2020 has been a very long, very weird year. Weirder still has been the dynamics of dealmaking. Obscure strategies like special purpose acquisition company (SPACs) slid into the mainstream (230 SPACs have debuted on major exchanges this year, raising more than $77 billion, according to SPAC Research.) Debates surrounding COVID-19’s status as a material adverse event clause dominated conversations throughout the winter and summer. And dealmaking spent most of the year on the rollercoaster of global economic pandemonium, with over $100 billion worth of deals in the U.S. terminated by June, according to S&P Global Market Intelligence.
Still, despite COVID-19’s utter decimation of global M&A in the second quarter, the rebound came quick. Maybe quicker than many people could have predicted. The summer saw a mass spike in blockbuster deals (36 transactions in Q3 were valued at $5 billion or higher) and September 2020 had the “highest monthly global merger total in 15 months,” according to Mergermarket’s 3Q20 M&A report.
“In the face of the global COVID-19 pandemic and economic lockdown, quarterly merger activity surpassed $1 trillion during the third quarter of 2020,” Matt Toole, director of deals intelligence at Refinitiv, told Financier Worldwide. “Whether it is delayed merger announcements held over from this past spring, the arrival of opportunistic strategic buyers or private equity buyers flush with cash and friendly credit markets, there is no question that dealmaking strongly rebounded far earlier than expected.”
While 2020 feels like a decidedly different year, one that’s hard to make sense of, you can walk away with a pretty detailed picture from examining the year’s biggest deals and even bigger disasters. Read on below for a refresher.
Five of the Year’s Most Exciting Megadeals
S&P Global Devours Competitor Ihs Markit
In what’s likely the year’s top deal, S&P Global announced plans to acquire rival IHS Markit. Proposed as an all-stock buyout, the megadeal is worth $44 billion and is slated to close in the second half of 2021. The volatility of 2020 has helped amplify the appetite for financial data, but it’s part of a rising momentum driven by increasingly sophisticated trading algorithms.
According to Reuters, the potential merger marries, “S&P’s credit rating expertise, market intelligence verticals and stock and energy benchmarks with IHS Markit’s fixed income benchmarks and indices, bond pricing and reference data, and information on the natural resources, automotive and engineering sectors.” The deal will face some antitrust scrutiny. A source told Reuters that S&P Global may have to divest a part of IHS Markit’s resources division. If approved, the deal will create a heavy hitter in the financial information market.
Nvidia Grabs Arm
The tech industry’s most momentous deal on paper for 2020 will likely be chipmaker Nvidia’s definitive agreement to purchase computing powerhouse Arm from Softbank Group for $40 billion. The acquisition has been trumpeted by Nvidia founder Jensen Huang as a catalyst for the next generation of computing.
“AI is the most powerful technology force of our time and has launched a new wave of computing,” says Huang. “In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI.” Like the S&P and IHS deal, Nvidia will face a regulatory battle, but if it goes through, the 2020s could welcome the newest member of tech’s trillion dollar market cap club.
Virgin Media and Telefonica’s O2 Merge
If connectivity has been the theme of the year then Liberty Global and Telefonica’s proposed joint venture merger of cable operator Virgin Media and mobile carrier O2 valued at $38.9 billion couldn’t have come at a better time. Collectively, the new entity will bring together 46 million video, broadband and mobile subscribers. It’ll also give Virgin Media access to O2’s next-gen 5G expertise. The Competition and Markets Authority in the UK has already made the decision to investigate potential competitive challenges, but analysts have pointed out the deal shares some shape with BT’s take of mobile company EE a few years earlier that was given the go-ahead by the CMA.
AMD Buys Xilinx
In megadeal circles, semiconductors are clearly hot commodities. Advanced Micro Devices $35 billion all-stock play for programmable chip maker Xilinx falls just short of Nvidia’s deal for ARM, but creates a semiconductor heavyweight valued at around $135 billion. Xilinx is the world’s premier vendor of programmable chips: an advanced type of chip capable of being adapted and upgraded after production. And AMD, a longtime rival of Intel, is hoping to use the deal to push into 5G wireless and automotive microchips.
Aon and Willis Towers Look To Create the World’s Largest Insurer
Unlike the other megadeals mentioned, Aon and Willis Towers likely won’t have to wait until 2021 for regulatory approval. The $30 billion bid by Aon for Willis Towers, the world’s second and third largest insurance brokers, has a December 21 date with the EU Watchdog’s antitrust approval. If the deal gets pushed through, the pair will be that much closer to insurance domination.
The friendly deal was announced in March after a dropped bid the previous year and approved by shareholders in August. “The events of 2020 are illustrative of the exact type of transformative long-tail risk our new organization will be best positioned to address, creating significant value for clients, colleagues, and shareholders,” Aon CEO Greg Case said of the deal following shareholder approval.
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Five of the Year’s Most Disastrous Deals
Viagogo’s Inopportune Timing With Stubhub
On February 13, 2020, Viagogo founder Eric Baker had accomplished what seemed like the perfect coup d’etat. 15 years after he was ousted from ticketing giant StubHub (still a startup at the time) his online ticket marketplace Viagogo was able to purchase StubHub from eBay for $4.05 billion. The deal was supposed to make him the kingpin of the event ticket space, giving him a 23% state in the newly combined company, one that was expected to bring in $1.5 billion annually in revenue.
By late March, the coronavirus pandemic had shattered that outlook, writing off an estimated 90% of the separate ticketing companies revenue and throwing the future of live events into disarray. Ticketing industry consultant Eric Fuller told the Guardian that Baker’s move felt brilliant at the time. “He overpaid but it probably made sense in the context of the worldwide domination that he would have,” says Fuller. “Then you had the bullet that nobody saw coming. Within days, the entire market shuts down.”
L Brands and Sycamore Partners Mutual Breakup Over Victoria’s Secret
A disaster of circumstance more than anything, Sycamore’s $525 million deal with L Brands to buy a 55% stake in Victoria’s Secret and Pink chains seemed all but done a few weeks before the pandemic. By April, both businesses were preparing for a lengthy legal battle as normal business operations were shuttered. For Sycamore, it was clear the deal couldn’t happen. L Brands wanted to sue to keep the deal intact. Ultimately, both agreed to walk away without termination fees, preventing what would likely have been an uneasy partnership.
Xerox Walks Away From Hostile HP Bid
Billionaire investor Carl Icahn’s backseat brokering broke down the past winter when Xerox abandoned its hostile $35 billion cash and stock bid for rival HP and push to replace board members. Icahn, who had a stake in both companies, had been pushing for a marriage to get the two together. HP has rebuked offers from Xerox in the past, but the deal was gaining momentum before the coronavirus stepped in.
On March 31, Xerox announced it was walking away from the bid, citing the pandemic and macroeconomic repercussions. With businesses shifted to work from home policies en masse, the takeover by Xerox—which is focused heavily on copiers and printers—made less sense as the months went on. And as for Icahn, he dissolved his stake in HP as of the end of June, according to a report by Reuters.
Softbank Cuts Off WeWork
WeWork’s woes started in 2019 shortly after filing its IPO paperwork. Increased scrutiny surrounding the coworking company’s finances and plan for profit, combined with CEO and co-founder Adam Neumann’s personal antics, led to a failed IPO and subsequent bailout by key investor Softbank. Neumann stepped down as chairman of the board. It seemed like the company might slip past its troubles, but 2020 had different plans.
In April, Softbank announced that it would be terminating its $3 billion tender offer to buy shares from majority owners; part of the $9.6 billion rescue financing package that gave the Japanese company control of WeWork. In August, Softbank was reportedly back in talks to provide another injection of support to the office sharing company, stoking the notion the tender termination was part of a wider snub of former chairman Neumann.
FTC Shaves off Dealmaking Potentially for Edgewell and P&G
The Federal Trade Commission is ending the year the way it started by scuttering razor takeovers. The FTC helped slow Schick owner Edgewell Personal Care Company’s purchase of direct-to-consumer razor startup Harry’s this past winter. This fall, it also made moves to block Proctor & Gamble’s acquisition of Billie, a startup selling razors and body wash. The FTC pointed out that the sale of Billie would, “eliminate innovative nascent competitors for wet shave razors,” to the loss of consumers. And it’s not necessarily wrong. Both DTC brands have helped redefine the razor industry and drive down prices. But the crackdown on consolidation may also seed some doubt in investors and founders’ minds that building a disruptive company doesn’t guarantee an easy exit deal.
The Unforgettable Year That Was 2020
The weirdness of 2020 won’t easily be forgotten. The repercussions of its highs and lows will surely reverberate amidst a pandemic that’s sure to continue into the new year. But at least the ground made by megadeals this past year will help to guarantee 2021 will be just as interesting.