Рынок слияний и поглощений

Mergers and Acquisitions Market Overview for 2020: Examples of M&A deals and analytics

Mergers and acquisitions (M&A) market is a set of macro— and microeconomic processes that lead to business consolidation. In both cases, the economic units are united. But if a new company is formed during the merger, then in the case of a takeover, one enterprise “dissolves” into another larger one.

Experts disagree about the polarity of the influence of such processes. Some consider it a natural development, others — a negative phenomenon that kills competition and leads to monopolization. Yet, be that as it may, these processes are part of the global business ecosystem, to which due attention should be paid.

Mergers and Acquisitions market in 2020

Рынок слияний и поглощений в 2020 году

Pretty cute under the microscope, the COVID-19 virus has made humanity feel uncomfortable in almost all aspects of life, and the economy is no exception. Lockdowns, restrictions on the work of enterprises, closure of borders — all this forced investors to significantly “slow down”.

The total amount of transactions in the global mergers and acquisitions market for 2020 amounted to 3.6 trillion dollars. A total of 32,591 transactions took place. These figures are respectively 9 and 12% lower than in 2019.

The largest M&A deals in the world

The first half of the year was a failure, but in the second there was a revival. According to experts, this was caused by the imminent appearance of a coronavirus vaccine and the election of a new president in the United States.

As a result, the international market of mergers and acquisitions, although it did not catch up with 2019, was able to significantly improve.

Merger of S&P Global and IHS Markit

Слияние S&P Global и IHS Markit

The largest transaction in the global mergers and acquisitions market in 2020 took place in the field of financial analytics. The American media holding S.&P. Global acquired the analytical agency IHS Markit, which itself was formed as a result of the merger of two companies in 2016.

The purchase will be fully paid for with S&P shares and promises to be profitable — since its creation, the capitalization of AyAchEs Markit has tripled and amounted to almost $ 37 billion. As a result of the transaction, 68% of the shares of the already merged company will be concentrated in the hands of S.&P.

Nvidia absorbs ARM

Nvidia поглощает ARM

One of the two kings of the world of video cards in September announced the purchase of a major processor manufacturer ARM Limited for $ 40 billion. Due to its compactness, low power consumption and at the same time high efficiency, microchips of this company are widely used in mobile devices — for example, in the Iphone.

This takeover will certainly strengthen Nvidia’s position — there are now more than 180 billion ARM processors operating worldwide. The transaction is under execution, the whole process, according to the parties, may take up to a year and a half.

Combining AMD and Xilinx

Объединение AMD и Xilinx

Another giant of the high-tech world has decided to “make a mark” on the mergers and acquisitions market. Xilinx is the largest manufacturer of programmable logic integrated circuits (FPGAs). The company’s products are widely used in consumer electronics, telecommunications equipment and robotics.

AMD is Intel’s main rival in the field of processor production. The purchase of Xilinx will allow AMD to strengthen its position in the confrontation with Intel in the segment of products for servers and data centers.

For Xilinx, this deal will give the opportunity to enter the Chinese market, which the company has not been able to achieve so far. American regulators resisted, for example, the supply of products for Huawei.

The upcoming merger was announced in October 2020. For each of their shares, Xilinx owners will receive approximately 1.7 AMD shares.

Facebook acquired Giphy

Facebook приобрел Giphy

Mark Zuckerberg’s company is a frequent guest on the mergers and acquisitions market, because it likes to acquire promising projects.

This time the choice fell on the Giphy animation image search and storage service, popular on social networks. Facebook, according to its custom, does not disclose the amount of the transaction. According to Bloomberg, it amounted to $ 400 million.

After the acquisition, the service was integrated into Instagram, whose users can now choose GIFs and stickers for their posts from the rich library of the application.

Problematic transaction

However, not everything is so smooth. The British Competition and Market Authority (CMA) has taken up arms on Facebook over this takeover. The regulator believes that the acquisition of Giphy could seriously hit the balance between social networks.

Animation of the acquired company was used not only by Facebook. Now, having become the owner of Giphy, Zuckerberg will be able to claim copyright for the products of the service, which was used not only for entertainment in social networks, but also for advertising purposes.

It was acquired, for example, by such giants as Pepsi and Dunkin Donuts. After the takeover of Giphy, their contracts were terminated.

SMA was so concerned about the takeover that for the first time in history it took steps to cancel it. According to the regulator, the only way out of the situation is to sell Giphy to a third-party company.

Facebook does not agree with the conclusions of the commission that studied the transaction and considers its conclusions unfounded. Zuckerberg intends to explain to the SMA that their suspicions are groundless and the purchase of the service will not actually harm competition at all.

Amazon bought Zoox

Amazon купил Zoox

Jeff Bezos is the richest man on the planet and it is not surprising that he does not miss an opportunity to increase his assets. Founded in 2014 in California, Zoox has been developing a fully autonomous self-driving car.

The goal of the startup was to create a network of robotic taxis. By acquiring Zoox, Bezos enters into competition with the leader of the American segment of unmanned transportation — Waymo, a company part of Alphabet holding.

However, the Amazon acquisition has a difference. Waymo is mainly engaged in the development of software and electronics for drones, giving the design of the car itself to Volvo. Zoox also plans to create a vehicle on its own.

The idea is to make the car symmetrical in front and back so that it can move equally in any direction. Four passengers will sit in pairs opposite each other.

Such a system will certainly make it easier to maneuver in the dense urban flow of US megacities. Amazon also intends to automate the delivery service with the help of Zoox inventions.

The deal cost Jeff Bezos $1.2 billion, which, with his company’s capitalization of 1.5 trillion, is just pocket money.

Johnson & Johnson acquired Momenta Pharmaceuticals

Johnson & Johnson приобрела Momenta Pharmaceuticals

A well-known medical corporation decided to further strengthen its Janssen Pharmaceutical Cos. division, which has developed a coronavirus vaccine.

For $6.5 billion, Johnson & Johnson acquired the biotech company Momenta, which specializes in the treatment of autoimmune diseases.

This was the largest event in the global market of mergers and acquisitions in the field of medicine in 2020.

One of the important points of the deal was the transfer to Johnson & Johnson of the rights to the drug nipocalimab, used for the treatment of hemolytic disease of newborns (GBN). This is a severe pathology, in which the incompatibility of the composition of the blood of the mother and child is manifested. The development was introduced recently and has great prospects.

Morgan Sanley bought Etrade

Morgan Sanley купил Etrade

The banking sector also has something to “brag about” in the mergers and acquisitions market in 2020. Morgan Stanley announced the takeover of the brokerage company Etrade. According to the Wall Street Journal, the bank thus expands its capabilities to work with ordinary customers.

Morgan Stanley works mainly with rich people and is considered a fairly “cool” bank. He recently launched a consultant bot for people with more modest incomes.

The integration of the online broker Etrade, which has more than 360 billion dollars of assets placed on 52 million accounts, will additionally serve to expand the range of clients.

Mergers and Acquisitions Market in Russia

Despite the difficult economic situation in the world, the M&A market in Russia has not fallen below the level of 2017 in terms of the number and total value of transactions.

Compared to 2019, the number of mergers and acquisitions fell by 15%, and the total amount — by 5%. In total, 567 transactions worth almost $60 billion in monetary terms, including domestic and foreign investments, were carried out in 2020.

Рынок слияний и поглощений в России

The restrictions caused by the pandemic, as well as the collapse in oil prices, forced investors to be cautious. Still, at the end of the year, we can say that the Russian economy, including the mergers and acquisitions market, has easily survived the crisis.

The government was able to develop and implement the necessary measures as soon as possible, so the fall in Russia’s GDP in 2020 was only 4%, while in Europe it was almost twice as much.

Mergers and Acquisitions Market — Coronavirus and Oil problems

The first quarter of 2020 started optimistically — the number and amount of planned transactions in the mergers and acquisitions market was higher than in the same periods of previous years.

But already in March, the first bells of changes caused by the coronavirus appeared. Then the Russian Federation and OPEC members could not come to an agreement on reducing the volume of oil produced.

As a result, uncontrolled production began on April 1, which led to a catastrophic drop in the price per barrel from $ 69 to $ 22 — by almost 70%. Oil pulled the ruble along with it — its exchange rate fell by almost a third.

This was followed by a rather serious lockdown to control the infection, as a result of which the number of transactions decreased in the second quarter of the year.

In an environment of economic uncertainty, it was difficult for investors to make decisions. And the end of the second quarter of the year presented a new “surprise” — the agreements reached with OPEC to reduce oil production hurt production and budget revenues.

Rectification of the crisis situation

Only the beginning of October 2020 brought some relief. The appearance of a vaccine against a malicious virus has given investors optimism. The government also did not stand aside — it launched a global plan for economic recovery, allocating $ 100 billion.

Borrowed funds were used for this, as a result of which Russia’s public debt increased to 20% of GDP. Yet, this is minimal compared to some other countries.

For example, the national debt of Germany is almost 70%, France — 116% of the gross domestic product. There are legends about the United States in this regard, although in fact the ratio is about 108%.

Nonetheless, if we take into account the size of the country’s GDP in absolute figures, this is an extremely serious amount.

Of course, foreign investors still acted cautiously — only two more or less large transactions in the oil and gas industry can be distinguished:

  • Trafigura company from Singapore bought shares of Vostok Oil for $ 8.5 billion;
  • The Norwegian company Equinor acquired the assets of Krasgeonats for $ 550 million and created a joint venture with Rosneft.

In turn, the Russian government spent $4 billion to buy shares of Igor Sechin’s company in Venezuelan projects. Rosneft announced its withdrawal from this country in order to lift sanctions against its subsidiaries.

Mergers and acquisitions market — the big picture

In 2020, 11 transactions took place in the Russian mergers and acquisitions market, the volume of which exceeded $ 1 billion. At the same time, their combined value of $ 35.738 billion amounted to more than 60% of the total volume.

In terms of the total number of transactions, the construction and development sector accounts for the most transactions in the Russian M&A market. It is also possible to distinguish the segments of trade, information technology, services and mechanical engineering.

In monetary terms, the fuel and energy sector is in the lead and the largest transactions took place in the coal and oil industries. The division of the market is clearly shown in the diagrams.

PJSC Rosneft acquires Taimyrneftegaz

ПАО «Роснефть» приобретает «Таймырнефтегаз»

Even if the Russian Federation is not a “gas station country”, as evil tongues from abroad say, oil still plays one of the key roles in the Russian economy. Thus, it is not surprising that the largest transaction on the Russian M&A market in 2020 took place between the miners of “black gold”.

Rosneft announced the acquisition of Taimyrneftegaz from E. Khudainatov’s Independent Oil and Gas Company for more than $11 billion. The Payakhskoye field, which is being developed by this company, is located in the Krasnoyarsk Territory.

It was discovered back in 1990 and a flow with a capacity of 30 m3 per day was obtained from the first exploration well. The reserves of the field were estimated at 50 million tons. This is considered an average indicator, besides, the deposit is located beyond the Arctic Circle, so the production conditions are not “resort”.

Nevertheless, the deal took place. The Payakhskoye field, according to Rosneft’s plan, will become the foundation for the development of the large—scale Vostok Oil project, with proven reserves of 6 billion tons of oil.

Merger of Uralchem with Uralkali

Слияние «Уралхима» с «Уралкалием»

The Russian chemical industry has also not been without major deals in the mergers and acquisitions market. Dmitry Mazepin’s holding Uralchem has announced the purchase of a controlling stake in Uralkali, one of the world’s largest producers of potash fertilizers.

The deal will allow both companies to increase business efficiency by expanding the range and optimizing production, sales and logistics.

The purchase of shares in the amount of $ 3.8 billion was financed by Sberbank, with which Uralchem has a credit relationship.

According to the Kommersant newspaper, the acquisition of a stake in Uralkali was a condition for issuing the next tranche aimed at restructuring the company’s debt to VTB.

However, the owner of Uralchem does not confirm this fact. According to Mazepin, the strategy of attracting borrowed funds for the purchase of Uralkali was chosen intentionally, due to the growth of the company’s shares, which will cover the cost of servicing the loan.

Mechel and Gazprombank sold A-Property assets

Рынок слияний и поглощений «Мечел» и «Газпромбанк» продали активы «А-Проперти»

The company “A-Property”, owned by the creator of Yota Albert Avdolyan, decided to invest in the mining industry. The choice fell on the Elgin coal complex, located in Yakutia.

This is the largest field in Russia — proven reserves amount to 2.2 billion tons. The Elginsky field is the only mining project of this scale in the world launched by a private company. Suffice it to say that in order to ensure transport accessibility, Mechel had to build a railway line with a length of more than 320 kilometers.

The reason for the sale of the project was the company’s credit obligations. Mechel’s debts amounted to 237 billion rubles. The deal helped to reduce them by more than half.

The total purchase amount is $1.856 billion. Mechel owned 51% of the field’s shares, Gazprombank’s share was 49%. Thus, A. Avdolyan became the rightful owner of the country’s largest coal reserves.

USM Telecom bought X Holding

«USM Telecom» купил «ИКС Холдинг»

The technology sector has also not been left out of the mergers and acquisitions market. The USM Group, owned by Alisher Usmanov, announced the acquisition of 100% of the shares of Anton Cherepennikov’s company for $2.039 billion. Previously, the holding had already acquired full ownership of Megafon.

X Holding was founded in 2018. Now it includes more than 30 enterprises engaged in the field of telecommunications and high technologies. Upon completion of the purchase, X Holding was integrated into the group and became one of the divisions of USM Telecom.

The reason for the transaction is the official registration of the connection between the structures of A. Usmanov and A. Cherepennikov, which has long taken place — the business of X Holding was tightly tied to the relationship with Megafon.

According to analysts’ forecasts, the merger will allow the mobile operator to expand its field of activity and become a multidisciplinary IT enterprise.

Mergers and acquisitions market — forecasts for the future

Рынок слияний и поглощений — прогнозы на будущее

The main issue, including for the mergers and acquisitions market, remains the uncertainty of the situation with the further development of the coronavirus situation. Premature optimism caused by the decline in morbidity in the summer of 2020 has taught investors caution.

According to experts, the main participants in the mergers and acquisitions market in the near future will be large companies and holdings with state participation, having free money supply.

Their strategy will be to buy up promising enterprises that are stranded due to coronavirus restrictions.

Mergers and acquisitions market — forecasts for the future

The main issue, including for the mergers and acquisitions market, remains the uncertainty of the situation with the further development of the coronavirus situation. Premature optimism caused by the decline in morbidity in the summer of 2020 has taught investors caution.

According to experts, the main participants in the mergers and acquisitions market in the near future will be large companies and holdings with state participation, having free money supply.

Their strategy will be to buy up promising enterprises that are stranded due to coronavirus restrictions.

Mergers and Acquisitions Market — expectations for the Russian M&A market

Despite vaccination and the mask regime that has already become familiar, the pandemic does not end in any way, having acquired a sluggish character. However, the world is beginning to get used to the new reality and everyone, including business, understands that it is necessary to move on. Moreover, there is still hope for an early victory over the disease.

The price of oil has stabilized and is even at a higher level than last year before the collapse. OPEC intends to continue to prevent a repeat of such a collapse.

The implementation of the economic recovery plan continues. This is noticeable by the strengthened ruble exchange rate. A set of measures to improve the investment climate is envisaged, import substitution options are being worked out.

The main goal is the possibility of rapid economic growth after the removal of antiviral restrictions. The Government has identified priority areas for attracting investments in the near future:

  • economic diversification. To do this, it is planned to invest additional funds in the development of production and manufacturing industry;
  • export growth and diversification. The growth of investments in enterprises producing goods for external consumption will be ensured;
  • ecology and renewable energy sources. This is a new niche — an investment strategy for it is still in development;
  • improving the quality of life. The implementation of the program of national projects, including “Housing and urban environment”, is aimed at this. The rapid pace of housing construction cannot but stimulate the market of mergers and acquisitions in the field of development;
  • the growth of real incomes of the population. An increase in this indicator will stimulate the development of the consumer sector of the economy and the service sector, as well as the market for M&A transactions in these industries.

The rise in earnings of citizens of the Russian Federation is called a key priority of budget policy for the next 3 years.

Against the background of these facts, the Russian market of mergers and acquisitions has prospects. The pandemic will end someday, and the Russian economy will be fully prepared to wait for this moment to begin a steady recovery.

Разрабатываем Стратегии для собственников бизнеса в целях оптимизации группы компаний, решения нестандартных задач и продажи активов. Оказываем услуги по сопровождению сделок M&A, управлению непрофильными активами и проектами в целом.

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