Morning Report

What you need to know one minute before daylight

Investment Bankers Discover Smaller Companies

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DAYLIGHT  

Suddenly, investment bankers are targeting smaller companies and smaller deals: Last fall, bankers from JPMorgan Chase “pitched Cianna Medical, a California company with tumor-detecting technology and about $40 million in annual revenue, on a sale. ‘I kept saying, tell me again why you’re interested in this deal?’ said Jill Anderson, Cianna’s then-chief executive. …

“While fees in the middle market are smaller, they are typically split between fewer banks. Deals also close faster and require fewer staff than complex, trans-Atlantic takeovers. An explosion in private equity also has brought order and sophistication to the middle market. Sleepy family-owned firms have been replaced by sponsor-backed companies eager to borrow, do deals and go public. There are 7,800 companies owned by private-equity firms, up 65 percent since 2010, according to the Milken Institute.”

THE ECONOMY

If President Trump follows through on his pledge to close the Mexican border, the US auto industry could shut down within a week: “‘That’s because every automaker operating an auto plant in the United States depends on parts imported from Mexico,’ said Kristin Dziczek, the vice president of industry, labor and economics at the Center for Automotive Research.”

Auto sales slumped in the first quarter: “Major automakers on Tuesday posted declines in US sales for the first quarter, adding pressure on car companies already grappling with weaker conditions in important markets globally. Analysts expect the industry to report an overall decline of around 5 percent in sales for March, historically one of the biggest months for car sales as the unofficial start to the spring selling season. First-quarter sales are expected to decline 3 percent to 4 percent compared with a year earlier, according to analyst estimates.

TECHNOLOGY

Here’s everything you need to know to buy the right CRM software: “The fact is that today’s CRM market is made up of hundreds of applications and many of them are very mature. Because they’re mostly cloud-based, these vendors watch each other like hawks; so, when one adds a feature, you can bet their competitors will roll out similar functionality within days. You can buy any one of a number of the mainstream products (Salesforce, Microsoft Dynamics, Sugar, Zoho, Nimble and others) and you’ll be fine! In fact, the features will probably be overkill. Don’t focus so much on the features. Focus on the look and feel. Focus on the company behind it. And focus on some of the other things I’ll mention below.”

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MANAGEMENT

Chick-Fil-A has been blocked from opening a location in Buffalo, making it the second city to bar the fast-food chicken sandwich restaurant from setting up at a new location in two weeks. The company’s controversial anti-LGBTQ beliefs have come back into the news cycle. “Last month, the San Antonio city council voted to block the restaurant from its airport, calling out its ‘legacy of anti-LGBTQ behavior.’”

Patagonia has decided to stop selling branded vests to finance firms: “Patagonia, which has become a staple of the ‘Midtown Uniform’ (slacks, a dress shirt and a fleece vest), is no longer in the business of branding Wall Street. “The American clothing company recently decided a requirement of new companies it works with will be that they align with Patagonia’s values of being environmentally conscious and prioritizing the planet. … ‘Due to their environmental activism, they are reluctant to co-brand with oil, drilling, mining, dam construction, etc. companies that they view to be ecologically damaging.’”

E-COMMERCE

Jumia, an online marketplace for electronics, is the African continent’s first unicorn which could mean substantial economic growth in the region: “Africa has an immensely young population that’s quickly growing into a vibrant middle class, offering serious growth opportunities for e-commerce initiatives. … Around the world, investors with an eye on the e-commerce industry are interested in how the company will disrupt existing giants like Amazon and Alibaba.”

HUMAN RESOURCES

Google says it will require companies that provide its contract workers to give them full benefits and a $15-an-hour minimum wage by 2022: “Google’s announcement comes the same day that a group of 915 Google workers signed on to a letter demanding equal treatment for the company’s temporary workers and contractors, known internally as ‘TVCs.’

“The letter, also obtained by The Hill, claims that temporary workers and contractors account for 54 percent of Google’s workforce, or 122,000 positions. Google declined to share how many of its employees are contractors and how many are full-time employees.”

STARTUPS

An artificial intelligence-powered startup wants to eliminate rental brokers: “Palo Alto-based Keyo said Monday it’s guaranteeing that its landlord clients are paid for every month of a lease, even if the tenant defaults or leaves early. The company has a network of 2,700 apartments in New York City and claims to have collected more than $3.5 million in guaranteed rent payments.

“Basically, landlords sign up their vacant apartments through Keyo and the company places qualified tenants in the units. Keyo charges the landlord one month’s rent to place the tenant—effectively a broker fee—and guarantee the financial terms of the lease. The tenant isn’t charged any additional fee by Keyo. Its app allows tenants to pay landlords directly—and the company has partnered with credit bureaus.”

Natural Cycles, an FDA-certified app that serves as a contraceptive, is expanding quickly in the US: “For $99 per year, the app applies a clinically proven algorithm to predict the roughly one week per month during which a woman is fertile. If your goal is to prevent pregnancy—as it is for most Natural Cycles users—the app will show fertile days as red, for when abstinence or condom use is a must, and green days for when they’re not. (Shades of red appear if your aim is conception, with peak fertility showing up as the darkest.)”

SUSTAINABILITY

In Norway, electric cars are dominating the new car market with 60 percent of new cars bought being fully electric: “Exempting battery engines from taxes imposed on diesel and petrol cars has upended Norway’s auto market, elevating brands like Tesla and Nissan, with its Leaf model, while hurting sales of Toyota, Daimler and others. … ‘To be honest, it is first and mostly because of the tax. The tax on cars in Norway is very high but on electric cars, it’s nothing,’ said Glenn Joergensen, 54, an airline pilot taking delivery of a Tesla Model 3 in the town of Lillestroem outside Oslo.” Norway hopes to end reliance on fossil fueled vehicles within the next decade.  

The lobster industry is pulling in record hauls, but these bountiful harvests might come to an end soon because warming waters are also causing a bait shortage: “As recently as 2014, the herring haul was 200m pounds. But thanks to new fish protections, this year’s catch will be less than 40m pounds. Metaphorically, that is—losing the little fish poses a big problem for lobster-trappers because it raises the cost of bait. For now, lobster fishers will use other types of less common fish and frozen herring to keep surf and turf on the menu—but those limited supplies will only last so long, and prices are bound to increase.”

ZACK ELLER’S DEALS OF THE DAY

Alibaba has acquired Teambition, a provider of apps that facilitate teamwork. “Nowadays, the need of a platform through which enterprises can communicate, collaborate and effectively manage their projects has been gaining a lot of momentum. Teambition is a firm that has vital platforms designed to plan and manage projects competently.”

Merck, a pharmaceutical company with an animal health arm, has acquired Antelliq, a digital technology company for livestock and companion animals. “The announcement positions the company as a global leader in animal health digital tracking, traceability and monitoring technology and complements the existing portfolio of vaccines and pharmaceuticals, the announcement said.”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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