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March 5, 2013
By Katie Little


The "deal toy" indicator has turned bullish on Wall Street.

Deal toys are small, relatively inexpensive and typically Lucite, trophies that serve as a way to commemorate a firm's noteworthy deals. A company may order 20 or more of them for the employees involved in the deal. As a result, they're a pretty good gauge of deal activity.

In Wall Street's heyday, before the financial crisis, companies ordered "toys" with abandon — not even worrying about how much they cost. During the financial crisis, the business dried up dramatically. And Wall Street remained rattled last year with the "fiscal cliff" at the end of 2012, when tax increases and spending cuts were set to kick in. Now, with that crisis averted, business is starting to roar back..

At GDN, a Manhattan-based deal-toy maker, orders doubled in the first two months of 2013 from the same period a year earlier, President and CEO Kim Russo said.

Once the fiscal cliff passed, "it was like somebody just turned the water on and the deals were pouring in," Russo said.

GDN currently has orders for toys to commemorate six deals worth over a billion dollars each, ranging from $1.3 billion to more than $20 billion — large even by Wall Street standards.
"Those don't come around very often," Russo said. "But when they do, you want to work on them. Normally you don't have billion-dollar deals every day."

The price of a deal toy varies widely from $80 to $300 at GDN, but companies look to spend about $100 on average, Russo said. The average order size is around 20 pieces. This can grow to 50 to 60 for bigger deals.

The upswing in the deal-toy market echoes the surge in mergers and acquisitions so far in 2013.

The total value of U.S. mergers and acquisitions transactions through the first two months of this year rose 93 percent compared to last year, according to data from investment-banking technology and consulting firm Dealogic.

In February, five $10 billion-plus deals were announced, including Warren Buffett's $23 billion deal with 3G to acquire ketchup maker H.J. Heinz. And in another positive sign, leveraged buyouts with a final stake greater than 50 percent posted the biggest month in February since mid-2007.

This came after a slower 2012, with fewer deals, fewer toys per deal and a reluctance to spend among some of the bigger banks.

From the Go-Go Days to a Toy Desert

Still, the deal-toy market is far from its pre-financial crisis mentality (or budgets), insiders said.

During the recession, firms slashed their budgets. For four to eight months, toy orders fell off. To survive the downturn, Russo laid off employees and moved to less expensive office space.

Lower Margins, Increased Competition

Average order size has fallen to roughly 20 to 30 toys from about 50 to 60 and the average order cost is about $2,500 to $3,000 plus shipping and tax. And the competition is fierce.

Although the big banks still have stringent budget policies, they have a little more toy flexibility for some of the larger deals.

Facebook's IPO was one such mega deal that warranted extra toy attention.

The Facebook deal toy features a big screen with Facebook icons and the names of many Wall Street heavyweights — a permanent reminder of the initial excitement surrounding the social media giant's debut.

Other toys on the toy makers' websites make up a virtual financial graveyard for deals gone by, including transactions with Lehman Brothers, Bear Stearns and Circuit City.

Russo likened the desire for toys to athletes, who upon winning the Olympics want more than just a "congrats."

And long after these "financial athletes" age or go the way of Lehman Brothers, the Lucite remains.

—Written by CNBC's Katie Little. Follow her on Twitter @Katie_Little_

Correction: An earlier version of this article reported that the average deal toy price at GDN is $100. In fact, the company said clients look to spend about $100 on average.

© 2013

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