Weekly Banking Insight: Competition scrutiny, consolidation and more

Greetings and welcome back to this weekly global investment banking update where we talk about the top transactions, themes, and narratives in the investment banking world.

This week saw an increased scrutiny by the UK competition regulator Competition and Markets Authority (CMA), focus on the pet sector and general M&A and PE outlook for 2024 taking shape.

UK CMA concerned with consolidation in pet industry

Pet ownership surged during the pandemic, prompting investment firms to pour billions into the veterinary sector, driving consolidation. However, the CMA’s planned investigation into business practices has rattled investors, causing share price drops. While private equity’s role in the sector is under scrutiny, concerns about reduced competition, outdated regulations, and consumer choice persist. The consolidation trend has led to higher costs for pet owners, exacerbating financial pressures amid a broader cost-of-living crisis.

Telegraph takeover still facing opposition

The proposed £600m takeover of Telegraph Media Group by Abu Dhabi-backed Redbird IMI faced opposition, prompting government intervention to prevent foreign acquisition. Despite declining print circulation, digital readership remains strong. The move reflects concerns over foreign influence in UK media ownership. Political pressure led to Rishi Sunak’s administration blocking the bid, emphasizing the enduring influence of national newspapers in UK politics. However, such interventions raise questions about editorial diversity and media plurality. While aimed at preserving plurality, government intervention may inadvertently consolidate ownership among traditional players, sparking debates over media merger laws and dominance.

French news channel BFM TV and RMC radio station to be acquired for €1.55bn

Shipping tycoon Rodolphe Saadé is set to acquire French news channel BFM TV and RMC radio station from Patrick Drahi for €1.55bn in cash, aiming to close the deal this summer. The move marks Saadé’s expansion in the French media landscape, adding to his existing holdings including La Tribune and a stake in M6. Saadé’s maritime transport group, CMA CGM, pursues media investments alongside diversification into logistics. Critics caution against billionaire media ownership’s impact on impartiality and democracy. Altice Média, which includes BFM and RMC, saw significant sales growth under Altice’s ownership, now transitioning to Saadé’s family-controlled group.

Barrat-Redrow deal under the UK CMA scrutiny

The UK’s CMA is examining Barratt’s £2.5bn acquisition of Redrow, questioning potential competition reduction in the housing market. The merger would establish the UK’s largest housebuilder, combining annual production of 22,000 homes and £7.5bn in revenue. While Barratt’s CEO anticipates CMA approval, the watchdog’s probe follows a broader investigation into major housebuilders sharing sensitive data. Despite criticism of land banking, blamed largely on the planning system, the CMA seeks feedback before initiating a formal competition inquiry. This marks the housing sector’s latest regulatory scrutiny amid concerns over housing shortages and market practices.

Vodafone to sell its Italian operations to Swisscom for €8bn

Vodafone sells its Italian operations to Swisscom for €8bn, completing its European reshaping strategy. Shareholders to receive up to €4bn via buybacks, and dividend cut in half to 4.5 cents/share. CEO Margherita Della Valle aims for streamlined operations post-sale. Vodafone focuses on B2B growth and digital services. Swisscom plans to merge Vodafone Italy with Fastweb, aiming for market leadership. The deal, favoring Swisscom over Iliad, assures transaction certainty for Vodafone. Restructuring divides Vodafone into five divisions. UK regulator probes Vodafone’s merger with Three UK. CFO Luka Mucic expresses confidence in improving returns and dividend growth.

Other key highlights:

  1. A surge in biotech dealmaking, exemplified by AstraZeneca’s $1bn acquisition of Amolyt Pharma, signals ongoing activity in the sector, with 46 transactions exceeding $100 billion announced last year, led by Pfizer’s $42bn deal for Seagen Inc., amid a broader rally in biotech stocks boosted by a return to long-duration growth stocks and a pressing need among pharmaceutical giants to replace sales lost to patent expiries, with top firms holding over $110bn in cash equivalents, fueling further M&A activity.
  2. Grant Thornton’s US division is selling a majority stake to New Mountain Capital, marking the largest in a series of private equity transactions reshaping the accounting sector, intensifying competition as firms expand beyond traditional services, with Grant Thornton positioning to invest in technology, acquisitions, and returning capital to partners.
  3. Entain is considering selling several overseas brands, hiring Moelis as advisors, potentially divesting businesses not integrated into its technology platform, such as BetCity, SuperSport, and STS Holdings, aiming to refocus on core markets like the UK and Germany and invest more in its BetMGM joint venture in the US.
  4. Porticoes Capital, led by Wall Street veterans including Leslie Lieberman and Tom Naratil, plans to acquire failed banks closed by the FDIC, aiming to raise hundreds of millions from investors in a private offering, bypassing the traditional hurdles for private investment groups, as concerns persist over the banking sector’s exposure to commercial real estate loans amid changing office dynamics.
  5. Thomson Reuters CEO Steve Hasker revealed plans to allocate an $8bn war chest towards AI-driven acquisitions, intending to expand the company’s AI capabilities to cater to professional services, with over $100m annually dedicated to internal AI development, amid a broader transformation from content provider to a technology-focused entity.
  6. Private equity groups globally are grappling with a surplus of over 28,000 unsold companies valued at more than $3tn, as decreased deal activity and higher interest rates create challenges for investors seeking asset sales, according to Bain & Co’s annual private equity report, with a potential two to three-year timeline before liquidity improves.

Parting thoughts

While the UK CMA is being cautious of maintaining healthy competition, pet and biotech industries seem to be high on M&A this year. On the other hand, PE houses may off-load some assets later this year as rates stabilise or, even better, start declining. Who knew interest rates could flip an entire industry’s activity and outlook for such a long time!

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

Sources: Bloomberg, Financial Times, 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.
MSc Finance graduate from the London School of Economics and Political Science (LSE)
Avatar for Ria Vaghela

Ria V Vaghela is an M&A Executive at RSM UK and an MSc Finance graduate from the London School of Economics and Political Science (LSE). She has worked at Jefferies, Dial Partners and 7i Capital prior to RSM UK gaining an experience of about 1.5 years. She has also worked as an Editor and Content Writer for The Representative Media. Apart from finance, she is interested in reading books on psychology and economics and also likes to paint and play lawn tennis

Leave a Reply

Your email address will not be published. Required fields are marked *