World

America First: US banks dominate M&A in 2019


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One DD scoop to start: leisure group Merlin Entertainments, best known for Legoland Resorts and Madame Tussauds wax museums, is set to be acquired in a £6bn deal by the Danish billionaire family that controls the toymaker Lego, private equity group Blackstone and a Canadian pension fund. More here.

Donald Trump thinks of himself as the ultimate dealmaker. As we all know, he’s even got a book on it — The Art of the Deal.

In it, Trump encourages thinking big (full disclosure: DD has no plans to ever read the ghostwritten book). US dealmakers have taken that to heart.

Intended or not, Trump’s “America First” policies have had an impact on global dealmaking. US activity is soaring, while Asia and Europe have been enviously watching from the sidelines.

Buoyant stock markets and cheap financing in the debt markets have helped to crank the volume of deals up almost a fifth from a year ago, and America’s slice of the takeover pie is bigger than it has been in more than three decades.

America’s merger success has come at the expense of cross-border deals, as Trump’s protectionist approach — including his trade war with China — keeps dealmakers thinking local.

Companies have found plenty of suitors on home turf, with 10 of the largest transactions sealed between companies located within the same country. The US accounted for eight of them.

While bankers in the US have been kept busy with mega deals from the likes of drugmaker Bristol-Myers Squibb, defence contractor United Technologies and oil group Occidental Petroleum, European bankers have looked on green eyed.

The trend has lined the pockets of American investment banks, with JPMorgan, Goldman Sachs, Citigroup and Bank of America all gaining market share over Asian and European rivals, according to Refinitiv data. Here’s how they all rank:

Regulators in Europe have taken a hard stance on antitrust issues, dashing the hopes of companies such as Siemens.

And if it’s not the regulators putting barriers up, the companies themselves are having a hard time seeing eye to eye. For Deutsche Bank and Commerzbank it was too complicated and Fiat Chrysler Automobiles got tired of delays at France’s Renault.

A single $69bn deal engineered by Saudi Arabia to bolster the prospects of its state oil company Saudi Aramco was chiefly responsible for a pick-up in activity in Africa and the Middle East, proving the impact that large deals can have.

Here are the main takeaways in terms of data:

  • $1.1tn worth of US corporate takeovers were agreed in the first half of the year;

  • global dealmaking reached $2tn in total, which is the third-highest on record but still down 13 per cent from last year;

  • European transactions tumbled 57 per cent to $287bn, marking the weakest first half in six years;

  • activity in Japan also dropped, by 23 per cent to $38bn. The value of deals in the rest of Asia Pacific came in at $342bn, down 28 per cent from last year.

Get the full story from the DD team here.

Japanese governance gets a makeover

Japan’s governance shortcomings have been a constant source of consternation for investors.

© FT monatge / Bloomberg

Take the highly acrimonious battle between the hedge fund Oasis Management and Alpine Electronics over its merger with Alps Electric, its parent company and Apple supplier.

Minority investors, including the Hong Kong-based firm, took issue with the price, which they thought was artificially low. When the deal was announced, Alpine investors said the tie-up stank of a distinctly Japanese odour of stitch-up and claim that the company would be worth about twice that.

The firm, ran by the activist fund Seth Fischer, said the deal was a clear example of the failure of Japanese managements to defend the interests of minority shareholders.

Japan’s governance issues are so profound — even high-profile companies such as Sony, Toshiba and Olympus have struggled to avoid them — that it prompted some people to ask, what else did you expect?

Even Elliott Management, the activist hedge fund run by Paul Singer, took a stake, emboldened by a government campaign urging Japanese businesses to engage with outside shareholders and deliver higher returns.

Now Japan is on the cusp of change. The country will unveil its first changes to its M&A guidelines in more than a decade on Friday as the government prepares for a spree of management buyouts and companies taking over listed subsidiaries.

The new guidelines reflect an acknowledgment by the government that current rules don’t sufficiently protect against conflicts of interest and too easily allow the steamrollering of minority shareholders.

The changes come as Japanese companies braced for what could potentially be the most contentious shareholder meeting season in history. Acutely aware of the high-profile activist pressures, some Japanese corporations are already making attempts to forestall trouble at their annual meetings by pledging to scrap their takeover defence strategies to placate investors.

But before activists get out the bubbly, it’s important to remember that the guidelines, which are intended to reduce the conflict of interest that arises from companies having cross-shareholdings and the overly cosy relationship between management and banks, are non-binding.

Still, it’s a show of Japan’s wider push for better governance standards that have left many investors in the region with a sour taste and could revive Japan’s underperforming equity market.

The FT’s Leo Lewis has the full story here.

Hays takes Broadway to the courtroom

Depositions are typically unpleasant affairs for those facing inquiry. But Carole Shorenstein Hays, Tony award-winning Broadway producer, was not going to let some probing questions crimp her style.

And that has become a problem for the Tony law firm, Sullivan & Cromwell.

Hays’s company was involved in a complex Delaware law dispute with a business partner over the rights to featuring the shows Dear Evan Hansen and Harry Potter and the Cursed Child in San Francisco.

In a deposition she gave over 10 hours, Hays’s evasive and bizarre answers led to a rebuke from the Delaware Supreme Court in a 20-page addendum to the decision for the underlying dispute.

The court wrote about “Hays’s wilful and bad faith litigation tactics”: “The deposition appears to have been a colossal waste of time and resources due to her behaviour, which made a mockery of the entire deposition proceeding.”

We’ve copied excerpts of her deposition answers below but please click the link and go to page 51 for the entire spectacle. Trust us, it’s worth your time.

The court also took issue with the law firm which the court believed should’ve done more to curtail its client’s courtroom antics.

Note, as the FT has written about previously, this is not the first time the Delaware Supreme Court has given direct advice to lawyers on how to do their job:

Q: Since you completed your studies at [New York University], have you had employment anywhere?

A: How do you define “employment”?

Q: You’ve never used the word employment in your life?

A: I’m just wondering how you define it.

Q: Have you used the word employment in your life, ever?

A: I’m asking you.

Q: You don’t get to ask the questions. I get to ask the questions.

A: Oh, sorry.

Q: Have you ever used the word employment in your life?

A: I’ve used many words.

Job moves

  • Jony Ive, the man behind some of Apple’s most iconic designs for the Mac, iPod and iPhone, is leaving the company after more than two decades. Sir Jonathan is setting up his own new venture, a creative business called LoveFrom, with Apple as its first client. Read the FT exclusive here.

  • Scott Gottlieb, the former director of the US Food and Drug Administration, has been elected to Pfizer’s board of directors. Gottlieb resigned from the FDA earlier this year after two years at the helm.

  • Liz Claydon has been appointed to lead KPMG’s deal advisory business. Claydon has been at the accounting firm for almost three decades, most recently as sector head of the company’s UK life sciences practice.

  • King & Spalding has hired Scott Levine and Christine O’Connell as partners in the law firm’s corporate, finance & investments practice in New York. Levine and O’Connell both join from Arnold & Porter, where they were partners.

  • Ernst & Young has appointed Jan Bellens as the global banking and capital markets leader and Isabelle Santenac has been promoted to global insurance leader.

  • Investment bank Baird has hired Scot Berg as a managing director in the firm’s global financial sponsor team in New York. Berg was previously a managing director at RBC Capital Markets.

  • JPMorgan Chase has hired Ryan Tull, a former managing director at Credit Suisse, to run the bank’s oilfield services advisory practice in Houston, Bloomberg reports.

Smart reads

The tiger cub with a roar Chase Coleman’s biggest problem is one most of us would like to have — too much money. The hedge fund manager, who’s married to a chemicals heiress, has $30bn in his Tiger Global fund. Where to put it all? (BBG)

Mile-high club JPMorgan Chase has a tough line to toe between promoting its own branded card, the hugely popular Sapphire Reserve, and keeping its airline partner that wants more money for miles happy. (Wall Street Journal)

The land of Vin-everything While South Korea has Hyundai and Samsung, Vietnam now has Vingroup — a rapidly expanding conglomerate that makes everything from smartphones to schools. But some activists are concerned about the company’s practices. (FT)

Fosun forks out At a time when many Chinese companies are breaking their habit of shopping overseas, Fosun doesn’t look like it has any intention of slowing down. (BBG)

News round-up

Lars Windhorst buys minority stake in Berlin soccer club (FT)

The incredible shrinking stock market (FT)

Vestager revives long dormant antitrust weapon against tech groups (FT)

UK formally intervenes in sales of stakes in key newspapers (FT)

Risky government reviews cloud deal prospects in big M&A year (BBG)

Emmanuel Macron says France does not need to cut Renault stake (FT)

French retailer Casino plans to revamp Latin American business (FT)

Grab raises $300m from Invesco to move beyond ride-hailing (FT)

Nissan CEO faces deadline to fix US problems (WSJ)



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