Weekly Banking Insight: Defence, Beauty and Pharma taking the lead

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 optimism in deal activity with sector-specific deal inclination.

Unilever explores PE interest for Ice Cream division valued up to €17bn

Unilever is seeking private equity interest for its ice cream division, including Wall’s, Magnum, and Ben & Jerry’s, valued between €10bn to €15bn, potentially reaching €17bn according to Barclays. CEO Hein Schumacher plans to list the business by 2025 but remains open to options maximizing shareholder returns. Advisors engaged private equity firms post-announcement. The division represents 16% of Unilever’s sales, prompting a strategic overhaul under Schumacher’s leadership. Potential challenges include Ben & Jerry’s impact on valuation due to political controversies. Previous divestments to private equity include the spreads and tea businesses. Unilever aims to focus on beauty, personal care, home care, and nutrition post-divestment.

Nationwide Building Society to acquire Virgin Money for £2.9bn

Nationwide Building Society is acquiring Virgin Money for £2.9bn, boosting Nationwide’s presence in business banking, mortgages, and savings. Nationwide will pay 218p per share plus a 2p final dividend, making it the UK’s second-largest mortgage and savings provider with assets totaling £366bn. The deal includes phasing out the Virgin Money brand, benefiting Virgin Group’s Richard Branson. Nationwide pledges to maintain branches until at least 2028. Virgin Money CEO David Duffy will retire, succeeded by Nationwide’s Chris Rhodes. Limited workforce changes are expected post-acquisition, with a commitment to Virgin Money staff for the first year.

Thyssenkrupp to deal with Carlyle Group for a stake in its Naval Unit TKMS amid heightened defence sector interest

Thyssenkrupp is in advanced talks to sell a stake in its naval unit, Thyssenkrupp Marine Systems (TKMS), to Carlyle Group amid increasing investor interest in European defense businesses post-Russian invasion of Ukraine. TKMS, which manufactures submarines and ships, is exploring options including private equity sale or German government stake. The move aims to capitalize on rising global demand for naval shipbuilding. TKMS, with a strong order book and sales forecast, could potentially lead to national and European consolidation. Thyssenkrupp’s restructuring efforts include divesting non-core assets, with TKMS being a key focus for strategic realignment.

AstraZeneca bolsters Oncology Portfolio with $2.4bn Fusion Pharmaceuticals acquisition

AstraZeneca has acquired Canadian biotech Fusion Pharmaceuticals for $2.4bn, expanding into radioconjugate oncology treatments to rival Novartis. Fusion specializes in radioconjugates, delivering radioactive isotopes directly to cancer cells, reducing side effects. AstraZeneca aims to develop a portfolio of radioconjugate drugs, boosting its oncology division, which generated $17bn in 2023. The deal includes $2bn upfront with additional contingent payments. AstraZeneca also acquired Amolyt for $1bn last week, totaling $3.4bn in recent M&A spending. The company plans to enhance Fusion’s manufacturing capacity. This acquisition follows AstraZeneca’s strategic expansion into oncology and vaccine sectors.

PAI Partners acquires majority stake in Beautynova, accelerating growth strategy in the beauty sector

French private equity firm PAI Partners is acquiring a 51% stake in professional hair products manufacturer Beautynova for €330m from Bluegem. Beautynova, based in Milan, saw €130m in sales and €30m in EBITDA in 2023, valued at 11x to 12x EBITDA. The deal aims to accelerate growth in the US and Europe. Despite market volatility, buoyant demand for beauty products, particularly in the US, continues to drive transactions. Notable deals in the sector include Kering’s €3.5bn acquisition of Creed and L’Oréal’s $2.5bn purchase of Aesop.

Other key insights:

  1. The M&A market is poised for a surge, driven by firms with substantial cash reserves, stable borrowing costs, and a desire to address gaps in corporate capabilities through acquisitions, although concerns over ill-disciplined acquisitions persist, with historical data showing mixed results from megadeals.
  2. Houlihan Lokey anticipates a surge in cybersecurity acquisitions this year as the rise of artificial intelligence heightens cybersecurity risks, with cybersecurity deal value already up 32% to $3.4bn this year; recent notable deals include Cisco Systems’ $28bn acquisition of Splunk Inc. and Proofpoint Inc.’s acquisition of Tessian Inc., signaling increased interest in cybersecurity firms amid escalating AI threats.
  3. Centroid Investment Partners, emerging as a key player in golfing, announced a new clothing line with Tiger Woods, following its acquisition of TaylorMade in 2021; founder Jinhyeok Jeong eyes further expansion with a potential $1bn US company acquisition, aiming to replicate the success of TaylorMade.
  4. Amid rising car insurance premiums, European insurer Ageas eyes a takeover of Direct Line Insurance Group Plc, seeking to capitalize on Britain’s now “structurally profitable” general insurance market, but faces challenges with Direct Line’s rejection of initial proposals and potential constraints on Ageas’s debt capacity, complicating the path to a friendly transaction.
  5. BAE Systems Plc and Campbell Soup Co issued investment-grade bonds totaling $7.3bn to fund acquisitions, with BAE’s $4.8bn bond supporting its $5.6bn purchase of Ball Aerospace, while Campbell Soup’s $2.5bn bond will repay debt from its Sovos Brands Inc. acquisition, amid a surge in bond sales for M&A financing as companies capitalize on favorable market conditions.
  6. A surge in dealmaking within the biotech sector has reversed declining fortunes, exemplified by AstraZeneca’s $1bn acquisition of Amolyt Pharma, signaling robust M&A activity as pharmaceutical giants seek to replenish aging drug pipelines, with top firms holding over $110bn in cash, driving optimism for further transactions amid patent expirations and the need to replace billions in sales over the next decade.
  7. The luxury industry, particularly Gucci, faces a significant downturn in Chinese sales, impacting French group Kering SA with a $9bn market value loss, as the broader sector grapples with sluggish demand amid rising unemployment and consumer caution, prompting brands to reassess their strategies in China and explore growth opportunities in other Asian markets.

Parting thoughts

To conclude, this week clarified that there are many businesses with piled up cash and acquisition capacity looking for quality expansion. Sectors such as beauty, pharma and defence stand out in driving deal activity. The optimism regarding investment banking activity in general has started to pump up now.

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

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