Weekly Banking Insight: Increasing optimism but challenges prevail
Greetings and 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 improved optimism regarding deal-making around the world but also mirrors challenges associated with the optimism.
General Atlantic growing assets: Acquiring London-based Actis making its AUM $83bn
US private equity firm General Atlantic is set to acquire a controlling stake in London-based infrastructure fund manager Actis and add $12.5bn to its $83bn AUM. Actis specialises in sustainable infrastructure investments, particularly in emerging markets. General Atlantic CEO Bill Ford emphasises the significant capital needed for sustainable infrastructure, presenting a substantial opportunity. The move follows BlackRock’s recent acquisition of Global Infrastructure Partners, reflecting a trend of consolidation in private markets. The deal positions General Atlantic as a major player with nearly $100bn in assets. It also shows the inclination towards infrastructure sector assets, with some focus on sustainability / ESG.
Panmure Gordon and Liberum to merge and become the largest advisor for UK listed companies
Panmure Gordon and Liberum are merging to create the UK’s largest adviser to quoted companies, combating challenges from a drop in IPOs and deals. The equal merger, led by Panmure Gordon CEO Rich Ricci, aims to enhance services for mid and small-cap businesses. Facing subdued market conditions, the combined firm plans M&A and private capital raising expansion. The London stock market had only 23 issuers in 2023, raising a mere £953.7m, a 40% decline. The deal follows industry consolidation trends off the back of economic challenges, positioning the merged entity for growth.
Synopsys to acquire Ansys for $35bn
Synopsys is set to acquire Ansys in a $35bn cash-and-stock deal, signalling a resurgence in tech dealmaking. The merger responds to the demand for a “fusion of electronics and physics” as chipmakers aim to design larger appliances. The transaction values Ansys at c.$35bn on an enterprise value basis. Synopsys CEO Sassine Ghazi highlights the complementary nature of their solutions, anticipating regulatory approval. The tech industry witnessed a decline in M&A during 2023, but recent months have seen notable deals. Synopsys shares rose 3%, while Ansys shares fell 5%. The combined company expects to hit a revenue of about $8bn for 2023.
JetBlue / Spirit Airlines $3.8bn buyout faces legal hurdles
A US federal judge rejected JetBlue’s $3.8bn all-cash buyout of Spirit Airlines. The court deemed Spirit’s ultra-discount model crucial in the airfare marketplace. Spirit’s board, pressured by hedge funds, abandoned a stock merger with Frontier Group in 2022 for JetBlue’s premium bid. JetBlue sought infrastructure, raising concerns about preserving Spirit’s model. JetBlue will pay $470m in reverse termination fees. The ruling, impacting Spirit’s market cap and potential bankruptcy, highlights the challenges of modern corporate governance and consolidation in the airline industry.
Continued optimism on 2024 private equity deal-making
Private equity is poised for a surge in takeover activity as firms shed long-held investments, responding to heightened investor pressure for cash returns amid rising interest rates. The drop in portfolio sales since 2021 is reversing, necessitating urgency in asset sales for an industry sitting on a record $2.8tn in investments. Despite fundraising challenges, executives foresee a rebound in sponsor-to-sponsor deals, finding opportunities in new investments amid lower competition and multiples. This pragmatic shift reflects a cautiously optimistic approach amid changing economic conditions, hinting at a potential recovery in dealmaking, although challenges persist.
Other highlights of the week:
- Sekisui House, a Japanese real estate company, agreed to buy US-based MDC for $4.9bn in cash possibly marking the start of more Japanese companies seeking international expansion for growth, away from scarce domestic opportunities
- Investment funds raise billions to invest in VC-backed start-ups increasing the activity in start-up secondary market
- Shell is disposing off its Nigerian business for $1.3bn over issues of oil theft, damage and related violence
Certainly the first month of 2024 has come with a wave of optimism and a few deals finally coming through. However, there is some skewness towards private equity transactions, infrastructure sector becoming slightly attractive and consolidation in a few other sectors for multiple reasons, one such being retention of market share. But, the challenges still prevail and optimism seems to revolve around stabilising interest rates. The on-going geopolitical scenario makes it tough to understand how the year will unfold for deal-making.
Based on the deal activity the first quarter this year may dictate the trend for 2024.
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.
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