Trends in the M&A Market

For this final discussion, I found two very different articles discussing new trends in the mergers & acquisitions market. From Bloomberg there is an article discussing changes in the M&A market as smaller, boutique investment banks are making headway in a market formerly controlled by smaller group of “big name” investment banks (think Goldman Sachs, JP Morgan, etc.). The second article is a summary of a survey of 200 big corporate and private equity M&A decision makers done by KPMG (one of the big four accounting firms). The key findings are interesting, particularly the barriers, strategies, impact of changes in credit markets and tax policies, and the use of generative AI in M&A deals and analysis.

You have a choice on how to go with this week’s discussion. Either take on the topic of boutique vs. “old-line” investment banks, how the M&A market has changed (based on one or more of the topics highlighted in the KPMG summary) or discuss a particular M&A deal that has closed in the last 6 months or is currently in progress.

If you go with either the boutique vs. old-line investment bank or new trends in M&A, you will need to be specific in your discussion and have appropriate supporting facts from a news article, company press release, etc. If you happen to work in an industry this is directly involved, that’s great, but you still need a public outside source to cite in your post.

If you go with a specific M&A deal: What is the company and what type of deal was completed or in the works? Discuss the industry and background on the firm. What changes might have happened to the firm or the deal in the months immediately before or after the deal? What is interesting about the company or the deal? What was (or might be) the synergies/motivation for the acquisition? As with all of the discussions in this course, I am not expecting a quantitative analysis!! If specifics of the deal are available and help support your discussion, go for it.

This is a wide-open discussion, but as always, you need solid supporting evidence from at least one outside article or company press releases.

Bloomberg.com Newsletter
Who’s Winning on Wall Street?
Merger advice seems to be on the rise! Plus: Bonus season is upon us.
By Sonali Basak
December 29, 2023 at 12:03 PM CST
The rumor of the demise of mergers is “greatly exaggerated.”
That’s what Stephan Feldgoise, the global co-head of mergers and acquisitions at Goldman
Sachs Group Inc., told me. The market for dealmaking is the worst in a decade—2023 was the
first year since 2013 to miss the $3 trillion mark in announced transaction volumes. But the bank
will still wind up as the top takeover advice giver for the seventh year in a row, Bloomberg data
shows.
Feldgoise isn’t the only one celebrating the benefits of a slowly rebounding deal market. Even in
a muted environment, dealmakers like him are betting on better times. Some are even hiring to
prepare for more work ahead.
This is a high-flying industry that’s long been dominated by Goldman, JPMorgan and Morgan
Stanley. Merger advice is a business banks love, because it can lead to hundreds of millions,
often billions, in fees without the need to tie up capital, as in the lending businesses or on a
trading desk. Yet some of the most notable investment bank winners this year are not among the
typical big three. These firms are hundreds of years younger and hungry for growth.
It’s an open question, though, whether these boutique investment banks can expand even further,
taking advantage of the weakness at a number of global investment banks.
Evercore, for example, solidified its standing among the top 10 dealmakers by merger volumes
advised on. It’s already been collecting the fourth-largest set of fees tied to M&A advice, and the
bank’s chief executive officer is setting even bigger ambitions. Centerview is another such firm
that has more than doubled its market share compared to last year, though it’s privately held and
doesn’t disclose its fees tied to M&A advice.
“Are we trying to be competitive with the top group? We absolutely are,” John Weinberg,
Evercore’s CEO, told me this week, as Bloomberg’s data held that the firm had also more than
doubled its market share this year. “And we’re trying to do it by having high-quality people.” He
went on to say that Evercore would “compete for every single opportunity.”
The bank is even hiring star dealmakers and focusing on promoting talent. “We’re adding more
capacity to serve clients, which we think will help our growth,” he said. “We’re adding talent in
a down market and are positioning ourselves for when the market does turn.”
Some of the world’s giant investment banks have had their fair share of tumult this year or faced
greater competition from firms like the one run by Weinberg (whose family ran Goldman for the
better part of its existence).
UBS Group AG, for example, saw its market share shrink, Bloomberg’s data shows, compared
with a year ago. It’s been in the process of integrating its operations with Credit Suisse. Barclays
saw its standing fall by one spot in Bloomberg’s so-called league tables, while Wells Fargo fell
out of the top 10 as it ceded more share to the boutique firms, or “independent” investment
banks, as they like to call themselves.
Even smaller firms have made a killing this year. Petrie Partners, for example, a small group of
energy specialists who worked on Exxon Mobil Corp.’s $60 billion takeover of Pioneer Natural
Resources Co., pushed ahead of global banking giants Deutsche Bank AG, Nomura and BNP
Paribas in the rankings. Lazard, Jefferies, Guggenheim, Moelis & Co. and Rothschild were all
among the top 20.
If the competition for mergers was this stiff in a weak year—you can just imagine how it’s
shaping up for a 2024 rebound.
KPMG M&A Survey Points to Come Back For M&A In 2024
Also shows 92% using or planning to use GenAI in M&A processes
December 18, 2023 – A recently completed survey of 200 big corporate and private equity M&A decision
makers shows optimism that dealmaking will make a come back in 2024. The survey found two-thirds
expect more dealmaking in 2024 than 2023, with most saying they will do their next deal in the first half
of 2024 rather than wait until later in the year. More than 70% said they are actively working on a deal
now, giving further weight to the anticipation of early 2024 activity.
Carole Streicher, Head of Deal Advisory & Strategy for KPMG US, said: “These survey findings resonated
with me as we have been seeing activity pick up from our clients in the last few months and expect this
momentum to continue into 2024, especially now that the Fed has signaled the end of its rate rises and
KPMG’s economists are forecasting four quarter-point rate cuts in 2024, starting in the spring.”
Dean Bell, Market Activation Leader for Deal Advisory & Strategy at KPMG US, said: “High rates were the
main brake on dealmaking in 2023. However, corporates told us a hypothetical half percent fall in rates
would not affect their plans very much, given their focus on growth through acquisition. Today, there is
less competition from private equity for valuable assets and they plan to take advantage of it. Private
equity buyers were of course more sensitive to rates, and this was borne out in the survey, with 66%
indicating they’d need rates to come down to do deals at a level similar to previous peaks.”
Per Edin, Innovation Leader for KPMG’s Deal Advisory & Strategy practice, said: “GenAI is already playing
a role in dealmaking today and its use will continue to grow in the future. M&A practitioners are either
currently using GenAI, or plan to use it in 2024, in their M&A processes, with deal strategy and for deal
structuring a key area of focus. We see tremendous opportunity for organizations to scale the use of
emerging GenAI capabilities in M&A, particularly in due diligence and target selection, and I expect 2024
will be the year that organizations take GenAI from initial pilots to wide-spread usage across their deal
teams.”
Some of the survey’s key findings are:
Current Deal Making & Expectations
There is optimism about the 2024 deal making market, where two-thirds (65%) expect it to grow beyond
what they are seeing in 2023.
Top Deal Making Barriers
High interest rates are limiting potential deals, especially for private equity. Market uncertainty and
shifting business valuations are also weighing on deal consideration.
The current market has also put greater pressure on managing risk and performing due diligence to
ensure value in deals.
Different Deal Strategies
Corporate seeks deals that will provide long-term value and growth, recession resistance and faster
business transformation.
Private equity is seeking opportunities to turn around distressed assets and expand into new markets
and customer segments.
Different Deal Making Plans
Most (80%) private equity deals are expected to be $1 billion or more while less than half (45%) of
corporate deals will reach this value.
Corporate plans to move faster with its deals, where over half (54%) are expected to announce in the
first half of 2024, compared to a third (33%) of private equity.
Credit Markets & Tax Policy
More (68%) private equity firms are looking to activate their ‘dry powder’ in 2024 through turn around
assets, paying higher multiples or seeking alternative assets.
Two-thirds (65%) say they are motivated to make deals before the presidential election, due to the
potential of tax policy changes.
Generative AI in M&A
53% said they are currently using, and 39% said they plan to use GenAI in the M&A process in 2024.
71% said they will use Gen AI for deal structuring and 51% said they’d use it for deal strategy.