question that growth matters since company earnings depend on general economic growth.

 

For More: http://www.blackhawkpartners.com/navigating-emerging-markets-today/

Want to crush ISIS?

I personally believe ISIS will never become a serious and credible state in the world.

 

They have made it clear that they don’t care much for international diplomacy or law  and that only Sharia can be used to govern their new state.

 

A fanatical force like this does well at first; they carry out brutal acts, capture swathes of land, steal, murder, rape, perform forced conversions to Islam and run a well oiled recruiting machine but this can only last for a while because sooner or later their resources are depleted and the circus over.

 

So you wanna crush ISIS? Better act fast and swift… Here’s a short list of their Achilles’ heal.

 

1. ISIS is militarily overextended and hopelessly ineffective against a trained and well equipped army. Although they’re led by a few savage Chechen’s and some Arab militants who answer to a mysterious bearded man who calls himself “Abu Bakr Al-Bagdadi”, it will take only one crushing defeat to completely demoralize their forces, who so far have only shown their prowess in gunning down heretics (Shia, Ezidi, Christians and some ethnic Turkmen), beheading children and foreigners and stealing some old military equipment left behind by the US and Russia.

 

For More: Want to crush ISIS?

 

Thank You,

Assessing The Trump Candidacy

So Donald Trump is serious about running for President.

 

There are some implications for the financial and investing communities.

 

But first, to address the well-founded skepticism after previous teases at runs each election cycle since 2000: Trump is running in the Republican primary and has just filed the requisite documents with the Federal Election Commission. He has the funds to tackle the ballot access requirements in each state, and to hire the brains to strategize a successful run.

 
In those respects, Trump evokes a comparison to an equally iconoclastic predecessor who ran twice for President in 1992 and 1996: H. Ross Perot. Now, Trump has a big advantage over Perot in that while it is far easier to get to the general election as a self-financing independent, it is far easier to actually win if you are the nominee of one of the two major parties.

 
(Full disclosure): Perot’s campaign committee was my first legal client ever, and I was just one year into law school. I was one of his election law and petition advisers and press people in New York in 1992. I was there. I know.)

 
Can He Win?

 

For More: http://www.financialpolicycouncil.org/fpcnew/blogdetails.aspx?id=1099/Assessing-The-Trump-Candidacy

Financial Policy Council Hosts Leading Crowdfunding Experts

On September 14th, the Financial Policy Council will host a private briefing with a panel of four crowdfunding experts who will discuss how Wall Street investment firms can strengthen market share and viability through crowdfunding. The speakers Georgia P. Quinn, D.J. Paul, Chris Tyrell, and Joy Schoffler each have unique backgrounds in various industries, but share a common, extensive understanding of the financial technology sector and the effect that crowdfunding will bring to the investment world. Ziad Abelnour, the founder and chairman of Financial Policy Council Inc., will moderate the panel.

 
Once overlooked entirely by institutional investors, crowdfunding has now become a solid contender in the financial world, eclipsing angel investments and eventually overtaking venture capital as the primary method for funding new businesses.

 
“Crowdfunding is revolutionizing the type of investors that participate and the way they access deals, as well as the companies raising capital,” said speaker Georgia P. Quinn, a securities attorney specializing in crowdfunding, and CEO of iDisclose, a web-based legal disclosure platform to help companies raise capital. “It is reducing costs of capital and increasing access to investments, which has major implications for both Wall Street and Main Street.”

 

For More: http://www.financialpolicycouncil.org/FPCNEW/FPC_AboutUs.aspx?id=NEWS

 

Thank You,