TD Bank to buy Cowen, Estée Lauder reportedly exploring Tom Ford deal

Yahoo Finance Live anchors discuss TD Bank seeking to buy investment bank Cowen and reports that makeup giant Estée Lauder is exploring a Tom Ford deal.

Video transcript

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BRAD SMITH: Welcome back to "Yahoo Finance Live," everyone. Amid all the speculation over a recession, there's been some serious dealmaking talk to keep an eye on. TD Bank is buying Investment Group Cowen for $1.3 billion. The Canada-based bank says that the deal will boost its growth strategy in the US.

Another tie up to watch is Estée Lauder potentially swooping for Tom Ford. According to "The Wall Street Journal," a deal there could be valued at $3 billion. That would easily be Estée Lauder's biggest to date here. And taking a look at shares of Estée Lauder, down as they typically would be for the company making the acquisition. And on a day like this, we're seeing them down by about 1.1% here.

But I think the bigger news here, as you've been tracking as well, this TD-Cowen deal also.

BRIAN SOZZI: Yeah, this is interesting. I would just say, it comes at a very cheap price, 1.7-times multiple of Cowen's tangible book value. That is very cheap for a business-- a storied business like Cowen.

But a couple of things TD is getting here. One, an instant investment bank. Cowen has been around for some time, very strong name on Wall Street. So this will help TD boost its presence in investment banking and perhaps play in that recovery of investment banking in 2023 and 2024. TD very small presence via its TD Securities business in investment banking.

Also two, Cowen has, I believe, a little over 60 analysts covering close to 1,000 stocks. So to get that access to research analysts, provide research to the TD team, maybe even retail investors, that is very important, too, as well.

And I'll note this, too, in an internal note I obtained from Cowen CEO Jeffrey Solomon, he said he wasn't out looking for this deal. It just essentially came to him and made sense, strategically, to bolt on that retail business of a TD with an investment bank like this. And here we go.

JULIE HYMAN: Oh, one other footnote for this, TD is going to be selling some non-voting shares of Charles Schwab in order to fund this. It says, it's not selling any more of this afterwards. But it's now owns about 12% of Schwab from 13.4%, previously. $1.9 billion is how much it raised from that sale. So those Schwab shares were under a little pressure a little bit earlier, even as, again, TD says it's not going to be selling any more of those.

I mean, if we take a step back for a moment and look at this kind of deal activity, because we also had a bunch of deal activity earlier in the week, Global Payments buying EVO payments. We had PerkinElmer spinning off-- divesting, I should say, one of its units. Valvoline also selling off its fuel business, remember, to Saudi Aramco, which shows that, yes, there's a lot of recession talk. But deals usually keep happening.

I mean on the flip side of that, we heard from KKR this morning, which reported its numbers. And it had lower deal revenue because we know that deals generally have been falling. But there's still you know, some stuff percolating out there.

BRIAN SOZZI: Very strategic deals--

BRAD SMITH: Right.

BRIAN SOZZI: --I would say. No big, sloppy, whale deal with these big billion dollar type of headlines. Very-- things that look like they were very well thought out and have a lot of strong strategic rationale. On a note, too, this Cowen deal. Look at Stifel. I mean, there, Stifel has been operating very, very well the past few years. Market cap of $6.2 billion. How are they thinking and feeling today after a day like this? Does this force that type of company, a smaller player on Wall Street but a very important player, does this force them to make a deal?

BRAD SMITH: Certainly. And regarding KKR, this also comes at a time where they have noted that their private equity funds have also depreciated by about 7% during this most recent quarter. And that is synonymous with what we're seeing across some of the other firms and their private equity holdings, too. So they're continuously looking for these deals that they can be involved in.

But they're having lower transaction fees, lower number of IPOs, companies going public, where they can be involved in those deals. The acquisition, the non-multibillionaire, mega billion dollar type of deals, that certainly hits its own income as well.

But then this also has an implication on the employment side, too, because for a lot of the financial firms that are looking across this dealmaking to see where they can be involved, and the number of people that are necessary to make that happen, this is why they're not announcing these massive layoffs, similar to the point that we've seen some of the tech companies doing so, because when the deals start to come back in full force, they're gonna still need people on board to help them navigate that environment, too.