Jp­mor­gan pre­dicts political un­rest will put lid on megadeals

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Chi­tra So­mayaji and Di­nesh Nair

GLOBAL political tu­mult is likely to dampen busi­nesses’ ap­petite for megadeals in 2019, ac­cord­ing to Jp­mor­gan Chase’s global co-head for merg­ers and ac­qui­si­tions, Her­nan Cris­terna.

On the heels of a year that has been one of the best for deal­mak­ers since 2007, con­cerns about a Us-china trade war, Brexit and grow­ing na­tion­al­ism are likely to trig­ger a slow­down in trans­ac­tions that are big­ger than $10bn (€8.78bn), Cris­terna said.

His bank ranks third glob­ally in ad­vis­ing on 2018’s takeovers, with its score­sheet in­clud­ing the big­gest deal of the year, Takeda Phar­ma­ceu­ti­cal’s $62bn (€54.45bn) ac­qui­si­tion of Shire.

“What CEOS and com­pa­nies are cau­tious of is en­gag­ing in a very large trans­ac­tion that might take a very long time to get ap­proved, if it’s ap­proved at all,” the banker said.

“I know what I’m buy­ing to­day, but I just don’t know what I’m buy­ing two years from now.”

Still, the banker is “cau­tiously op­ti­mistic” about the deal­mak­ing en­vi­ron­ment go­ing into 2019. This year is poised to be the sec­ond-best ever for M&A, de­spite a de­cel­er­a­tion in trans­ac­tions in the sec­ond half and es­pe­cially in the fourth quar­ter, he said.

The lion’s share of takeovers were in the range of $1bn (€878m) to $5bn (€4.39bn), ac­cord­ing to the banker, and there’s go­ing to be a “sig­nif­i­cant flow” of deals in that bracket next year as busi­ness ti­tans are “play­ing of­fence as well as de­fence.”

Com­pa­nies that are likely to strike deals are those that want to rein­vent them­selves or dis­rupt op­er­a­tions, and many busi­nesses will seek to tap “what’s still cheap sources of fund­ing,” he said yes­ter­day.

Other firms are look­ing to sim­plify their port- fo­lios to fo­cus on their strengths or tap syn­er­gies to pre­pare for a rainy day, ac­cord­ing to Cris­terna. “It’s go­ing to con­tinue to be a very ac­tive mar­ket, but what’s go­ing to hurt and what we’re go­ing to see less of is the $10bn deals,” he said.

On the big­ger trans­ac­tions, chief ex­ec­u­tives are con­cerned about the “very com­pli­cated reg­u­la­tory en­vi­ron­ment, whether it’s US-CHIna, whether it’s Brexit, whether it’s in­dus­trial pol­icy, a some­what na­tion­al­is­tic def­i­ni­tion of strate­gic in­dus­tries, deals tak­ing a long time to get ap­proved,” the banker said.

“So that’s where there is cau­tion in the mar­ket.” Bloomberg

Takeda Phar­ma­ceu­ti­cal made the big­gest deal of this year in ac­quir­ing Shire

Newspapers in English

Newspapers from Ireland

© PressReader. All rights reserved.