Biggest M&A Transactions of 2021 & 2022
The year 2021 hit record-breaking global M&A activity. Companies bought and sold each other at an extremely rapid pace, and there have been no indications of that pattern slowing down anytime soon. So, what's been causing the rise of M&A?
No doubt, the pandemic has a lot to do with the significant increase of M&A transactions.
As the economy recovered from the pandemic shock, companies were either sitting on cash or wanted to transform their business and steer it in another direction.
Private equity firms are also on a spending spree, and investors are desperate to put their money to work.
As a result of this high demand, companies' prices for sale are also at an all-time high. If a business is doing well amid a global pandemic, the price just doubled, if not tripled. Not to mention the bidding war that is happening on the buy-side; whether it's a strategic buyer or financial buyer.
While this trend is set to continue for the foreseeable future, let's look back at some of the biggest M&A deals of 2021 and what we can expect to see in the year 2022.
Largest M&A Deals of 2021
Discovery, Inc. and AT&T Inc.'s WarnerMedia business ($43 billion)
In May 2021, AT&T announced its plan to acquire Discovery Inc. and merge it with its WarnerMedia business through a spin-off. The goal is to hand over operational control to Discovery, helmed by their CEO David Zaslav, and both companies' management teams. The merger will result in a new standalone entity Warner Bros. Discovery and is expected to close and clear past antitrust in the first half of 2022.
This move will allow AT&T to focus its capital expenditures on building out its wireless network rather than compete with other streaming providers. Also, AT&T’s debt ratio is expected to drop to 2.5 times by the end of 2023.
AT&T shareholders will own 71% of the new company as Warner Bros. Discovery is looking forward to competing with Netflix and Disney Plus with the projection of reaching 400 million homes.
Altimeter Growth Corp. and Grab Holdings Inc. ($40 billion)
The largest blank check merger is between Altimeter Growth Corp and Southeast Asia's Tech Giant Grab. Valued at $39.6 Billion, Grab is set to go public and trade on Nasdaq under the name GRAB. This merger will make Grab the most valuable Southeast Asian company to list shares in the U.S. and will use the proceeds to expand its super app footprint and drive economic empowerment across Southeast Asia.
Canadian Pacific Railway Ltd and Kansas City Southern ($27.2 billion)
After a competitive bidding war against Canadian National Railway, Canadian Pacific Railway closed a $27.2 billion cash-and-stock deal to acquire Kansas City Southern. This deal will create the first direct railway linking Canada, the United States, and Mexico.
With the completion of this deal, KCS shareholders will receive 2.884 CP shares and US$90 in cash for each KCS common share held and US$37.50 in cash for each KCS preferred share held.
Lionheart Acquisition Corporation II and MSP Recovery, LLC ($32.6 billion)
Another record-setting SPAC transaction is Lionheart Acquisition Corporation II merging with MSP Recovery, LLC for a total valuation of $32.6 billion. MSP specializes in medicare secondary payer recovery rights, improperly paid Medicaid, and commercial payments. Their founder and CEO, John H. Ruiz, will lead the combined company after the deal closes.
This will enable MSP to accelerate acquisitions of claims portfolios while further scaling and enhancing its data-analytics capabilities within its existing infrastructure. This includes planning and developing next-generation technology for new machine learning, artificial intelligence, and real-time decision support. According to MSP, they are expecting to gather $230 million in proceeds with this transaction. https://refini.tv/3wuAoOV
AerCap Holdings N.V. and G.E. Capital Aviation Services ($30 Billion)
In March of 2021, G.E. sold its jet leasing business to its rival AerCap for $30 Billion, as the aviation industry continues to struggle due to the pandemic. G.E. would have a 46% stake in combining the two world's largest aircraft lessors.
According to AerCap, the combined company is expected to generate $7B in annual revenue and $5B of operational cash flow, boasting more than 2000 owned and managed aircraft, over 900 owned and managed engines, over 300 owned helicopters, and approximately 300 customers around the world.
E.U. antitrust regulators have already approved this deal without conditions as they did not see any competition issues.
Oracle and Cerner ($28.3 billion)
Before 2021 ended, Oracle announced its acquisition of Cerner for $28.3 billion - their most significant acquisition to date. Cerner is No. 2 in the electronic health record business, with 25 percent of the market in 2020.
For Oracle, buying Cerner is about getting ahead in the evolving health care tech through Cerner’s industry-specific technologies - including its electronic health records data system, software for emergency room and hospital bed management, nursing workflow tools, and cloud-based data analytics and AI tools.
Gores Guggenheim, Inc. and Polestar Performance AB ($20 billion)
Joining the list of SPAC acquired companies is Swedish electric-car maker Polestar. It announced its intention to go public late last year by merging with the U.S.-listed blank-check firm Gores Guggenheim. It is one of the biggest blank-check mergers in the E.V. sector valued at $20 billion. This deal is expected to close in the first half of 2022.
Polestar’s going public is brought about by the increasing trend of automakers shifting their focus on environment-friendly vehicles. Post-merger, the combined company will be named Polestar Automotive Holding UK Ltd. and will trade under the symbol “PSNY” on the Nasdaq.
BMO financial group and Bank of the West ($16B)
BMO will acquire Bank of the West for a cash purchase price of $16 billion. The deal is expected to close by the end of 2022, and the companies are expected to merge into BMO Harris Bank.
According to Bank of the West's balance sheet, the transaction will add nearly 1.8 million customers to BMO, on top of the $56 billion worth of loans and $89 billion of deposits. Additionally, BMO will expand in Minnesota, Kansas, Arizona, Missouri and Wisconsin as a result of the transaction, according to the data.
ConocoPhillips and Permian Assets owned by Shell Enterprises LLC. ($9.5 billion)
ConocoPhillips has successfully acquired the Permian assets of Shell Enterprise for $9.5 billion in cash. The assets include 225,000 net acres and producing properties located entirely in Texas, as well as more than 600 miles of operated crude, gas, and water pipelines and infrastructure.
Shell will maintain its offshore production in Texas but completely abandon onshore productions.
Kimco Realty Corporation and Weingarten Realty Investors ($3.87 billion)
Kimco just closed its acquisition of its rival Weingarten late last year for $3.87 billion. The transaction brings together two industry-leading retail real estate platforms with highly complementary portfolios, creating the preeminent open-air, grocery-anchored shopping center and mixed-use real estate owner in the country.
Kimco shareholders own 71% of the combined company post-close who now has 559 open-air grocery-anchored shopping centers - one of the better performing parts of the commercial real estate sector during the pandemic as people rushed to stores to stock up on essential items.
M&A Deals of 2022
The M&A market is still hot. According to a survey conducted by Deloitte, deals are expected to increase even further as companies are looking for more transformational change through M&A transactions.
And as early as the first quarter, we are seeing indications of what companies are merging in 2022. Here are some of the recent big company mergers that we know of so far:
Microsoft and Activision Blizzard ($68.7B)
Surpassing the largest deal of 2021, Microsoft announced its intention to acquire Activision Blizzard for $68.7 billion - their largest deal ever. This would dramatically expand Microsoft’s already sizable Xbox video game business.
Activision Blizzard’s games lineup includes “Call of Duty,” “Candy Crush,” “Warcraft,” “Diablo,” “Overwatch” and “Hearthstone.” According to Microsoft, the deal will accelerate the growth of its gaming business across mobile, PC, console, and cloud and will provide “building blocks” for the metaverse.
If this deal goes through, this would be a massive shake-up in the video game industry and make Microsoft the world's no. 3 gaming company. Microsoft expects this deal to close in the fiscal year of 2023. That’s a very long time to close a deal but Blizzard operates in a number of markets which could make regulatory approval complicated.
Take-Two Interactive and Zynga ($12.7B)
One of the biggest acquisitions in video game history, Take-Two Interactive, the video game publisher that owns Rockstar and 2K games, is set to acquire mobile games giant Zynga for $12.7 billion. Take-Two said the deal will enable it to take more of its intellectual properties to the mobile game market.
The CEO of Take-Two, Strauss Zelnick, expects the deal to create $100 million in annual cost synergies within the first two years, and at least $500 million of annual Net Bookings opportunities over time.
Both companies have created memorable game franchises, which will combine to form one of the largest portfolios of intellectual properties in the sector.
CBRE Investment Management and Hillwood Investment Properties ($4.9B)
CBRE recently agreed to buy a portfolio of logistics properties from Hillwood Investment Properties amounting to $4.9 Billion to accelerate global logistics strategy. The transaction would rank among the largest sales of industrial properties on record and also the largest acquisition to date by the CBRE Investment Management.
The portfolio spans more than 28 million square feet and includes 33 U.S. assets and 24 assets across Germany, Poland, and the United Kingdom. It was appealing to CBRE because it was centered in markets with large labor forces, has advanced transportation systems, and is close to a large number of consumers.
The transaction is still subject to customary closing conditions and is expected to close later this year, or early 2023.
What to Expect in 2022
With only a few months in, here are a few things that we could expect in 2022:
Due to the ongoing pandemic, more and more companies have resorted to virtual diligence. With the evolution of technology combined with recent events, organizations have been forced to embrace these changes and adapt. Companies like Atlassian have gone completely virtual in their M&A process and are currently using tools to manage their deals effectively.
It's no secret that the workforce has preferred working remotely. If companies can do effective and successful M&A transactions remotely, there is no reason not to, especially since so many employees have stated a better work-life balance with remote work. And with the massive 2021 M&A activity, we have seen the cost-effectiveness and speed of doing virtual M&A. For those reasons, it will be here to stay.
More focus on ESG
Environmental, social, and governance (ESG) investing isn't new, but the pandemic has throttled it into the forefront of M&A transactions and will likely influence deal-making. Primarily driven by investor and consumer demands, more companies now focus on improving ESG credentials through acquisitions.
As a result, ESG diligence is now a thing. Acquirers are currently looking into the target's policies regarding diversity, human rights, climate change, etc. Sustainability is also now a factor that will affect the valuations of companies.
It has also affected the financing market. More favorable terms are given to acquirers if certain ESG conditions are met.
More Deal Activity
We have no current evidence that the M&A activity is slowing down. It could very well surpass the record-breaking year of 2021.
Strategics will need to focus on labor shortage, and supply-chain disruption brought about by the pandemic. They will need to be more proactive if they want to compete with financial buyers.
Private equity firms had a great 2021. Buyout deals were the driving force behind their success, accounting for almost 27% of global M&A activity. P.E. firms have record cash levels, and they will most likely convert it into more deals.
They have been very active buying companies left and right, outbidding strategic buyers with their speed and flexibility.
Despite a tightening PIPE market and adverse regulatory developments, SPAC IPOs and de–SPAC also had a massive year. We highly expect the SPAC market to remain fluid and robust in 2022.
With the surge of M&A in the past year, it has undoubtedly become a seller-friendly market, with valuations soaring high and companies aggressively fighting over targets. Acquirers are either looking to strengthen their ground in their respective industries or expand to a more sustainable business model.
Speed has been an ingredient if you want to compete in this hot market. If you are an acquirer, you need to shorten your diligence time to close deals faster.
If you want to learn more about M&A best practices, be sure to check out our website mascience.com.