Global M&A's 'glass half-empty' quarter
Happy Friday!
This week, Andres Gonzalez and I interviewed some of the world’s top rainmakers to collect their thoughts on the latest state of play with global deal activity. While M&A volumes announced worldwide rose 14% to $846.8 billion in Q3 till date, dealmakers are bracing for a slowdown in global M&A in the Q4 as companies postpone pursuing big targets ahead of the U.S. elections.
Investment bankers and deals lawyers are hoping this will only be a temporary setback before a rebound next year. U.S. M&A volume was down 8% to $338 billion, with stock gyrations, regulatory scrutiny and rates putting a dampener on activity.
Dealmaking was more robust outside North America, with Asia-Pacific surging 54% to $273 billion on the back of some large deals - with the figures including a proposed cross-border convenience store bid. Europe climbed 7% to $160 billion, the data showed.
Companies are starting to put off their pursuit of transformational deals until after the U.S. presidential elections in early November, investment bankers and lawyers said, as they want more certainty around regulatory and economic policies under a new administration.
"It's not been the most exuberant of M&A years we've seen. People have been more glass half empty than half full, I would say," said Adam Emmerich, co-chair of the corporate department at law firm Wachtell, Lipton, Rosen & Katz.
Increased scrutiny, especially from antitrust watchdogs across the world, weighed on the number of so-called "megadeals" worth more than $25 billion. Not a single transaction with an equity value of $50 billion or more has been signed so far this year.
Tom Miles, global co-head of M&A at Morgan Stanley, said historically, such deals have been a driver of overall deal volume. "It is clear that the lack of larger deals is a direct result of some of the regulatory pressures that exist," Miles added.
However, transactions in the $1 billion to $10 billion range were up 27%. During the quarter, the total number of deals worth $5 billion to $10 billion rose to 12 from 10 a year earlier, the Dealogic data showed.
Candy giant Mars' $36 billion takeover of Cheez-It maker Kellanova, Blackstone's $16 billion buyout of Australian data center operator AirTrunk, and Verizon's $9.6 billion acquisition of Frontier Communications ranked as the largest deals of the quarter. Canadian convenience store giant Alimentation Couche-Tard's attempted $38 billion takeover of Japan's Seven & i was rebuffed earlier in September.
Companies flush with cash are focusing on deals that face minimal risk of regulatory hurdles.
Elsewhere, Krystal Hu and Kenrick Cai produced a terrific scoop on ChatGPT-maker OpenAI working on a plan to restructure its core business into a for-profit benefit corporation that will no longer be controlled by its non-profit board - a move that will make the company more attractive to investors.
The OpenAI non-profit will continue to exist and own a minority stake in the for-profit company. The move could also have implications for how the company manages AI risks in a new governance structure.
Chief executive Sam Altman will also receive equity for the first time in the for-profit company, which could be worth $150 billion after the restructuring as it also tries to remove the cap on returns for investors.
Milana Vinn was first to report that Lightspeed Commerce, a Canadian payments software maker with a market value of C$3.2 billion ($2.37 billion), is working with a financial adviser to explore options including a potential sale.
The sale talks come months after the Montreal-based company replaced its CEO Jean Paul Chauvet and brought back founder Dax Dasilva at the helm, as investors raised concerns over the company's plan to prioritize growth over profitability following disappointing quarterly results in February.
Lightspeed has tapped investment bankers at JPMorgan Chase to evaluate its options and solicit interest from potential buyers, which could include other financial services providers and private equity firms.
And finally, L Catterton, the private equity firm backed by luxury goods giant LVMH, clinched a deal to acquire a majority stake in pilates studio operator Solidcore from its current owners.
The deal values Solidcore at between $600 million and $700 million. L Catterton will own Solidcore through its Flagship Fund.
The company, known for its challenging 50-minute workout classes on its “sweatlana” reformer machines, had been exploring a sale with investment banks North Point and Piper Sandler, Reuters reported in May.
And here’s the best of the rest from the Reuters corporate finance file:
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Bain-backed memory chipmaker Kioxia has scrapped its plan for an initial public offering (IPO) in October, three sources familiar with the matter said.
Go in guns blazing and it’s easier to miss the target. A $3 billion hostile takeover bid for Vista Outdoor has encountered fierce resistance from the camping-and-ammo outfit, which keeps maneuvering to divest its Remington brand instead. The latest tactics, however, provide an abject lesson in overshooting on defense.
UniCredit boss Andrea Orcel is no stranger to playing hardball. The former Merrill Lynch banker advised Royal Bank of Scotland on the hostile 2007 breakup of ABN Amro, for example. Yet even for him, it’s aggressive to snap up 11.5% of state-backed German lender Commerzbank just days after an initial 9% purchase met a cool reception from the target and its government. The raid requires softening, and Orcel has ample room to do so.
Activist investor Elliott Investment Management on Friday was named the presumptive winner in a U.S. court auction of shares in a parent of oil refiner Citgo Petroleum with a bid that puts an up to $7.286 billion enterprise value on Venezuela-owned Citgo, according to a court filing.
Privately held oil and gas producer Validus Energy has struck a deal to buy rival Citizen Energy for more than $2 billion, including debt, according to people familiar with the matter.
Morgan Stanley's middle-market buyout arm is exploring a sale of Sila Services that could value the residential services company at about $1.5 billion, including debt, people familiar with the matter said on Friday.
TPG has agreed to buy a minority stake in Homrich Berg, in a deal that values the wealth management firm at around $1 billion, people familiar with the matter said.
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Have a wonderful weekend!
Best,
Anirban
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Reuters News
Thomson Reuters