Weekly Banking Insight: BlackRock’s Big Play, HPE’s Tech Leap, and More

Greetings and Happy New Year! Welcome to this weekly global investment banking update where we talk about the top transactions, themes and narratives in the investment banking world.

This week’s summary gives a glimpse of evolving strategic moves companies are following that not only redefine company portfolios but also mirror broader trends in the market.

BlackRock to acquire GIP for $12.55bn

BlackRock, a major financial player, is acquiring Global Infrastructure Partners (GIP) for $12.55 billion, aiming to double its fees from private markets. This move is strategic as it taps into the growing sector of infrastructure investments especially due to technological advancements and policy support. The deal may influence other financial firms to seek partnerships or go public. For those new to finance, it’s a significant acquisition that expands BlackRock’s reach and highlights the trend of financial firms seeking opportunities in different market segments.

Private Equity activity outlook for 2024

Goldman Sachs’ global head of asset and wealth management, Marc Nachmann, predicts a shift in private equity dynamics. With interest rates no longer at historic lows, relying on cheap debt for returns will be challenging. Nachmann emphasizes a return to private equity’s roots, focusing on solid deal sourcing and operational improvements. He anticipates increased performance variations among firms and a rise in corporate carve-outs. While the private equity transactions have declined in the past year, RSM UK’s private equity investment activity preview concludes that 2024 seems to stabilise this decline and set the market for growth next year.

M&A outlook for 2024

Despite geopolitical uncertainties, there’s optimism for increased mergers and acquisitions (M&A) activity in 2024. In 2023, global M&A fell to around $2.9tn, but favorable conditions, including lower borrowing costs and a buoyant equity market, suggest a rebound. Mega deals in energy, healthcare, and BlackRock’s acquisition of GIP signal sector revivals. However, challenges persist, with tough antitrust measures and geopolitical instability affecting dealmaking. The impact of upcoming elections, particularly in the US, remains a factor. Overall, while the M&A outlook has improved, a mixed scenario is expected, with dealmakers cautiously optimistic. It looks like instead of mega-deals, small to mid-sized deals might uptick the market this year.

Pennon acquires Sutton and East Surrey Water for £380m

Pennon Group, a FTSE 100 water company, acquires Sutton and East Surrey Water for £380m from its Japanese owners. Despite concerns about the UK’s water sector, Pennon adds SES Water to its portfolio, serving 750,000 customers in southeast England. The purchase involves an £89m equity payment and assumption of SES’s £291m net debt. Pennon announces a £180m equity capital raise to maintain leverage within 55-65%. The acquisition aligns with Pennon’s strategy, following previous purchases of Bournemouth Water and Bristol Water. The deal faces UK competition regulator approval amidst ongoing scrutiny of water companies’ financial health and performance.

HPE to acquire Juniper Networks for $14bn

Hewlett Packard Enterprise (HPE) is set to acquire Juniper Networks for $14bn, a 32% premium to Juniper’s previous trading price, entering the AI-driven tech frenzy. HPE aims to integrate Juniper’s switches and routers into its corporate computing systems, emphasizing their role in managing AI-intensive applications in data centers. The deal, valued at nearly 10x of Juniper’s revenue, offers $450m in annual cost synergies. Despite concerns from HPE shareholders about fit and new leverage, the transformative buyout reflects Juniper’s journey from extreme market fluctuations to a stable, profitable business amid the AI-driven tech boom.

Key transactions during the week:

1. Iberdrola backs out from the $8.3bn acquisition of PNM Resources
2. Airbus offers €1.8bn for the cyber security division of Atos
3. Sony to back out from $10bn acquisition of Zee over delays and Zee’s financial performance concerns
4. Aiolos Bio, a company specialising in respiratory medicine, to be bought by GSK for $1.4bn
5. Chesapeake Energy to buy Southwestern Energy for $7.4bn in an all-share deal marking it the biggest US oil & gas deal in a decade

Parting thoughts

As the banking sentiment for this year slowly unfolds, transactions such as BlackRock-GIP and HPE-Juniper Networks highlights a broader trend of companies seeking opportunities in diverse market segments.

In the next few weeks, we will see more outlook articles and transactions shaping the trajectory of investment banking this year. 

Stay tuned for the summary next week to stay upbeat in the this fast-paced sector!

Sources: Bloomberg, Financial Times, RSM UK Research Reports and Insights, Desktop Research

Disclaimer: This weekly global investment banking update provides insights into recent transactions and market trends for informational purposes only. It does not constitute financial advice, and readers are encouraged to verify information independently before making investment decisions. The content reflects the views of the respective sources mentioned, and while efforts are made to ensure accuracy, completeness, and reliability, we do not guarantee it. Investing involves risks, and past performance is not indicative of future results. The mention of specific companies or transactions does not imply endorsement. Stay informed about regulatory changes and market conditions, and consider seeking advice from qualified financial professionals for personalized guidance.