Private equity firms eager for allocations sometimes argue they can make money by buying unloved assets at distressed prices, fixing them up, and selling them off to big companies looking to make “strategic” acquisitions. So it’s interesting to read a new paper from a pair of professors at the University of St Gallen, which attempts to answer whether PE firms or corporates get better deals when they buy assets.
The short answer: PE firms generally buy targets at lower earnings multiples than strategic acquirers — but much of the effect, which has diminished significantly since the mid-1990s, comes from purchases of smaller targets on public markets by smaller funds, often in coalition with other PE firms. Moreover, the biggest discounts are mostly captured by PE firms that do relatively few deals. Read more
You might have heard the speculation. You might have seen it discussed in Markets Live, passim. (We were sceptical.) But SABMiller is now very much in play….
The Board of SABMiller notes the recent press speculation and confirms that Anheuser-Busch InBev SA/NV (“ABInBev”) has informed SABMiller that it intends to make a proposal to acquire SABMiller. No proposal has yet been received and the Board of SABMiller has no further details about the terms of any such proposal.
No hints in advance. We’re still doing the checking calls.
But we are pretty sure we will have details of a rather sizeable US takeover during FT Alphaville’s regular Markets Live session on Thursday. Read more
Rumours are reaching FT Alphaville that nTelos, a US regional wireless company, is a takeover target for Shenandoah Telecommunications.
Shenandoah (better known as Shentel) has been putting together a knockout $200m offer for the Virginia-based mobile broadband provider, a nearly 50 per cent premium to Tuesday’s closing value, according to people claiming direct knowledge of the negotiations. A price of around $9.25 a share has been all but agreed, they said, against Tuesday’s close of $6.20. Read more
We had a hunch back in July 2012 that negative rates, as and when they would surely manifest, would create all sorts of perverse incentives for banks and capital owners.
Notably, our point was, that banks would prefer to lend money to monopoly-minded corporates focused on artificially constraining supply — rather than those focused on improving competition rather or pursuing capex policies. Failing that, a negative rate environment would otherwise create a plethora of zombie corporates propped up with cheap financing, producing output that isn’t necessarily valued much by anyone in the wider world. Read more
One small detail in Shell’s £47bn takeover of BG Group to consider: Stamp Duty. HM Treasury can look forward to a £235m windfall once the deal concludes.
Corporate buyers used to avoid the 0.5 per cent tax by using schemes of arrangement, where shares in the target company would be cancelled, followed by the issue of new shares by the bidder. However a change to company law last month closed the loophole.
The measure was announced in December’s Autumn Statement, but hasn’t attracted much attention since, possibly because it was only forecast to bring in about £65m per year. Read more
From Dealogic for your historical comparatating pleasure, the top ten largest mergers and acquisitions of all time (in nominal dollar value).
Shell’s cash and share offer for BG is the second biggest oil and gas deal so far, at $82bn, just behind of the 1998 takeover of Mobil corp by Exxon, worth $86bn.
Meanwhile, in the all-time deal value league, Shell BG places ninth. Tabulation below the fold. Read more
Given some readers will have followed our November report that Amaya Gaming Group of Canada seemed to be preparing a £1.2bn takeover offer for London-listed Bwin.Party Digital Entertainment, it’s only fair that we now share the following — from erstwhile colleagues at Dealreporter:
Bwin.party’s [LON:BPTY] potential suitors are rumoured to have lost interest in acquiring the company, two bankers following and an industry source with knowledge of the situation said. Read more
Merger and acquisition activity, as we all know, comes in waves. There are M&A frenzies and then there are M&A lulls.
But a new study by a group of complexity and evolutionary scientists looks deeper into the social drivers of corporate M&A activity and suggests there may be more intrinsic forces, such as ancestry, at work.
The authors define ancestry as the cumulative number of mergers from all acquired entities — an idea that puts the corporation in the category of an organism which pursues M&A for mainly for survival reasons. The more pronounced a corporation’s ancestry on the M&A front, they say, the more likely it is to survive in the long term. Read more
John Komlos of the Ludwig-Maximilians University in Munich proposes in a new paper that ‘creative destruction’ has become devastating, not just destructive:
the destructive power associated with Schumpeterian creative destruction has increased markedly relative to their creative component, in contrast to previous epochs. Creative destruction’s gentle winds have mutated into cyclones of destruction.
Thus, our sense of well-being will probably not keep pace with even the slow economic growth being predicted by Gordon, Summers, and Krugman. While the economy will be growing, albeit slowly, we predict that our sense of well-being will be mysteriously lagging well behind.
For a potential $7bn plus takeover battle, the attempt by National Company KazMunaiGas (NC KMG) to acquire full control of the London GDR-listed associate KazMunaiGas Exploration Production (KMG EP) has failed to generate much discussion.
Maybe it should given that NC KMG, which is 100 per cent owned by the Kazakh sovereign wealth fund, has offered just a 15 per cent premium to take out the the 37 per cent of KMG EP it doesn’t already own. Read more
Set the scepticism dial to 10 — on the basis that memories of German carmaker buying Chrysler is the sort of thing to make car executives wake up in a cold sweat. However Fiat shares were up more than 4 per cent at pixel time for a reason…
That reason is a story in the German manager magazin which reports major shareholders are in conversation about a potential takeover of Fiat by VW, with Chrysler the key to solving VW’s US problems.
Der Volkswagen-Konzern steht vor dem nächsten großen Coup. Auf Großaktionärsebene finden bereits Gespräche über eine Übernahme von Fiat statt. In einer Integration von Chrysler sieht Volkswagen einen möglichen Lösungsansatz für die eigenen US-Probleme.
Judging by the amount of time it took to register and start playing, downloads may be a counter-indicator of investment banker business. But in a world where everything is gameified…
“Buy. Sell. Merge. Master…” Read more
Google has a $30bn warchest to spend on foreign acquisitions, or so it’s told regulators. If it decided to spend the cash in one go the options for what it could buy* are rather limited.
There are only seven companies outside North America (we skipped Canada, rather unfairly) valued between $29bn and $30bn:
- Philips has to be top of the list, as the only technology company on the list. Beard trimmers would be a natural fit for the Silicon Valley behemoth, but medical equipment and lightbulbs not so much.
- Nordic banks Swedbank, DNB and SEB could provide Google with a solid platform to launch its own currency.
- Investor is out of the question: a Stockholm holding company with a wide portfolio of Swedish minority stakes, it would only be useful if Google planned to go a whole lot further and buy up every Swedish blue chip (currently worth a bit less than twice Google).
- East Japan Railway is a bit low-tech for Google; the problem of self-driving trains has already been solved, after all.
- Compass Group brings the most obvious cost savings: the British catering giant already runs the canteen at the Googleplex (“I liked the sandwich so much I bought the company,” Larry Page didn’t say). Perhaps Google could apply its innovative approach to rethink lunch.
The attempt by US drug company Pfizer to buy AstraZeneca, the crown jewel of Britain’s pharmaceutical industry, has prompted entirely predictable reactions.
There is outraged huffing and puffing from the left and from vested interests about the loss of the UK science base. Even the FT has joined in with the pseudo-dirigism more usual in the Guardian or Le Monde, calling for an independent assessment of takeovers which might damage UK science… Read more
SocGen are at it again, and this time they appear to be mid-thrust:
Disappointingly, there’s no introspective mention of value destruction to be seen, but we do get price defense as the main justification for M&A activity: Read more
Can it be a merger Monday if the big deal leaked on Friday?
Either way, the second quarter deal making was already off to a fast start before the cement makers got involved, according to Goldman Sachs, and Europe is finally starting to join in the fun.
A week into 2Q, M&A announcements continued at a brisk pace (+21%y/y) while completions also saw gradual improvement (+7% y/y). While the year to date strength in M&A has been primarily driven by the US (+21% y/y), we have seen notable improvement in selected pockets of EU deal flow. Specifically, EU buyers’ appetite have seen sizable growth (+38% y/y), though more in favor of cross-border purchases (2x vs. 2013TD) relative to domestic consolidation (+27% y/y).
It may be something in the wind, but is it becoming acceptable for companies to spend again?
Exhibit A: Morgan Stanley politely suggests that, even though companies which actually increase investment in their business with capital expenditure have tended to trail the scrimpers, it might be time to look at the capital intensive types again. Read more
It’s been a while since we used the RAW* tag on Markets Live. But hey! Monday’s session managed to drag the following pre-packed statement out of F&C Asset management…
London, 27 January, 2014: The Board of F&C Asset Management plc (“F&C” or the “Company”) notes the recent press speculation and confirms that it has received an indicative offer from BMO Financial Group (“BMO”) of 120 pence in cash per ordinary share (the “Offer Price”) for the entire issued and to be issued ordinary share capital of F&C (the “Possible Offer”). In addition, F&C shareholders will be entitled to receive and retain an ordinary course dividend of 2 pence per F&C share for the financial year ended 31 December 2013. Read more
Rattled by the equity sell-off?
Here’s an antidote…five pages of potential bid targets, courtesy of Andrew Garthwaite and team at Credit Suisse… Read more
Graham Secker and team at Morgan Stanley seems to think so, citing the corporate earnings recovery, rising business confidence and welcoming capital markets. There’s also an element of M&A having to come back into fashion, given that in Europe at least takeovers are running at a circa 20 year low… Read more
What’s been lighting a fire under Forest Laboratories?
As Liberum Capital see it, everything is in place for private equity to flourish — except for the small matter of deals.
Companies have lots of cash, debt is cheap, the market for secondary deals between private equity groups is healthy, and the number of buyout-backed initial public offerings is well on track to beat last year.
Fundraising also pulled in $204bn globally in the first half of this year, versus $170bn in the same period in both 2011 and 2012.
But there is a note of caution… Read more
Reading that Alcatel-Lucent is to cut 10,000 jobs (with 900 axes to actually fall in France) we found ourselves humming the grand old Duke of York.
We have no comment on the merits of this latest bout of self-help, which actually aims to cut 15,000 jobs and add another 5,000 by 2015. But for context (charts by us, data from Bloomberg): Read more
It’s possible Prem Watsa is a genius. We don’t wish to exclude it. Read more
Blackberry’s logo (below) resembles nothing as much as a hail of seven silver bullets. It appears the gun has been pointing the wrong way.