By Cara Lombardo and Dana Cimilluca
This year was a big one for mergers and acquisitions, but it
could have been even better.
The value of deals announced globally reached $3.8 trillion
through Dec. 27, making 2019 the fourth-best year on record for
M&A. The combined value of deals fell just 4% short of last
year's total, according to Dealogic, as the appetite for
megamergers reached a new high.
Companies struck 12 deals worth more than $25 billion, twice
last year's total, led by United Technologies Corp.'s $86 billion
combination with defense contractor Raytheon Co., which is subject
to regulatory approval.
The U.S. was the standout region, with total deal value up 12%
to $1.8 trillion.
But those numbers belie weakness under the surface evidenced by
a 1.6% decline in the amount of transactions as many companies
remained on the sidelines, cowed by uncertainty surrounding the
U.K.'s departure from the European Union and the U.S.-China trade
confrontation.
Nowhere was that hesitation on display more than in Europe,
where the total deal value sank by 30% as countries including
Germany faced economic slowdowns and uncertainty over Brexit
gripped the U.K and the rest of the region.
Another factor deal makers cite: valuations. With stocks in or
near record territory, acquisitions are pricey. That has prompted
many acquirers, like United Technologies, to use their own surging
stocks as payment.
With President Trump appearing to make progress on a limited
deal with China, and Brexit looking more certain following Boris
Johnson's decisive election victory in the U.K., some of that
uncertainty could dissipate in the new year. Together with signs
that the U.S. economy is on solid footing, that has put most
bankers and lawyers who help arrange tie-ups in an optimistic mood
as the year draws to a close.
Still, there are lingering fears that the yearslong deals boom
will run out of gas, and many of the same advisers are mindful that
the presidential election represents a major unknown -- a word the
executives and boards they counsel detest.
The Wall Street Journal spoke to some of the advisers behind
this year's biggest deals and asked them about the current
environment and what lies in store for 2020.
Faiza Saeed
Ms. Saeed, presiding partner of Cravath, Swaine & Moore LLP,
says 2019 was the year that big, strategic tie-ups that seemed
inevitable finally came together. She advised on several major
deals, including Viacom Inc.'s recombination with CBS Corp.,
Occidental Petroleum Corp.'s purchase of Anadarko Petroleum Corp.
and TD Ameritrade Holding Corp.'s sale to Charles Schwab Corp. She
says the string of megadeals was driven in large part by companies
teaming up to respond to technological disruption. "In the last
year or two, both acquirers and targets came to the realization at
the same time," she says.
Blair Effron
Mr. Effron and his Centerview Partners co-founder Robert Pruzan
steered the firm to another year in which it punched above its
weight. Among the deals Mr. Effron worked on: Tiffany & Co.'s
sale to LVMH Moët Hennessy Louis Vuitton SA, the CBS-Viacom merger
and AT&T Inc.'s truce with activist investor Elliott Management
Corp.
Mr. Effron, a prominent Democrat, is optimistic about the
deal-making environment going into 2020 and beyond, regardless of
who sits in the Oval Office. Corporate boards are cautious but not
pessimistic and mainly just want certainty, he says. "I generally
discount the impact of the election. We've gotten so good at
managing through volatility and uncertainty."
Frank Aquila
Mr. Aquila, a partner at Sullivan & Cromwell LLP, notched
roles on Tiffany & Co.'s planned sale to LVMH, Novartis AG's
acquisition of Medicines Co. and Amgen Inc.'s $13.4 billion
purchase of anti-inflammatory drug Otezla from Celgene Corp. He
sees the resolution of some Brexit and trade uncertainty as a boon
for Europe and Asia, whose recovery could provide major ballast for
the M&A market. Deals that got shelved amid the uncertainty
will come back as companies adjust to a low-growth environment, he
says. "If you want outsized growth, the way you get it is through
transactions that yield revenue growth with immediate
synergies."
Eric Schiele
Mr. Schiele, a partner at Kirkland & Ellis LLP, was around
two of the year's largest deals: AbbVie Inc.'s $63 billion purchase
of Botox maker Allergan PLC and Bristol-Myers Squibb Co.'s $84
billion acquisition of Celgene, which he was brought in to help
defend after an activist challenged it.
He isn't as sanguine as others on the M&A market. "The
number of deals, rather than value, is probably the better sign of
health," he says. He expects that figure to modestly decline again
in 2020, with boards still on edge over macroeconomic risk. But if
valuations drop, private-equity buyers could provide a jolt to
smaller-deal activity, the heart of the M&A market, he
says.
Mark Shafir
Mr. Shafir, Citigroup Inc.'s global co-head of M&A, had a
hand in Occidental's purchase of Anadarko, Tiffany's sale to LVMH
and Broadcom Inc.'s purchase of Symantec Corp.'s enterprise
business. He has stayed involved at Occidental as Carl Icahn wages
a proxy fight against the oil giant, expanding the traditional role
of an M&A banker. "Back in the old days, you get to the
announcement and we go away until closing," he says. "Now you have
to be vigilant and do a lot of prep work around shareholder
reaction and the activist threat."
Scott Barshay
Mr. Barshay, global head of M&A at law firm Paul, Weiss,
Rifkind, Wharton & Garrison LLP, says 2019 was an "uncanny
imitation" of 2018, with a continued raft of large deals. He was
involved in several, including Chevron Corp.'s proposed acquisition
of Anadarko, which ultimately agreed to the sale to Occidental
instead; General Electric Co.'s $21 billion sale of its
biotechnology business to Danaher Corp. and Gardner Denver Holdings
Inc.'s deal with a division of Ingersoll-Rand PLC. Despite the
political and economic unknowns around the world, clients feel
confident in their outlooks, especially in the U.S., he says.
"They're looking for reasons to do deals. They're not looking for
reasons to run away from deals."
Write to Cara Lombardo at cara.lombardo@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
December 30, 2019 05:44 ET (10:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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