Big Chips: megadeals roar back to life

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So much for M&A being dead

Megadeals are acting a bit like London buses. You wait three months for one to come along then they all land at once.

Just when we were starting to feel sorry for dealmakers facing the end of a seven-year M&A boom and wondering what boutique advisory shops were up to during the deal drought, two $10bn-plus deals landed in one day.

The bigger of the two is a near-$21bn all-stock merger between Analog Devices and its rival semiconductor maker Maxim Integrated Products. The tie-up is expected to create a $68bn chipmaking powerhouse that will help the companies compete with much larger rivals like Texas Instruments.

As DD’s Eric Platt and Ortenca Aliaj reported, the transaction is a way for Analog to boost its offerings and build a presence in the car market where Maxim is hugely successful.

It has done this before, in 2016, when it bought Linear Technology for $14.8bn. Reports at the time said that Analog had actually been courting Maxim before deciding to buy Linear.

We have seen a spurt of dealmaking over the past two weeks — Uber bought Postamates for $2.65bn while Berkshire Hathaway paid $9.7bn to take over Dominion Energy’s natural gas transmission business — but megadeals had become a rare species.

According to FT’s Lex, it will stay that way.

But there’s one more important hurdle to cross: regulatory approval. Semiconductors are essentially the brain of technological devices, so world leaders are on high alert over national security concerns, especially if they’re being produced or managed elsewhere . . . say, China.

The second deal, while smaller, is even more interesting. A blank cheque company set up by Citibank dealmaker Michael Klein, pictured below, will take MultiPlan, a healthcare technology company with private equity owners, public via an $11bn merger.

We have talked about Spacs — or special purpose acquisition companies — before, and there’s more to come from team DD on the subject.

Here’s how this deal works: Churchill Capital Corp III raised $1.1bn in February in a public listing. Investors in the Spac had no idea which company it would acquire, or when, but they did know that Klein was leading it.

To get the deal done Klein got more financing from investors, both through equity and convertible bonds. By far the largest Spac M&A, the MultiPlan deal gives a good hint about what’s to come.

Hedge fund billionaire Bill Ackman was planning to raise $3bn for his Pershing Square Tontine Holdings vehicle. It was already expected to be the largest Spac in history before he upped it to $4bn. Ackman’s hedge fund, Pershing Square, will provide an additional $1bn to $3bn.

That puts some famous Silicon Valley companies that have wanted to go public but haven’t yet within his sight.

While we’re at it, there’s another Spac deal that landed today — Spartan Energy Acquisition Corp, backed by Apollo Global Management, acquired electric carmaker Fisker in a $2.9bn deal.

Catching up with Morgan Stanley’s former key man

Colm Kelleher eschewed personal interviews for his 30 years at Morgan Stanley.

A year after stepping down as the bank’s president, the Irishman broke that mantra, telling the FT’s Laura Noonan how he almost quit to follow John Mack to Credit Suisse back in the day, before later concluding that he didn’t want to become “a bit of a professional gunslinger”.

The banker, who is seen as a potential candidate to run Barclays after Jes Staley, insisted he didn’t want to work full-time again, having already worked 30 years straight because “the problem with being in an investment bank is if you take time out, you may not get back in, you know that, which is why I ran it through to the end of my natural coil”.

Out-takes from the interview included Kelleher's views on the state of the world — “What the markets are not pricing in is a recession. And as sure as night follows day there will be a recession”, and the exhaustion he felt after 13 years of “massive stress” since he became chief financial officer of Morgan Stanley in 2007.

Over a patchy Zoom connection from his Tuscan house, he described a gentler life spent exercising, playing the piano, playing golf, brushing up on his Spanish and completing all six volumes of The Rise and Fall of the Roman empire.

So far it’s working out well for him. He’s not missing Wall Street and “if you have these goals, you can build around them and you actually have a schedule that keeps you pretty busy and out of your wife’s way”.

Franchise players

At the best MBA programmes in the world, a good proportion of students have no interest in going to work for Goldman Sachs, Blackstone Group or Elliott Management. The reason: been there, done that.

Harvard, Wharton and Insead are filled with 20-somethings who already have blue-chip CVs. And after years of tough grind on Wall Street, they don’t want to go back to the salt mines to make somebody else a billionaire.

But real entrepreneurship — coming with an innovative product or building a great brand is no bargain either. The solution increasingly for some: flipping burgers in order to flip an asset later.

As Sujeet Indap explained on Monday, owning fast-food franchises has become the meal ticket for some Harvard grads. It is mostly a game of mastering the operations, raising debt and creating scale.

One Harvard Business School duo started their fast-food venture while still students in 2014 and landed a nine-figure payday just a few years later. But the question we raised is does franchising success ultimately rely on two of America’s most acute pathologies: excessive leverage and exploiting cheap labour?

Job moves

DeAnne Julius, a member of the advisory board to China’s sovereign wealth fund, stepped down from the post after voicing concerns about speech regulations in Hong Kong, the Wall Street Journal reported.

Julius Baer has hired a team of UBS wealth managers led by Giuseppe De Filippo in a push to sell private debt and equity investments to clients. Read more here.

Ian McIntosh, the chief executive of Louis Dreyfus Company, is retiring from the agricultural trading company less than two years after taking the position. He will be replaced by chief operating officer Michael Gelchie in October.

PJT Partners and the Dubai-based advisory group deNovo Corporate Advisors struck an agreement to work together on cross-border transactions for clients in the region, Bloomberg reported.

Larry Brandman and Neil Pigott joined Boies Schiller Flexner as partners in the firm’s bankruptcy practice.

Baker McKenzie hired Marc Thorley as a partner on its dispute resolution team in London. He joins from Simmons & Simmons, where he was head of dispute resolution for the Asia-Pacific region.

Smart reads

About face Edward Kleinbard once helped multinational corporations find workarounds to paying their full share of taxes. But the lawyer, who died of cancer last month, might be better remembered for his late-life work advocating for higher taxes. (NYT)

Oilfield blues Drilling rigs that supported the local economy in west Texas — including barbers earning $180,000 per year — are now sitting untouched after the spread of Covid-19 caused demand to fall off a cliff. (WSJ)

Silver screen Movie-goers have stayed away during the pandemic, creating headaches for industry executives such as Cineworld chief executive Mooky Greidinger. Now, Greidinger also finds himself fighting back against a lawsuit seeking $1.1bn in damages for a deal gone awry. (FT)