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Each week, we report instances where the money junky hedge funds, private equity groups and the already big companies swallow another piece of the global economy.
Here are some more of what the BIGS have been gobbling up and how the Bigs keep getting bigger and the rich keep getting richer.
It should be noted that when interest rates in the U.S. were floating at near zero, merger and acquisition hit an all-time high in 2021. Now with rates rising, M&A activity is slowing down.
And most importantly, a lot of these acquisitions were made with the belief of rising economic growth. Now, as economies go down and interest rates rise, the debt burden from these M&A’s will grow heavier, crashing many of them into bankruptcy and default on debt.
MEGADEALS BUOY 2022’S M&A MARKET
Although equity and bond markets have stumbled, 25 mega-mergers worth at least $10 billion each were announced around the world in the first half of this year.
The number lifts the M&A dollar volume 12 percent higher than during the same period last year, although the number of deals has dropped by 20 percent, according to the Financial Times.
Takeovers made up 26 percent of M&As, the largest proportion since records began being kept in 1980, the FT said.
Blackstone and the Benetton fashion family paid $54 billion in April for Atlantia, an Italian infrastructure management company. It was the largest deal yet to take a European public company private.
In the U.S., a group led by Eliott Management took ratings service Nielsen private for $16 billion and bought Citrix, a cloud computing company, for $16 billion.
In the U.S., M&A dollar volume excluding takeovers was just $950 million, a decline of 28 percent year on year.
In 2021, the SPAC frenzy hoisted the M&A market to near-record levels.
As markets weakened and the U.S. Federal Reserve began raising interest rates, investors dumped SPACs for safer havens. A large number of SPAC deals are trading well below their debut prices.
We have tracked SPACs’ demise in “SPACs: Here Today, Gone Tomorrow?” (8 Jun 2021), “Knives Are Out For SPACs” (24 Aug 2021), and “Investors Turn Their Backs on SPACs” (24 May 2022), and other articles.
Global banks have seen their fees for structuring M&As slip just 7 percent this year, helping shore up profits against the 26-percent drop in the banks’ bond business and the 72-percent crash in fees related to stock issues.
TALKS INTENSIFY BETWEEN MERCK AND SEAGEN
Representatives of drug giant Merck & Co. and Seagen, a company that makes cancer treatments, will meet again this week as negotiations intensify around plans to merge.
Taking over Seagen would expand Merck’s catalog of cancer therapies, among which a drug called Keytruda grossed $17.2 billion in sales in 2021.
Seagen pioneered a treatment method called antibody drug conjugates. The method shoots toxins like bullets into cancer tumors, which minimizes damage to surrounding healthy tissue.
Merck and Seagen have collaborated to develop a breast cancer treatment using the new method and will test it in combination with Keytruda.
Seagen’s current market capitalization is around $30 billion. Any takeover would rank the deal among the largest in recent years.
Pfizer’s $11.6-billion takeover of Biohaven Pharmaceutical Holding Co. has been the largest pharma deal so far this year.
However, a proposed combination of Merck and Seagen would draw regulatory scrutiny, a factor giving Merck pause, according to persons familiar.
Other companies have expressed interest in Seagen, according to The Wall Street Journal, but none have made their intentions public.
CAA MAKES DEAL FOR ICM PARTNERS
Creative Artists Agency (CCA) will take over ICM Partners in a deal valued at $750 million.
The two talent agencies are among the industry’s largest, giving the combined entity a value of about $5 billion, the WSJ said.
The purchase brings 425 of ICM’s staffers to CAA, along with clients such as comedian Chris Rock and movie director Spike Lee.
CAA represents movie actors Tom Hanks and Reese Witherspoon and director Steven Spielberg, among hundreds of other A-listers.
As entertainment goliaths such as Walt Disney Co., Discovery, and Amazon grow in size and clout, talent agencies are looking to match that scale to swing more heft on behalf of clients, the WSJ noted.
Last month, United Talent Agency continued its own expansion by buying Curtis Brown Group, a British literary agency. Endeavor Holdings recently broadened its portfolio by acquiring the Ultimate Fighting Championship franchise and the OpenBet wagering business.