• Sukhjeet Singh

The Most Significant Mergers & Acquisitions (M&A) of 2021

Mergers and acquisitions (M&A) is a broad term that encompasses a wide range of financial transactions that combine companies or assets, including mergers, acquisitions, consolidations, tender offers, asset purchases, and management acquisitions. Although the terms mergers and acquisitions are frequently used interchangeably, they have slightly different connotations.


An acquisition occurs when one corporation buys another and establishes itself as the new owner. On the other hand, a merger is when two companies of similar size join forces to move ahead as a single new organization rather than remaining individually owned and run. For example, when Daimler-Benz and Chrysler merged, the two companies ceased to exist, and a new corporation, DaimlerChrysler, was formed. The stock of both firms was relinquished, and new company stock was issued in its place.


To put it another way, a purchase agreement is referred to as a merger when both CEOs agree that merging their companies is in their best interests. Acquisitions, on the other hand, are typically considered in hostile or unfriendly takeover negotiations in which the target firm refuses to be bought. A deal may be classified as a merger or an acquisition depending on whether the acquisition is friendly or hostile and how it is publicized. To look at it another way, the difference is in how the board of directors, employees, and shareholders of the target firm are told about the sale.


According to PwC, in 2021, global mergers and acquisitions (M&A) reached new highs, shattering previous records by a wide margin. In 2021, the number of announced deals in the world surpassed 62,000, a 24% increase over 2020. Publicly announced deal prices hit an all-time high of US$5.1 trillion, including 130 mega-deals worth more than $5 billion, up 57% from 2020 and surpassing the previous high of US$4.2 trillion set in 2007. The often-frenetic M&A activity in 2021 was fueled by high demand for technology, as well as digital and data-driven assets, as well as the release of pent-up deal-making demand from 2020.


The strong rebound in the global economy affected due to Covid-19 was reflected in the record levels of deal-making in 2021 across all regions (i.e., Europe, the Middle East, and Africa (EMEA), America, Africa, and Asia). With a 34% increase in deal volumes over the previous year, Europe, the Middle East, and Africa (EMEA) led the way, followed by the Americas with 22% and Asia-Pacific with 17%. Despite the fact that deal volume in 2021 was around the same in all three regions, transaction value was more heavily weighted towards the Americas, with over 50% of deal values and approximately 60% of mega-deals going to the Americas.

The above graph shows the data of Mergers and Acquisition, globally from the 1st quarter of the year 2019 to the 4th quarter of the year 2021. The graph shows the data such as Total Deal Volume (i.e., number of deals in a particular year), Deal Value (Monetary value), and Monetary value of deals excluding Megadeals. The maximum deal volume of Mergers and Acquisitions has occurred in the 2nd quarter of the year 2021 and the deal with the highest monetary value has occurred in the 3rd quarter of the year 2021. Similarly, both the minimum deal volume and minimum monetary deal value has occurred in the 2nd quarter of the year 2020. The above-shown trend pertains to the global market. Now, let’s talk particularly about the US Mergers and Acquisitions trend from previous years. Here is a trend from the year 1985 to 2021:

As the above-presented graph states, the maximum number of Mergers and Acquisitions took place in the year 2015, i.e., 12,885, accounting for US$2417.39 Billion. Similarly, the least number of acquisitions occurred in 1985, i.e., 2309, accounting for US$305.64 Billion.


Types of Mergers and Acquisitions

1. Mergers - A merger occurs when the boards of directors of two firms agree to merge and seek shareholder approval. For example, in 1998, the Digital Equipment Corporation and Compaq agreed to merge, with Compaq absorbing the Digital Equipment Corporation. In 2002, Compaq merged with Hewlett-Packard. CPQ was Compaq's pre-merger ticker symbol. The present ticker symbol was created by combining this with Hewlett-(HWP) Packard's ticker symbol (HPQ).

2. Acquisitions - In a straightforward acquisition, the acquiring corporation acquires a majority interest in the acquired company, which retains its name and organizational structure. Manulife Financial Corporation's acquisition of John Hancock Financial Services in 2004 is an example of this type of deal, in which both companies kept their identities and organizational structures.

3. Consolidations - By integrating core operations and eliminating previous organizational structures, the consolidation creates a new corporation. Both companies' stockholders must approve the merger, after which they will get common equity shares in the new company. Citicorp and Travelers Insurance Group, for example, announced a merger in 1998, resulting in Citigroup.

4. Tender Offers - A tender offer is when one company offers to buy the outstanding stock of another company for a set price rather than the market price. Bypassing management and the board of directors, the purchasing firm immediately tells the other company's shareholders. In 2008, Johnson & Johnson submitted a tender offer of $438 million to buy Omrix Biopharmaceuticals. Most tender offers culminate in mergers, even if the acquiring business may continue to exist (especially if there are a few dissenting shareholders).

5. Acquisition of Assets - In an asset purchase, one business buys the assets of another company outright. The corporation whose assets are being purchased must get shareholder approval. During bankruptcy procedures, other companies bid on various assets of the bankrupt company, which are liquidated when the assets are transferred to the acquiring firms.

6. Management Acquisition - A management acquisition, also known as a management-led buyout (MBO), occurs when the leaders of one firm purchase a majority stake in another and take it private. Former Executives frequently collaborate with a financier or former company officers to help fund a deal. Such M&A transactions, which are quite often financed disproportionately with debt, require the approval of a majority of shareholders. Dell Corporation, for example, announced in 2013 that its founder, Michael Dell, had acquired the company.


Top 5 Biggest Mergers and Acquisition of 2021

1. Discovery, Inc. and AT&T Inc.’s WarnerMedia business - The $43 billion deal between Discovery Inc. and AT&T Inc.'s WarnerMedia unit, announced on May 17, was the largest transaction. According to the agreement, WarnerMedia and Discovery will merge their businesses to form a new entertainment firm. Discovery President and CEO David Zaslav will lead the new agreement, with representatives from both companies playing key roles. AT&T shareholders would own 71 percent of the new company, while Discovery owners will hold 29 percent. The deal was structured as a Reverse Morris Trust. AT&T's WarnerMedia was represented by Sullivan and Cromwell LLP, with financial advisors LionTree Advisors LLC and Goldman Sachs & Co. LLC. Discovery was represented by Debevoise & Plimpton LLP, with financial consultants Allen & Company LLC and JP Morgan Securities LLC.

2. Altimeter Growth Corp. and Grab Holdings Inc. - The $40 billion merger announced on April 13 between investment firm Altimeter Growth Corp. and Grab Holdings Inc. is the year's second-largest deal. With its deal with Altimeter Growth, Grab, a Southeast Asian app for food delivery, hailing transportation, and digital wallet payments will go public. This was "anticipated to be the largest-ever U.S. equity offering by a Southeast Asian corporation," according to reports. The public company will be listed on NASDAQ under the symbol "GRAB." Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, as well as Hughes Hubbard & Reed LLP, represented Grab. Evercore and J.P. Morgan were Grab's financial consultants. Ropes & Gray LLP and Travers Thorp Alberga both represented Altimeter.

3. Canadian National Railway Company and Kansas City Southern - On May 21, the freight railway business Canadian National Railway Company and Kansas City Southern, which owns the cross-border rail line connecting the United States and Mexico, revealed their desire to merge in a $33.6 billion agreement. By building an expedited route from Mexico to Canada through the United States, the two businesses hoped to "construct the preeminent railway for the twenty-first century." Wachtell, Lipton, Rosen & Katz, Baker & Miller PLLC, Davies Ward Philips & Vineberg LLP, WilmerHale, and White & Case, S.C. represented Kansas City Southern. BofA Securities and Morgan Stanley & Co. LLC served as its financial advisors. Cravath, Swaine & Moore LLP, Norton Rose Fulbright, Torys LLP, and Stikeman Elliot LLP represented Canadian National Railway. J.P. Morgan, RBC Capital Markets, and Centerview Partners LLC were Canadian National's financial consultants.

In September, Kansas City Southern, on the other side, cancelled the agreement and signed one with Canadian Pacific Railway Limited. Under the terms of the new arrangement, Canadian Pacific will pay $31 billion for Kansas City Southern. Similarly, this deal will help construct a rail network connecting the United States, Mexico, and Canada, allowing for "unprecedented reach via new single-line hauls.” Wachtell, Lipton, Rosen & Katz, Baker & Miller PLLC, Davies Ward Philips & Vineberg LLP, WilmerHale, and White & Case, S.C. are all representing Kansas City Southern. BofA Securities and Morgan Stanley & Co. LLC are its financial advisors. Sullivan and Cromwell LLP, Bennett Jones LLP, the Law Office of David L. Meyer, Creel, Garca-Cuéllar, Aiza Y. Enriquez, S.C., and Black, Cassels & Graydon LLP are representing Canadian Pacific Railway.


4. Lionheart Acquisition Corporation II and MSP Recovery, LLC - In terms of monetary value, the $32.6 billion SPAC agreement announced on July 12 between Lionheart Acquisition Corporation II and MSP Recovery, LLC was the fourth largest of the year. MSP, which specializes in Medicare Secondary Payer recovery rights and retrieving erroneously paid Medicaid, will go public as part of the deal. Weil, Gotshal & Manges LLP represented MSP Recovery and its sellers, and Keefe, Bruyette & Woods served as its financial advisor. Lionheart was represented by DLA Piper, while Nomura Securities International, Inc. served as its financial advisor.

5. AerCap Holdings N.V. and GE Capital Aviation Services - The next largest agreement, worth $30 billion, was between AerCap Holdings N.V. and GE Capital Aviation Services, a subsidiary of General Electric Company. The purchase, which was announced on March 10, was a cash-and-equity blend. The sale will purportedly allow GE to concentrate on its core businesses, while the acquisition will help "build an industry-leading aircraft lessor with a larger offering and improved capacity to serve customers through industry cycles." GE was represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP, Clifford Chance, and A&L Goodbody. Its financial advisors were PJT Partners LP and Goldman Sachs. AerCap was represented by Cravath, Swaine & Moore LLP.


Honorable Mentions

What is the role of Intellectual Property in M&A?

Intellectual property (IP) is property arising from intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The most well-known types are copyrights, patents, trademarks, and trade secrets. Now just like any other assets a company may own, IP is one of them and hence, a crucial part of M&A. IP assets are the intangible assets of the company which play an important role in the growth of a company and add up an immense value to the asset portfolio. It is one of the reasons for which IP assets are acquired and companies go for the reconstruction process such as M&A. Benefits of IP in Acquisition or Merger-

  • Value addition to the firm's portfolio

  • Acquiring unique capabilities

  • Transfer of technology

  • Diversification

  • Growth

Copperpod provides Technology Due Diligence services. Copperpod's intellectual property audit investigates existence, ownership, and market potential for all patents, trademarks, trade secrets and other intellectual property owned by the seller. Copperpod analyzes existing hardware and software systems and processes owned by the seller to provide you a clear and detailed view of the seller's architecture, growth plans and the investment that such growth will require.


References

1. https://www.pwc.com/gx/en/services/deals/trends.html

2. https://www.investopedia.com/terms/m/mergersandacquisitions.asp

3. https://imaa-institute.org/mergers-and-acquisitions-statistics/united-states-ma-statistics/

4. https://lawstreetmedia.com/news/deals/top-5-biggest-ma-deals-of-2021/

5. https://intellizence.com/insights/merger-and-acquisition/largest-merger-acquisition-deals/