One scoop to start: Formula One owner Liberty Media is in exclusive talks to buy the company that owns MotoGP for more than €4bn, in a deal that would unite the elite car and motorcycle racing series, according to people familiar with the matter.
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In today’s newsletter:
Apollo’s personal expenses scandal resurfaces
Blockbuster US deals throw M&A a lifeline
Swedish software group attracts short sellers
If a US federal court district judge along with three appeals court judges collectively mischaracterised your business practices and concluded that your customers were being overcharged, you would probably want to set the record straight with the judicial branch. Apparently, Apollo Global Management has other priorities.
The FT in late 2020 was the first to report about a Southern District of New York decision in which Judge Kevin Castel ruled that Mohammed Ali Rashid , an Apollo private equity partner, breached his duties to LPs by improperly billing hundreds of thousands of personal expenses.
Rashid, who had been fired from Apollo and repaid the expenses, offered an intriguing defence: He said he believed Apollo, not the funds, was reimbursing him for, among other things, restaurant boondoggles at New York City icons, including Brother Jimmy’s and Nobu .
(For the uninitiated, between the aughts and coronavirus pandemic, Brother Jimmy’s, or Bro J’s, was a go to hangout for twenty-something finance bros , including Rashid.)
Evidence indicated that his colleagues also thought Apollo was on the hook for expenses. Additionally, limited partnership agreements seemed to indicate that Apollo should be paying expenses even as the funds and LPs were getting the bills at the time. Rashid did not convince the district judge even as the court also pointed the finger at Apollo’s practices.
But earlier this month, the US Second Circuit Court of Appeals bought Rashid’s theory and reversed the lower court judgment. It in effect said Apollo was improperly sending expenses over to LPs and if it didn’t have its house in order, how could Rashid be the only person held accountable?
DD’s Sujeet Indap asked Apollo what it thought of all this. Apollo told him: “Apollo’s accounts receivable department never knowingly, or as a matter of practice, improperly billed any Apollo-managed funds for expenses that should have been accounted for as management company [Apollo] expenses.”
Apollo itself was never a target in the Rashid matter and has never apparently sought to set the record straight with the court. Ultimately, if its LPs are satisfied there may be no need to worry about the notions of anyone else, including federal judges.
If a UK paper and packaging company is at the centre of a bidding war, then M&A must be back.
On Tuesday, International Paper confirmed that it had made a takeover proposal for UK group DS Smith , raising the possibility of a bidding war for the company, which has already reached a deal with Mondi .
And DS Smith isn’t alone. The M&A machine is slowly revving up again, driven by blockbuster deals — those worth more than $10bn — which more than doubled in the first quarter of 2024 compared with last year, signalling the earliest signs of recovery in a market that has faced a lengthy drought.
The UK packaging industry aside, most of this year’s M&A action is happening across the Atlantic, with the US pulling its weight. Most of the deals were in the energy, tech and financial sectors, according to data from the London Stock Exchange Group .
The US’s share of global takeover action reached a 35-year high, while European deals climbed 60 per cent from a year earlier. Asia-Pacific deals dropped 28 per cent.
Some of the biggest deals struck in the quarter included Capital One ’s $35bn acquisition of Discover Financial , and chip design toolmaker Synopsys ’s $35bn takeover of engineering software maker Ansys .
But the market’s only busier compared with last year’s decade low; deals cratered in 2023 following a frenzy of activity during the pandemic that was fuelled by rock-bottom interest rates.
“There’s a lot of volatility with a lot of fits and starts in the pace of activity,” said Stephan Feldgoise , global co-head of M&A at Goldman Sachs . “You have this extraordinary equity market performance but also some red flags, particularly when it comes to more economically sensitive consumers.”
The increase in deals has been partly spurred by an anticipation of rate cuts from central banks, which investors think could come as early as June.
Still, some are being cautious, and one group of investors doesn’t seem convinced: private equity is sitting on a record number of assets . That’s the case even as they start to face pressure to sell some portfolio companies to return capital to their backers.
Accounting software group Fortnox is the Swedish stock market sensation you have never heard of. The company’s shares have quintupled in value since chief executive Tommy Eklund took the reins in 2020, with its market capitalisation at about $4.6bn on Tuesday. It has expanded into areas such as invoice financing and credit cards, and acquired a business that connects customers with professional contractors.
But some analysts and hedge funds are sceptical about how much further the business can expand, while questioning the quality of its reports to investors.
The group’s shares fell more than 14 per cent on Wednesday after the FT reported some of these concerns, wiping about $690mn from its market cap.
For instance, the company said in 2021 that there were 1.5mn Swedish businesses in its total addressable market, far higher than the roughly 800,000 companies the firm said comprised its “relevant market” in 2019.
Data from Sweden’s statistical agency show that there are 1.33mn registered enterprises in the country. Meanwhile, Sweden’s tax authority told the FT that of 750,000 people registered as sole traders in 2022, approximately 180,000 reported no revenues.
Roger Hartelius , Fortnox’s chief financial officer, told the FT that it also counted other organisations, including condominium associations and sports associations. Those associations need to “manage and report to the tax office”.
Investors also questioned some of the company’s reports, including its decision to change the presentation of its operating segments every year under CEO Eklund. Hartelius told the FT that “our main focus is on customers and products and the responsibility connected to that is how we have chosen to be organised”.
Firms that have shorted the stock include London-based Marble Bar , CapeView Capital and Kuvari Partners .
Bain Capital has promoted David Gross to co-managing partner, the highest position at the asset manager, where he will work alongside John Connaughton . He succeeds Jonathan Lavine , who will become chair of the group. The firm also named Chris Gordon and Robin Marshall as the heads of its global private equity business.
Christopher Finn , the longtime chief operating officer at Carlyle Group , is retiring this summer. Finn will be replaced by Lindsay LoBue , who joined the US private equity group in October from Goldman Sachs , and was named deputy COO in February. Finn will become a senior adviser to Carlyle.
Investcorp has named Abbas Rizvi as its chief financial officer, replacing Jan Erik Back , who will retire in April.
Linklaters has elected 27 new partners globally , with the majority falling within the law firm’s corporate division.
Dean Meyer has joined venture capital firm Sequoia as a partner focused on early stage investments. He was previously an investor at Vine Ventures .
Talent battle The frenzy to hire talented AI experts is reaching new heights, with groups offering million-dollar-a-year pay packages and hiring entire teams in order to stay ahead, The Wall Street Journal reports.
Card tycoon Michael Rubin, the chief executive of Fanatics, went all in on trading cards — and became the most feared dealmaker of his generation in the process, Bloomberg reveals.
Economic rescue China’s citizens are saving rather than spending, the FT writes. Will Xi Jinping’s pivot to high-tech manufacturing be enough to boost the country’s economy ?
Biden administration warns of lengthy disruption at Baltimore port (FT)
Commuting is back — but not as we knew it (FT)
Disney settles lawsuit in Florida theme-park dispute (FT)
Amazon writes its largest venture cheque yet for AI start-up Anthropic (FT)
Janet Yellen warns China against clean energy dumping (FT)
Xi Jinping tells US CEOs that China’s growth prospects remain ‘bright’ (FT)
Tom Hayes loses appeal against Libor rigging conviction (FT)
US small-caps suffer worst run against larger stocks in over 20 years (FT)
Due Diligence is written by Arash Massoudi , Ivan Levingston , William Louch and Robert Smith in London, James Fontanella-Khan , Ortenca Aliaj , Antoine Gara , Sujeet Indap , Eric Platt , Mark Vandevelde and Amelia Pollard in New York, Kaye Wiggins in Hong Kong, George Hammond and Tabby Kinder in San Francisco, and Javier Espinoza in Brussels. Please send feedback to due.diligence@ft.com
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