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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.
Also, 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.
ADOBE BUYS YOUNGER COMPETITOR FOR $20 BILLION
Software giant Adobe, which invented the PDF document format, will spend about $20 billion to take over Figma, a cloud-based company making software that enables software developers and their colleagues to collaborate.
The acquisition is the largest in Adobe’s 40 years.
Figma is valued at about $10 billion but is seen as fetching only about $400 million in annual revenue this year.
News of the purchase sank Adobe’s share price by 17 percent. The stock has lost about 45 percent of its value this year amid the general plunge in tech stocks. However, the NASDAQ overall is down only 26 percent, barely half of what Adobe has lost.
Investors are worried that buying Figma indicates that Adobe is losing its competitive edge and is trying to buy out its up-and-coming rivals, according to The Wall Street Journal.
“This is a very hefty price tag, even considering [Figma’s] very strong growth rate, given the recent devaluations across software and especially at Adobe,” analyst Mark Moerdler at Bernstein Research wrote in a 15 September note to clients.
“This was an acquisition driven by need and not opportunity,” he added.
In defense of the purchase, Adobe said that Figma has about a 90-percent profit margin.
It sees Figma’s software as complementing its own suite of development tools and that Figma will give it entrée to a new universe of potential customers, the company said in a statement.
FRENCH CONGLOMERATE BUYS U.K. SOFTWARE COMPANY
Schneider Electric, a French industrial conglomerate, will pay £31 per share for all outstanding shares of Aveva, a U.K. software company that designs programs for industries from chemicals to mining to transportation.
The offering price is 41 percent above the stock’s price in late August, just before news of the pending purchase broke.
Schneider already owns 60 percent of Aveva.
Under the sale’s terms, 75 percent of Aveva’s minority investors will need to back the deal, which the company’s board is recommending.
At least one—M&G, which owns 0.75 percent of Aveva’s stock—has announced it will oppose the deal. Schneider’s offer ignores the company’s long-term potential and is taking advantage of a valuation artificially made lower by current overall equity market conditions, M&G said.
The offering price values Aveva at about £9.5 billion.
The sale picks off one of the few sizable tech companies that remained on the London stock exchange.
In August, Canadian software giant OpenText put up £5.1 billion to gobble up British competitor Micro Focus International.
PRIVATE EQUITY FIRM BUYS ITALIAN LUXURY FOOD BUSINESS
Investindustrial, a European private equity firm, is expanding its footprint in the food industry by buying 52 percent of Eataly, an Italian purveyor of luxury food and drinks with more than 40 stores in Asia, Europe, the U.S., and Middle East.
With its investment of €200 million, the equity firm plans to expand Eataly’s concentration in existing markets and to open new ones.
Some current investors will hold the remaining 48 percent. Those include the Farinetti family, which founded the company, and Tamburi Investment Partners, another private equity company.
Under terms of the sale, the Saper and Bastianich families will sell their shares to Investindustrial.
Nicholas Farinetti, son of the company’s founder and current CEO, will surrender that post to become chair of the board. A new chief executive will be appointed.
Investindustrial also announced its purchase of the U.S.-based private label food supplier Treehouse Foods, and Parker Foods, which makes ingredients for processed foods.
The private equity firm manages €11 billion in assets and has sunk €2.5 billion into the food industry over the past two years.
WALGREENS TAKES THE REST OF SPECIALTY DRUG FIRM
Walgreens Boots Alliance, the drug retailer’s British branch, has reached a deal to buy the remaining 30 percent of Shields Health Solutions it does not already own.
Walgreens will pay about $1.37 billion to take over Shields, which provides expensive specialty drugs for rare or complicated illnesses.
Shields’ sales have grown by 57 percent this year through September, Walgreen’s said.
As part of the deal, Shields CEO will take over Boots’ pharmacy division.
Walgreens began buying its way into Shields in 2019, then in fall 2021 it paid $970 million to take its stake to 70 percent with an option to buy the rest of the business.