Connect with us

Business

What’s Next for the Deal Boom?

Published

on

The DealBook newsletter delves into a single topic or theme every weekend, providing reporting and analysis that offers a better understanding of an important issue in the news. If you don’t already receive the daily newsletter, sign up here.

When your job involves pulling off seemingly impossible M.&A. transactions, persistent optimism is a necessary quality. But the always sunny outlook of deal makers seemed especially warranted last year.

Despite the calamity of the pandemic, the corporate world did extremely well. Companies announced $5.8 trillion worth of transactions — surpassing the previous high by more than $1 trillion, according to Refinitiv. And unlike many previous deal booms, activity wasn’t constrained to just one sector or one region, with nearly every part of the M.&A. world taking part in the frenzy.

“This is the stuff that dreams are made of,” said Anu Aiyengar, global co-head of mergers at JPMorgan Chase.

Most investment bankers say that while last year’s blockbuster pace may not be sustainable, they expect the deal boom to continue: Companies and their investors are still craving growth, and private equity firms are ready to spend their collective hundreds of billions in cash on new takeovers.

But dreams don’t last forever, and there are several reasons that making deals could be significantly more difficult in 2022 than it was last year. (Some deal mavens even admit as much.) Here is what’s keeping corporate rainmakers up at night.

By far the biggest concern among bankers and lawyers is government intervention. Deal makers always expected the Biden administration to scrutinize mergers on antitrust grounds more closely than its predecessor, but now they worry it will go further than they had predicted. Many of President Biden’s top antitrust enforcement picks — including Jonathan Kanter at the Justice Department, Lina Khan at the Federal Trade Commission and Tim Wu as an antitrust adviser — are noted critics of concentrated corporate power.

Mr. Biden himself recently argued that a dearth of competition in the meat-processing industry was leading to higher prices for consumers. And antitrust officials have sued to stop several high-profile deals, opposing Nvidia’s $40 billion purchase of Arm, Aon’s $30 billion bid for Willis Towers Watson, Illumina’s $7 billion takeover of Grail and Penguin Random House’s $2 billion deal for Simon & Schuster.

“Some of the new approaches on the regulatory front, antitrust in particular, will likely wind up being adjudicated by the courts one way or another,” said Peter Orszag, the C.E.O. of Lazard’s financial advisory business. He added that the flurry of legal challenges was a primary reason that many of the deals announced last year involved $10 billion or less. Relatively small deals are considered less likely to draw opposition from regulators.

Some M.&A. practitioners say the blitz of litigation is a strategy for changing regulations. A string of company losses in these cases could help buttress efforts by lawmakers like Senator Amy Klobuchar, Democrat of Minnesota, to toughen up antitrust laws.

Tougher antitrust scrutiny isn’t confined to the United States: The European Union’s regulators are cracking down as well, raising objections to deals, including Illumina’s.

The prospect of being tied up in months of fights with regulators could make corporate leaders reluctant to pursue deals. “It’s becoming more of a topic of discussion, especially for public company boards on whether they can take that risk,” Ms. Aiyengar said.

For years, rock-bottom interest rates have made borrowing the billions necessary to finance an acquisition fairly inexpensive. As inflation rises rapidly, that era is likely to end soon.

Federal Reserve officials last month weighed raising interest rates faster than expected, and the anticipation of higher borrowing costs could deter some corporate boards from moving ahead with a deal, some practitioners said. Higher interest rates could also hit private equity firms, which often rely on access to cheap borrowing to do their core deal-making.

“If inflation continued to ramp up, and there were some volatility on interest rates, that could have an impact,” said Stephan Feldgoise, Goldman Sachs’s global co-head of M.&A. But he quickly added that he believed this might not be a huge threat.

“Would that have a dramatic effect, though?” he asked. “Debt’s still pretty cheap.”

Despite some rocky moments, including the onset of the pandemic and spurts of meme-stock mania, the stock market has steadily risen over the last several years. That kind of stability has been incredibly helpful for the mergers business. Corporate boards like predictability, particularly when it comes to their companies’ stock price as they consider striking a big deal.

While M.&A. could survive more bouts of occasional volatility, prolonged periods of market choppiness could undercut business leaders’ boldness in pursuing takeovers.

Ms. Aiyengar of JPMorgan said unwelcome surprises, such as even more rapid inflation, a deadly new coronavirus variant or renewed supply-chain disruptions, could spook deal makers.

“If there is a shock like that and the market re-rates, that could affect deal-making,” she said. “That influences boardroom confidence.”

While any of these shocks could disturb the deal-making party, few bankers believe that they will bring the boom to a screeching halt. Companies still face immense pressure to grow, and striking a deal remains one of the fastest ways to do that. (Indeed, The New York Times Company this week agreed to buy the sports news site The Athletic for $550 million, specifically citing the deal’s potential to expand its subscriber business.)

“Companies and boards are saying, ‘If there’s something strategic we want to do, we should try and get it done,’” Mr. Feldgoise of Goldman said.

What do you think? Will the deal boom continue in 2022? Let us know: dealbook@nytimes.com.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published.

Business

Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

Published

on

Text size

Source link

Continue Reading

Business

After pandemic drop, Canada’s detention of immigrants rises again By Reuters

Published

on


© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

Source link

Continue Reading

Business

Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

Published

on

Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

Source link

Continue Reading

Trending