Global Banking & M&A, explained

Anu Aiyengar , J.P. Morgan's Global Head of M&A, joined our fireside chat to respond to questions from students worldwide. The session was hosted at NYU School of Professional Studies . Below are excerpts from her remarks and the link to her complete response to each question.?

What does the Global Head of M&A do?

Every day is different, so if you like variety, this is a good job. The career progression is Analyst, Associate, Vice President, Executive Director, and Managing Director. My grandmother once asked me what I do, and she couldn't conceive that somebody would actually pay for my advice (laughs from the audience). We advise companies on whether to do transactions. My job is to help a company achieve its dreams or potential, and help its boards and C-suite navigate it from vision to the actual transaction. 1 Watch full response

M&As as part of a company's growth strategy

For growth, a company may have immediate organic growth opportunities and allocate its resources to focus on that. If the market is anemic, not growing, the way to grow is through market share gains or adding capabilities. The capital allocation mix may include capital investments to grow your business organically, M&A for inorganic growth, and return to investors. 2 Watch full response

M&A tips for buyers and sellers

Start with your company's strategic direction; why are you buying or selling something? A transaction happens when what it is worth to you is more than what it's worth to me; it's simple as that. As a buyer, you must do something with the business that differs from what I will do. Be really careful in coming up with your plan about what you will do with the acquisition and who will be responsible for that. Private Equity firms call it the 100-day plan. A deal makes sense at a certain price range. After that, whether it makes sense is based on the execution of what you do. 3 Watch full response

M&A Strategy. Buy now at a lower price, or let competitors go belly up?

What is good for JP Morgan and all banks is for banks to be healthy and for investors and depositors to have confidence in that banking system. Uncertainty is not a good thing. That is why a group of banks put 30 billion dollars into First Republic. You want the entire banking system to be healthy, for the whole market to believe in it, investors, depositors, and regulators. The amount of capital that sits in banks today is a lot, so people should have a lot of confidence in the system. ? Watch full response

J.P. Morgan M&A, on becoming number one

Today, J.P. Morgan is the result of different brands that came together under J.P. Morgan. At one point, our Latin American business was bigger than in the United States. We have deep roots in London and through Flemings in Asia. One of the things that attracted me to JP Morgan was that it's not an American Bank; it's a collection of local banks that came together to become global. I like the global part of the business. ??Watch full response

Strategic or cheap, available?

Don't buy something for yourself because it's cheap; buy it because you need it. Same in business, start with Does it make strategic sense? Maybe the startup has a technology, but they haven't figured out a go-to-market strategy, and you will be able to commercialize it. Perhaps it's a well-established company with different capabilities, and what you want is something ready to go, Plug and Play. Start with what your strategy is and what your gap is. A different way of thinking about it is what is available and what is cheap; I don't recommend that. ? Watch full response

The impact of activism on M&As

Years ago, when it started, activism was relatively small. Today activism is an alternative equity asset class with more than $100 billion under management. Not all of them agree; one activist could say Do X, another activist could say Do Y. When you're running a company, and someone else comes and tells you what you're doing is wrong and you should do things differently, the general human reaction is not to be happy. Every shareholder has a point of view, and the Board of directors is a proxy for representing that in the company's stewardship. Listen to what people have to say. Sometimes it's a good idea, sometimes a bad one, listen and decide for yourself. ? Watch full response

?Valuation of M&A targets with negative cash flows

Well done on your project*; Pfizer's is the largest deal announced in 2023. Now is the best environment for large, well-capitalized investment-grade companies because you're sitting on a lot of cash, sponsors dependent on more leveraged financing structures are out of the market, and cash valuations are reasonable. At a Pharma company, R&D drives organic growth. Just like when evaluating your projects, for a ?pharma company that currently has negative cash flows and will add inorganic R&D, what will you do with it? If the company has done phase two testing but not yet phase three, large Pharma companies sometimes enter into a licensing agreement; other times, they buy the company. By doing enough of them, even if a small percentage is successful, they can do quite well due to their ability to market it worldwide. That's why Pharma companies have huge M&A departments. ? Watch full response

*Note: the question, reproduced at the bottom, refers to our discussion with Mike Gladstone, Global President, Pfizer. Watch here. Read Here

How big does a transaction need to be for J.P. Morgan to be interested?

First, become a client. We cover companies from very early stages in one part of the firm; as the company grows to below 50 million dollars in revenue, you're in one part of the firm, then as you grow and become larger and larger, you go to different parts of the firm. Being a client is the only criterion; there is no size cut-off or anything like that. We bank companies from the cradle. In the early stages of the company, they first usually get private Capital, but it's never a linear line; sometimes, it goes zigzag. My team does M&A work for our clients in the Commercial Bank and our clients in the Investment Bank.? Watch full response

M&A Decision-Making: Gut Instinct or Hard Data?

Experience matters a lot. If you started in this business in 2010 or 2012, you only saw an up market. In my career, we have the dot.com bubble and many other mini ones in different industries and sectors, so having perspective on that is good. We do a ton of financial analysis with analytical rigor, but you have to apply judgment, ?which is informed intuition instead of a gut thing. It's based on experience, knowledge of the market, the client, the counterparty, and the competitors. The incremental expertise we bring beyond the numbers is a big part of why we get hired.1? Watch full response

Mergers & Company culture

Culture is very important. We joke that when you join Mother Morgan, it's like a mom, who takes care of you, teaches you, sometimes calls you, and ensures you do well. My role as a manager is to make everyone in my team the best version of themselves. We are a very big organization with a very strong culture. People from other firms usually mention the longevity of people in the Firm. I've been here 24 years, and many times in meetings, people have been with us for ?35 years. Longevity is not common on Wall Street and creates a very strong culture. For other companies looking to do M&As, ?when the two companies are relatively equal in size, whether that will be successful depends on culture. It won't be a good fit if there is a cultural mismatch.11 Watch full response

Sustainability

?We have an entire practice around sustainability, ?including helping companies communicate that to their investor base. We worked with Allbirds; their big story was around sustainability and how to position that for a shoe company. Our focused sustainability advisory practice, advises companies on how to think about the transition and how it affects M&A. Sometimes, instead of doing the transition yourself, you can buy the capability to help you do it.12 Watch full response.

Is technology, a?threat to banking jobs?

I think of it as a tool. When I started, doing trading comparables for Enterprise Value to Ebitda would entail pulling the 10Ks and 10Qs from the SEC website, reading all of it, and calculating it. I may have pulled multiple all-nighters doing that. Now, I have instant access to it. It didn't take people's jobs away; it made my job easier. Imagine most companies trade at a multiple between 14 and 16 and one at 22. Now you have time to sit back and analyze why.

Meanwhile, there is so much information nowadays that a big challenge is consuming all that. If something can read everything on a topic, summarize it, and give it to me, how wonderful is that? I'm extremely excited at the possibilities of what technology, including AI and machine learning, can do.13 Watch full response

Decline on M&A activity in Q1 2023

On average, M&A volumes from 2015 to 2019 were $4 trillion each year. In 2020, the first half was pretty slow. In M&A, we use words such as "You need to look into the whites of the other person's eyes before you make a decision" and "You need to go kick the tires." There was no looking into people's white of their eyes, you could barely see anything on Zoom, and there was no kicking of tires happening either. In theory, without the ability of people to meet, you would think M&A was zero, but it turns out that when you put people at home and they have nothing else to do, they do a lot of deals. Companies had to have digital capabilities, and with supply chain constraints, you had to buy; there was no other option. That drove an extraordinary level of M&A activity. In 2021 the market grew to six trillion. When we compare it to that, it is unsurprising that the volumes are down. There is also a huge uncertainty regarding interest rates, inflation, and war. Humans prefer not to change anything when there's a lot of uncertainty. Others think now is the best time to invest. Some of the best deals are getting done, but there are fewer deals.1? Watch full response

Career tips on investment banking

People think we do complicated math. We add, subtract, multiply, and divide, and we do it in Excel. If you hate numbers, that's a different thing, but it's not like we do calculus. Investment Banking is a great career if you are interested in looking at companies, analyzing them, studying them, and thinking about what they should do. All of Wall Street does internships, which I highly recommend. We all try to make our internship programs 100 percent real. There's also a ?client service element to the job. I always tell people that you should derive some psychic income from the client service part; when you help somebody figure something out, does that give you a high? Look at yourself and what motivates you. If I had started thinking, "Are there a lot of women who do this, and are they this, and are they that?" I may have psyched myself out of it. The key was to consider whether I liked this and was good at it. 1? Watch full response

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Why do we bring speakers to a Finance class?

At a school with constant innovation, the best thing we can do for our students is to have them speak with real-world leaders to become inspired. It's mutually beneficial. Teaching this class is a highlight of the week for me. For my day job', I frequently use ideas about pricing and product launches I learn from my students. Read more about this class.

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Previous speakers and recordings

Coca-Cola NA Chief Communications Officer. Disney Parks & Recreation Chief Financial Officer. IBM's Chief Communications Officer. McDonald's Chief Global Impact Officer; McDonald's Chief Communications Officer; McDonald's Corporate Vice President, Supply Chain. Procter & Gamble CFO, Asia-Pacific. Nike Global Retail Marketing Lead. Campbell Soup President, International. Estee Lauder Chief Marketing Officer. Estee Lauder Chief Communications Officer. IBM's Vice President, Marketing & Communications. IBM's V.P. of Communications for IBM Software. IBM's Vice President of Communications. IBM's Global Head of CSR. IBM's Chief Communications Officer. Roche Head of Strategic Finance. Access recordings here.

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Special thanks

Any Aiyengar for joining us. Bahriye Goren, Robbin Smith, Patrick Brady, Lisa Joseph, and all my students, who make this lecture my favorite part of the week.

These talks are offered as part of the Leading Global Growth series from NYU School of Professional Studies and managed in coordination with NYU SPS Integrated Marketing & Communications Department within the Division of Programs in Business.

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Watch the questions on Youtube

The recording is available on YouTube here with subtitles/captions in English, Spanish, Chinese & other languages. Those in a country where YouTube is not accessible can watch it on NYU's stream channel.

Questions asked

1.What does the Global Head of M&As at the largest bank do? Kate Ruberti

2.How is M&A part of a company's growth strategy? Mahek Shah

3. You managed transactions worth over $1 trillion. What best practices did you see from clients on how to value and execute M&As? Sometimes companies overvalue their targets. According to the WSJ, Goodwill write-down was over $140 Billion. How does that happen? What are some of the main drivers of why buyers overpay for M&As? In this class, we learn processes for large global companies and startups. What are some tips on how to buy & sell companies? George Benaroya

4. JP Morgan benefited from SVB's customers moving their deposits to JP Morgan. The market cap for small and medium size banks has declined by 50%. In situations like this, not just in banking but in general, is it better to buy smaller competitors at a much lower price or let them fail and capture their business after that? Phuong Anh Do

5. J.P. Morgan became number one in M&As in Canada in 2022, and I saw its expansion in Saudi Arabia, where I am from. What does it take to get become number one on international markets? Moneera Alateek

6. Imagine a Board that has two options: to acquire a startup with growth potential or a larger legacy company with problems at a discount. What kind of research should I do to help the Board decide? Xinwei Wang

7. How does activism affect the overall M&A market? The WSJ points out that "Disrupting deals is a preferred tactic for activists" on the one hand and that "investors may be disappointed by the lower returns" on the other hand. ?Shayma Kasraoui?

8. Our team selected Pfizer, and we created a strategic plan for their growth. We learned from Mike Gladstone, Pfizer's FRM Global President, how they acquired companies during market declines. With inflation and rate hike challenges, it seems like a "buyer's market," but we struggled to find good targets since many startups have negative cash flows, and predicting pharma industry growth is complex. Do you have any advice for evaluating such businesses? Ye Tao??????????

9. How big does a transaction need to be for JP Morgan to be interested? NYU students founded companies from IBM to, more recently, startups such as Etsy, and JP Morgan was the exclusive financial advisor. For those building startups, what would it take for JP Morgan to become their M&A advisor? ?Juan Felipe Ducruet?????????

10 Despite having access to mountains of data, many experienced executives tend to make business decisions based on intuition. As an M&A veteran, do you rely more on intuition or data analytics when faced with high-stakes decisions? Zhixin Li???

11. What is the corporate culture of JPMorgan Chase in your division? What are some best practices for "merging" company cultures when acquiring a company? Zhirun Liu??????????

12. We are witnessing an increasing focus on sustainability in the financial sector as the globe continues to struggle with the critical problem of climate change. What effects do you anticipate this development to have on the investment banking industry, and how is JP Morgan addressing the rising need for sustainable financial solutions? Mahek Shah??????

13. JP Morgan invests 12 billion dollars in tech every year on technologies. What are your plans for leveraging this investment to drive growth and create value for your clients? Do you think people's jobs are at risk due to innovations? Harsh Kakadia??????

14. What do you think about the main factors that led to the substantial decline in global M&A activity in the first quarter of 2023, and how have you experienced it? Zen Koo

14. As the only female executive leading the M&A franchise at the biggest bank in the US, what tips do you have for those who want to be hired by JP Morgan or in the investment banking industry? Jing Shen??????