Tell me about an M&A deal that interested you recently
As the title says could you guys list some examples. This question comes up often in interviews and every time I open up WSJ I can't find any deals except if they're very high profile which isn't every day. What's the best source to find recent M&A deals? I'd also appreciate any details you should bring up when asked the question.
One time this Tony Stark-esque nutjob tried to take a plummeting overly-leveraged auto company private, and failed. Can't remember the name.
Funding NOT secured.
Mr Stank is ready to see you now.
Since I'm in CO, I look more at the strategic side of deals and did so in IB interviews too but people seemed to like it. You can add some element of finance to make it more 'banky'. Anyway, 3 deals I found interesting were:
Biotech Gilead buying Kite Pharma: it's a pretty interesting deal because Gilead's viral program (Hep C, HIV etc) was kinda slowing down with drugs coming off patent etc so it made sense to diversify. They are known in oncology but not massive in immuno-oncology so to be the 2nd to bring a CAR-T therapy to market was brave (especially when the competitor is AstraZeneca). Also, they spent $12Bn+ on the deal for a market that is estimated to be around $2Bn in value...interesting choice.
[Aerospace] Safran buys Zodiac Aerospace. Solid deal and they went after a market that has a handful of powerful players. Seating. There were multiple reasons but with airlines introducing 'premium economy' and moving to make the internal aspects of planes a huge part of the flight experience (besides fast planes and good onboard entertainment) this is the market segment to be. Also, Recaro has most often been a big player here so being able to buy Zodiac and take them head on was a smart move.
[F&B] Asahi sells Tsingtao stake to Fosun. Although not a full company deal and technically a sale it is very interesting to go back to when Asahi bought the stake. Few non-Chinese players had luck in this market and the Asahi stake deal also had a lot of political tension between the two nations behind it (tension built up over years not a single event). Asahi wasted quite a bit of time of money since Tsingtao didn't honour it's side of the deal and little to no Asahi was sold in China. It's also interesting to note the stake is going to a Chinese company again. It's a very incestuous market and dominated by a couple players.
On biotech/pharma any thoughts on Sanofi acquiring Bioverativ for a 64% premium earlier this year? Been invested in Sanofi since mid march as they were undervalued according to me and I gotta say I am almost 20% up right now but not sure about the acquisition and especially Bioverativ activities.
I'm not very familiar with Bioverativ but from a quick initial look at I can draw up 2 potential reasons:
Sanofi is weaker in rare blood disorders which Bioverativ is strong in. You pump up and diversify your R&D pipeline. Bioverativ also have 1 product in Ph3 and 2 more in Ph1/2 so they are doing what they do very wel..
Everyone wants an in-house genetic engineering department and it's easier and cheaper to buy. These guys seem to know their stuff and like Kite Pharma, there are few genetic players on the market that are relatively big, good and easy to integrate
Thanks for your quick look, as a non pharma specialist I didn't get the second part which now makes sense. Even on a financial stand point the acquisition made sense, accretive, using cash and taking some low interest debt that will be paid off quickly. I love to cross reasons with industry specialists.
BIVV is a pure-play hemophilia company with recombinant factor infusions that are about to be obsolete when SGMO/QURE/ONCE's gene therapies for hemophilia come online. I know a ton of hedge fund guys who were long the listed gene therapy companies and short BIVV and were absolutely destroyed... including myself. Will be interesting to watch what develops. I think it was a terrible acquisition. I'd take profit on your Sanofi position.
I'm sorry to say but there is quite a bit of inaccuracy in this statement. Bioverativ's lead candidate is a mAb to C1 factors in a clotting cascade and not recombinant versions of clotting factors. This means different market dynamics and market aspects. They are also playing in genomic editing and genetic engineering (one of which is with Sangamo).
Sangamo itself has hemophilia as one of it's 4-5 disease areas and out of two of their products only 1 is a gene therapy, the other is gene editing just like Bioverativ.
UniQure's hemophilia A program is still pre-clinical meaning if they manage to have their drug go all the way through development to approval (which has 1 in 10,000 chance) it'll be 10-15 years before it's on the market by which Bioverativ will have capture a big portion of the gene-based haemophilia market (because they have Sanofi to back them in sales and marketing). Yes, they are advancing in hemophilia B but Bioverativ is primarily working on A and Cold agglutin disease (rare disease which might help them get accelerated or approval or priority review and orphan status) so at least for now they won't go head to head.
Spark is actually doing pretty well but their big ticket is again hemophilia B (with a collab with Pfizer) and they are on their own for hemophilia A. They could end up doing wonders as these guys already brought a drug to market (hats off for being a relatively small company) but I think their bread and butter is ophthalmology and they are trying to spill over to other therapy areas with mixed success.
It's fair to confuse these things but remember that since the underlying clotting factors are different in the two hemophilias, for the purpose of market research and deployment they are as different as brain and skin cancer.
seeking alpha, cnbc, reuters, nytimes, pitchbook, googling around. They all have "deals" sections that will have the major deals
https://www.reuters.com/finance/deals https://www.pehub.com/
What size deals are you looking for? For less headline grabbing stuff, I find The Middle Market to be helpful.
Bloomberg Deals (https://www.bloomberg.com/deals</a">https://www.bloomberg.com/deals) is an absolute must read. Spend 20-30 min a day and you'll have plenty to talk about during interviews.
Someone else above recommended Seeking Alpha...just be careful as some of the articles are very incorrect but are long and full of confirmation bias at peak.
Sign up for one of the newsletters to track recent deals
PEhub has a good one
BullpenNews.com is only weekly, but has all the big deals for given week
Matt Levine's column / newsletter is basically required reading for the financial sector
Agreed with the comments above regarding Seeking Alpha... pretty hit or miss in my experience.
Bullpen News is our fav. Comes out once a week and has good content in addition to deals coverage.
PEHub is also must read in my opinion, plus short and sweet
I'm surprised Matt Levine doesn't get more mention around here. His writing is incredible. Probably would have quit finance a few years ago if I didn't have his column to read every day
Easy one for your kids out there is Pandora/SiriusXM. Pick a company that you use as a consumer and make it easy on yourself. For example any of Facebook/Whatsapp/Instagram/Oculus should be easy to describe. You don't need to discuss a deal that just happened...just don't bring up Barbarians at the Gate because you read the book/saw the movie.
This Micheal Kors and Versace sounds kind of interesting.
I just googled "M&A deals." Reuters has a Deals of the Day section with some pretty good stuff.
If you are interviewing for TMT or Consumer or something like that, the first two are probably good bets. If you are interviewing for Sponsors, Transportation, FIG, or some crazy M&A structuring group, I think the last one is a slam dunk.
Say you're an airline CEO/CFO and you need to raise money for overhauling your operations, rolling over debt, etc. Maybe the market is not willing to lend to you at a reasonable rate or buy your stock at what you think is a fair price. What can you do? Sell your planes? You probably lease them already. You may need to get more creative about how you can monetize your assets.
The frequent flyer program is really a financing vehicle as well as a marketing vehicle. You incentivize customers to fly with you by having a credit card company pay you a portion of the fees they charge to merchants in exchange for points or offering points for flying with your airline (rather than an upfront discount). You book a rewards liability on your balance sheet that represents a cheap (but not free) source of funding. There are a few public companies that manage and hold these rewards liabilities on their balance sheet; Smiles and Multiplus are examples.
These companies are asset light and mainly hold liquid securities; their funding comes from deferred revenue. They earn revenue as rewards are redeemed and they earn interest on their investments. They book cost of rewards redeemed as they pay out the rewards. Smiles had a 30%+ operating margin last year. You might be thinking this is too good to be true. How can you take a crappy airline and turn it into a data driven, highly profitable tech company? Well... this business is already embedded within the airline's operations. Of course, selling it leaves you with an even crappier airline. However, as a standalone company this business may have a much lower cost of capital (think high P/E multiple) and will provide cash that can help you through the near term turbulence. Moreover, as a standalone business its management might be empowered to think bigger and adopt a coalition model leveraging customer data to partner with other airlines, merchants or financial institutions.
Of course, the whole concept depends on a heavily negotiated agreement between the airline and the new loyalty business. The airline has to prefund the liability it transfers (so no fraudulent conveyance) and it has to agree to some method for pricing future points transfers. They need to ensure their customers' data won't be used to undermine their business and that the rewards value proposition to customers will remain intact. I have no idea how all that works, but it sure seems like it would be a fun deal to work on.
Note that this can and has gone wrong in some cases (see AIMIA). There are significant related party risks that could wreck the vehicle if it depends largely on one partner. Like most financial engineering plays... you could get burned flying too close to the sun. BX and TPG are quite sophisticated though and are dealing with a counterparty that has limited negotiating leverage (because it has too much financial leverage). I expect they will do alright.
The main problem with private equity investing in frequent flyer programs is exit strategy. Affinity has done well out of Velocity which has seen huge growth but can't IPO its stake because public markets won't pay a realistic valuation due to the counterparty risk. The airline is the natural buyer (and likely has a pre-empt) but can't afford to buy the stake, and anyway doesn't need to because it already captures the full value of the customer data. FF programs are great businesses that spit out huge amounts of cash, but not great investments for closed-end funds that have a finite life.
I'd love to have a better understanding of how these things work. We pitched a rewards program carve-out to a credit card company once, but it never went anywhere. My MD argued that the "rewards program was non-core." I don't know how that's freaking possible when that's perhaps the key differentiator among upmarket card issuers. I just don't know how in practice you work through the agreements such that the OpCo doesn't try to bloody the RewardsCo on renewal terms or squeeze them any number of ways. One solution would be for the OpCo to own a significant economic interest, but the whole point of the separation is to (a) raise proceeds at a premium valuation or (b) leverage their capabilities with other rewards programs. Not sure you can achieve this while keeping incentives aligned.
any thoughts/comments on Michael Kors to buy Versace?
Bullpen News had a good blurb on this deal - BX got a good multiple
Thank you very much;)
MK in on fire. Bought Jimmy Choo a while back and now Versace. He's smart because he isn't integrating - he'll kepp the firms in the true luxury segment they belong whilst reaping the benefits. Smart man.
I used Andeavor Marathon, it’s interesting and decently known but isn’t Disney Fox level
Whatever deal your interviewer was on.
THIS ^ +SB lol
For banking, I think better to emphasize strategic - strategic deal vs. PE deal unless you're talking to someone in levfin / sponsors... otherwise seems like overeager finance kid dying to get into PE before you even know what banking is
If you go to a semi-target or better, go to your school's finance lab or look into online databases and libraries available to students. Bloomberg, FactSet, Thomson ONE are all good for finding deals in the first place, and if it is a public deal they often release the prospectus with literally all the information you could ask for about the deal. Sometimes they even have fairness opinions/valuations which is really helpful to see how they are actually used in real life
I usually pick one that the firm I'm interviewing with has done, then follow the BIWS format to have some structure around how I'm gonna discuss it. Even better if the deal is in a vertical within a particular industry that you follow, that way you can discuss the deal, larger market segment, any sort of trends, and VC activity/growth prospects if applicable.
Edit: just realized I didn't really answer your question. I used CapIQ or the tombstone page of a firm I'm interviewing at. If you're looking at TMT, tech crunch has a lot of M&A info.
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