00:00:00:00 - 00:00:02:14 Welcome to M&A corner brought to you by Mizuho Greenhill. 00:00:02:14 - 00:00:06:02 M&A is a core corporate strategy to scale, diversify and innovate, 00:00:06:02 - 00:00:09:23 as well as refocus, streamline and unlock the value of captive assets. 00:00:10:10 - 00:00:11:11 The past couple of years 00:00:11:11 - 00:00:14:11 have been challenging for dealmaking due to heightened uncertainty 00:00:14:13 - 00:00:15:11 in today's world. 00:00:15:11 - 00:00:16:06 Getting a transaction 00:00:16:06 - 00:00:19:06 over the finish line requires a balance between art and science. 00:00:19:13 - 00:00:22:21 In this podcast, we sit down with expert dealmakers to delve into the latest 00:00:22:21 - 00:00:25:05 trends, dive into issues that are shaking M&A, 00:00:25:05 - 00:00:28:16 and offer in-depth analysis on the factors influencing today's dealmaking. 00:00:28:21 - 00:00:31:22 Join us as we uncover insights that look deeper and move 00:00:31:22 - 00:00:34:22 Beyond The Obvious. 00:00:36:04 - 00:00:37:14 Hi, I'm Kevin Constantino, 00:00:37:14 - 00:00:40:14 co-head of corporate finance and head of M&A Mizuho Greenhill. 00:00:40:15 - 00:00:43:11 and I am here with David Wiles, head of Greenhill, Mia. 00:00:43:11 - 00:00:46:02 Today we're going to discuss international M&A trends. 00:00:46:02 - 00:00:49:05 How this differs from the US and the outlook for the remainder of the year. 00:00:49:11 - 00:00:50:08 David, welcome. 00:00:50:08 - 00:00:52:01 - Thank you. It's great to be back in New York. 00:00:52:01 - 00:00:53:11 - I thought we could talk a little bit 00:00:53:11 - 00:00:55:19 about the M&A environment in Europe 00:00:55:19 - 00:00:57:02 and in the UK in particular 00:00:57:02 - 00:00:58:14 since this is a rare opportunity 00:00:58:14 - 00:01:00:19 to have you in our New York offices today. 00:01:00:19 - 00:01:02:03 Can you touch a little bit on 00:01:02:03 - 00:01:04:08 what you're seeing in the UK in particular? 00:01:04:08 - 00:01:06:14 Obviously, it's been a remarkable year in terms 00:01:06:14 - 00:01:07:23 of an election cycle that finally 00:01:07:23 - 00:01:09:19 has the Tories out of power. 00:01:09:19 - 00:01:11:05 How does that influence 00:01:11:05 - 00:01:13:16 how people think about business locally 00:01:13:16 - 00:01:17:03 and how does it affect the M&A market, if at all, in the UK? 00:01:17:03 - 00:01:18:13 - I think there is some optimism 00:01:18:13 - 00:01:20:05 that we've now got a government 00:01:20:05 - 00:01:23:08 that has a longer-term time horizon. 00:01:23:08 - 00:01:27:11 The UK, I guess consistent with many markets’ needs, 00:01:27:11 - 00:01:30:01 a real industrial policy around investment, 00:01:30:01 - 00:01:32:13 particularly enabling investments that support business. 00:01:32:13 - 00:01:35:12 And I think the previous government was on much more 00:01:35:12 - 00:01:39:18 of a cycle of managing by month, by month, by month. 00:01:39:18 - 00:01:41:04 Whereas the new government’s come in 00:01:41:04 - 00:01:43:15 with a large majority potentially for two terms 00:01:43:15 - 00:01:45:11 and therefore, they can start thinking about life 00:01:45:11 - 00:01:47:09 with a 10-year time horizon. 00:01:47:09 - 00:01:50:03 And I think if you look at where the UK economy is, 00:01:50:03 - 00:01:52:15 we're pretty much taxed to the eyeballs. 00:01:52:15 - 00:01:54:04 We're borrowed to the limit. 00:01:54:04 - 00:01:57:20 So the only way you can fund a social plan is really 00:01:57:20 - 00:02:01:01 through growth and the hope is that the new Labour government 00:02:01:01 - 00:02:05:14 will deliver on more of a growth-oriented investment plan, 00:02:05:14 - 00:02:06:18 but people are sitting back 00:02:06:18 - 00:02:08:23 and waiting to see how that will manifest itself. 00:02:08:23 - 00:02:11:08 We've got an important budget coming up in October, 00:02:11:08 - 00:02:13:08 just before your election in November. 00:02:13:08 - 00:02:17:13 And the US obviously has an implication around the UK 00:02:17:13 - 00:02:20:06 as well, given the codependency of us 00:02:20:06 - 00:02:21:02 on North America. 00:02:21:02 - 00:02:23:08 So there's a lot to play for 00:02:23:08 - 00:02:25:16 around that October, November timeframe. 00:02:25:16 - 00:02:28:03 And I think going into the summer people backed 00:02:28:03 - 00:02:30:04 off in terms of making decisions 00:02:30:04 - 00:02:32:08 and being front-footed. 00:02:32:08 - 00:02:33:22 And I think if we get the right answer 00:02:33:22 - 00:02:35:11 through the budget in the UK 00:02:35:11 - 00:02:38:23 and the markets respond well to whatever happens 00:02:38:23 - 00:02:41:09 to the election here in North America, 00:02:41:09 - 00:02:44:06 then I think people will feel more optimistic about going 00:02:44:06 - 00:02:46:18 into the latter part of this year and into 2025. 00:02:46:18 - 00:02:48:19 - It's definitely something different if you're talking 00:02:48:19 - 00:02:50:16 about two terms for a government instead 00:02:50:16 - 00:02:51:19 of one head of lettuce. 00:02:51:19 - 00:02:54:08 So I applaud you for that new stability. 00:02:54:08 - 00:02:55:11 Can you talk a little bit about 00:02:55:11 - 00:02:59:05 how large corporations in the UK think about making 00:02:59:05 - 00:03:02:19 strategic decisions in particular inorganic opportunities? 00:03:02:19 - 00:03:04:03 You look at the FTSE 00:03:04:03 - 00:03:07:14 and obviously it's probably the most global index out there 00:03:07:14 - 00:03:10:03 in terms of what those companies do and where they operate. 00:03:10:03 - 00:03:12:12 How did they think about the world relative to 00:03:12:12 - 00:03:14:16 a smaller company that might trade on AIM for instance? 00:03:14:16 - 00:03:16:06 - So it is very different. I think 00:03:16:06 - 00:03:18:09 if you look at most FTSE companies, 00:03:18:09 - 00:03:22:03 they probably have less than 10% and in some cases less than 5% 00:03:22:03 - 00:03:25:02 of their revenues and profits in the UK. 00:03:25:02 - 00:03:26:09 So the leadership team, 00:03:26:09 - 00:03:29:03 the boards are impacted just like we all are 00:03:29:03 - 00:03:31:06 by what's going on in our local environment. 00:03:31:06 - 00:03:35:02 But really what's driving decision-making is the global economy 00:03:35:02 - 00:03:37:03 and today when we think about the global economy, 00:03:37:03 - 00:03:39:20 it's really the US is the most important thing. 00:03:39:20 - 00:03:43:00 So for most of our large cap corporates and clients, 00:03:43:00 - 00:03:45:12 it's the US that they're most focused on. 00:03:45:12 - 00:03:47:04 It's the most dynamic market. 00:03:47:04 - 00:03:49:19 It's also where more innovation is taking place 00:03:49:19 - 00:03:52:15 relative to any other region. 00:03:52:15 - 00:03:54:13 Almost sort of if you compare and contrast 00:03:54:13 - 00:03:56:12 to where we've been in the last 10-20 years, 00:03:56:12 - 00:03:59:03 I think Europe has gone backwards a little bit in terms of 00:03:59:03 - 00:04:01:13 of innovation and bringing new ideas to market. 00:04:01:13 - 00:04:03:13 The US with the IRA Act 00:04:03:13 - 00:04:07:02 and other initiatives has really stolen the march not just on 00:04:07:02 - 00:04:09:08 technology but increasingly around energy 00:04:09:08 - 00:04:10:10 and energy transition. 00:04:10:10 - 00:04:13:02 So North America's a really important theme 00:04:13:02 - 00:04:15:07 for most of our larger caps. 00:04:15:07 - 00:04:17:06 You then flip the switch a little bit, 00:04:17:06 - 00:04:19:07 obviously if we're dealing with sort of smaller 00:04:19:07 - 00:04:20:23 or more regionally focused businesses, 00:04:20:23 - 00:04:23:18 then obviously the UK economy does have quite a dramatic 00:04:23:18 - 00:04:26:15 impact on how they think about lives. 00:04:26:15 - 00:04:27:23 And we've been through two 00:04:27:23 - 00:04:30:20 very big shocks in the UK 00:04:30:20 - 00:04:33:07 in the last sort of five years, not just Covid, 00:04:33:07 - 00:04:35:05 which we all experienced globally, 00:04:35:05 - 00:04:37:07 but also Brexit, which was 00:04:37:07 - 00:04:40:01 from an economic perspective an exercise in quite 00:04:40:01 - 00:04:42:22 significant self-harm in terms of what it did 00:04:42:22 - 00:04:45:05 to GDP and GDP growth. 00:04:45:05 - 00:04:46:19 Now that's starting to unwind 00:04:46:19 - 00:04:51:03 and the UK is now back getting to a higher level 00:04:51:03 - 00:04:53:06 of growth relative to some 00:04:53:06 - 00:04:55:06 of its more natural peers on the continent. 00:04:55:06 - 00:04:57:05 So that's starting to correct, 00:04:57:05 - 00:04:59:21 but that GDP lag has definitely 00:04:59:21 - 00:05:02:01 been there for quite some time. 00:05:02:01 - 00:05:04:00 It's interesting and maybe it's just a function 00:05:04:00 - 00:05:06:14 of how the equity markets operate in both the US 00:05:06:14 - 00:05:08:22 and in the UK and the underlying health of the economies, 00:05:08:22 - 00:05:11:20 but there was a bit of a valuation gap that started 00:05:11:20 - 00:05:14:12 to develop with those FTSE 100 companies 00:05:14:12 - 00:05:16:15 where you felt like they weren't trading at a level they 00:05:16:15 - 00:05:18:05 would be trading at if they were 00:05:18:05 - 00:05:20:12 on the New York Stock Exchange or on the NASDAQ. 00:05:20:12 - 00:05:22:20 If you look at that as an opportunity for someone 00:05:22:20 - 00:05:24:02 to come from overseas 00:05:24:02 - 00:05:26:06 and invest into one of these UK companies, 00:05:26:06 - 00:05:29:00 how protectionist is this government going 00:05:29:00 - 00:05:30:19 to be relative to past governments? 00:05:30:19 - 00:05:32:21 Obviously we have something called CFIUS here, 00:05:32:21 - 00:05:35:15 which is designed to prevent sort of takeovers 00:05:35:15 - 00:05:37:04 of sensitive industries. 00:05:37:04 - 00:05:38:13 Frankly, it's been expanded now 00:05:38:13 - 00:05:40:13 because it's become a political tool, 00:05:40:13 - 00:05:42:05 as we're seeing in Nippon Steel. 00:05:42:05 - 00:05:44:14 But is there that same dynamic that exists in the UK 00:05:44:14 - 00:05:45:19 or is it a little bit more open 00:05:45:19 - 00:05:47:10 for investment from overseas? 00:05:47:10 - 00:05:49:10 - I think it's a little bit more open generally. 00:05:49:10 - 00:05:52:00 It's been our mindset for a number of years, 00:05:52:00 - 00:05:54:17 but we do have similar CFIUS type legislation. 00:05:55:19 - 00:05:57:22 It's been expanded in recent years. 00:05:57:22 - 00:06:00:12 Just like here there's a political dimension. 00:06:00:12 - 00:06:02:20 It has to be signed off by the Secretary of State. 00:06:02:20 - 00:06:05:16 So there is very much that I think, 00:06:05:16 - 00:06:09:16 that so far has been very focused on sensitive industries 00:06:09:16 - 00:06:14:15 and geopolitical sensitivities. Particularly China, 00:06:15:03 - 00:06:19:04 in terms of anything where this state backing, 00:06:19:04 - 00:06:21:22 there was a recent example of the sale 00:06:21:22 - 00:06:25:15 of the Telegraph newspaper group, which was originally going 00:06:25:15 - 00:06:30:02 to be sold to a pool of capital out of the Middle East, 00:06:30:02 - 00:06:32:23 but it was essentially a state-backed pool of capital 00:06:32:23 - 00:06:35:19 and that got caught out in the rules 00:06:35:19 - 00:06:38:02 and it wouldn't have necessarily happened 00:06:38:02 - 00:06:39:06 that way a decade ago, 00:06:39:06 - 00:06:41:20 but there's definitely a look through 00:06:41:20 - 00:06:45:12 and if there is a state involvement in an industry, 00:06:45:12 - 00:06:47:10 then that becomes much more problematic. 00:06:47:10 - 00:06:48:18 And anything with a defense 00:06:48:18 - 00:06:51:18 or with an energy security dimension 00:06:51:18 - 00:06:53:11 is also difficult, but more broadly— 00:06:53:11 - 00:06:55:10 - But you can still buy a soccer team? 00:06:55:10 - 00:06:57:09 - You can still buy a soccer team 00:06:57:09 - 00:06:58:20 and most global industries, 00:06:58:20 - 00:07:00:20 particularly in areas like healthcare 00:07:00:20 - 00:07:04:23 and in most industrial segments in consumer then 00:07:04:23 - 00:07:09:00 we are not by inclination a protectionist society, 00:07:09:00 - 00:07:11:01 but we will interestingly see 00:07:11:01 - 00:07:14:04 how the new Labour government responds and reacts. 00:07:14:04 - 00:07:16:22 And whereas the Conservative government previously was, 00:07:18:00 - 00:07:20:06 was more interventionalist than many Conservative 00:07:20:06 - 00:07:22:14 administrations have been in the past. 00:07:22:14 - 00:07:24:13 The new Labour administration's probably going 00:07:24:13 - 00:07:29:08 to have a higher focus on transactions that impact on labor. 00:07:29:08 - 00:07:35:10 So if it impacts— steel is a classic, just like it is here for us there, 00:07:35:10 - 00:07:37:06 a reasonably large employer, still 00:07:37:06 - 00:07:40:01 and an industry that's in somewhat decline. 00:07:40:01 - 00:07:42:16 And so those industries which have large 00:07:42:16 - 00:07:45:08 employment, large labor components are probably going to 00:07:45:08 - 00:07:47:11 get a higher level of scrutiny 00:07:47:11 - 00:07:49:12 from this government than perhaps the last. 00:07:49:12 - 00:07:51:02 - I just want to ask you a little bit, David, 00:07:51:02 - 00:07:54:21 about private equity in the UK and in Europe more generally. 00:07:54:21 - 00:07:57:08 Can you talk a little bit about its function in the market, 00:07:57:08 - 00:07:58:11 its prevalence in the market. 00:07:58:11 - 00:08:00:09 Obviously it's really important 00:08:00:09 - 00:08:02:00 to the US dealmaking environment. 00:08:02:00 - 00:08:03:11 Can you talk a little bit about what it means 00:08:03:11 - 00:08:05:00 in the European context? 00:08:05:00 - 00:08:06:23 - So very, very similar. 00:08:06:23 - 00:08:09:01 Europe always has followed the US 00:08:09:01 - 00:08:11:22 and in that particular area as well. 00:08:11:22 - 00:08:15:09 So all of the big global private equity firms are strongly 00:08:15:09 - 00:08:18:04 present in London and in Europe 00:08:18:04 - 00:08:22:11 and deal activity is driven 00:08:22:11 - 00:08:25:23 they're a catalyst for change, whether that be businesses 00:08:25:23 - 00:08:27:04 that need to restructure 00:08:27:04 - 00:08:29:07 and therefore they're a natural home for a division 00:08:29:07 - 00:08:31:13 that's not necessarily part of a core 00:08:31:13 - 00:08:34:10 strategic direction going forwards, whether it's 00:08:34:10 - 00:08:36:14 to create consolidation platforms to 00:08:36:14 - 00:08:39:02 help accelerate consolidation that needs 00:08:39:02 - 00:08:41:16 to take place in other industries. 00:08:41:16 - 00:08:43:20 So it's a very significant part 00:08:43:20 - 00:08:47:07 of what's driving deal activity. 00:08:47:07 - 00:08:50:05 I think that just like here in the US, 00:08:50:05 - 00:08:53:21 businesses are more comfortable being private for longer 00:08:53:21 - 00:08:56:05 and there's no real need necessarily for a company 00:08:56:05 - 00:08:59:21 to become public in order to deliver on its strategy 00:08:59:21 - 00:09:01:11 and to raise capital. 00:09:01:11 - 00:09:03:17 In fact you might argue that 00:09:03:17 - 00:09:06:03 a 20% ownership of a listed company 00:09:06:03 - 00:09:07:19 is less liquid than a 20% ownership 00:09:07:19 - 00:09:09:10 of a private company these days. 00:09:09:10 - 00:09:11:15 So that dynamic is definitely at play 00:09:11:15 - 00:09:14:15 and private equity have the ambition 00:09:14:15 - 00:09:16:14 to do large transactions. 00:09:16:14 - 00:09:19:18 So size is not as much of an impediment 00:09:19:18 - 00:09:22:06 to getting deals done with private capital in the way 00:09:22:06 - 00:09:23:18 that it used to be. 00:09:23:18 - 00:09:26:22 And so it's a very important part of the market for us. 00:09:26:22 - 00:09:30:23 - Volumes have been muted in the US over the course of 2024 00:09:30:23 - 00:09:32:14 and probably a little bit disguised 00:09:32:14 - 00:09:35:08 by very large transactions that make up for 00:09:35:08 - 00:09:36:21 a lower number of volume 00:09:36:21 - 00:09:39:08 in terms of number of deals that occur. 00:09:39:08 - 00:09:42:08 Are you seeing something similar in the UK 00:09:42:08 - 00:09:43:15 and in Europe generally 00:09:43:15 - 00:09:47:01 and if so, how do you see us coming out of that? 00:09:47:01 - 00:09:49:08 What are the catalysts for that to improve? 00:09:49:08 - 00:09:51:15 - Probably even more so than North America. 00:09:51:15 - 00:09:55:15 So the combination of the political uncertainty in the UK 00:09:55:15 - 00:09:57:20 but also we've had quite a lot of political uncertainty 00:09:57:20 - 00:10:02:16 in Germany with some issues around a lurch 00:10:02:16 - 00:10:04:22 to the right in certain regional elections. 00:10:04:22 - 00:10:07:14 We saw recently in France with Macron 00:10:07:14 - 00:10:09:13 calling a snap election to try 00:10:09:13 - 00:10:12:18 and rebalance against a lurch to the right 00:10:12:18 - 00:10:14:10 through the European elections. 00:10:14:10 - 00:10:18:00 So there's quite a lot of geopolitical instability 00:10:18:00 - 00:10:19:06 in Europe generally, 00:10:19:06 - 00:10:20:21 which you overlay on top 00:10:20:21 - 00:10:23:04 and that's held back deal activities. 00:10:23:04 - 00:10:25:16 So 2023 was a bit of an air pocket 00:10:25:16 - 00:10:27:18 from an M&A perspective if you look back over, 00:10:27:18 - 00:10:29:22 a 10-year time horizon 00:10:29:22 - 00:10:32:15 and while ‘24 is looking a little bit better, 00:10:32:15 - 00:10:38:11 it's slightly— the statistics are slightly flattered by some larger transactions. 00:10:38:11 - 00:10:42:05 So actually deal activity is still relatively muted. 00:10:42:05 - 00:10:46:05 I think there is a buildup of ambition to do more 00:10:46:05 - 00:10:47:23 and that sits with the corporates 00:10:47:23 - 00:10:50:17 but also sits very strongly with private equity. 00:10:50:17 - 00:10:53:09 I think if there's some stability in North America 00:10:53:09 - 00:10:55:08 in particular on the back of the election 00:10:55:08 - 00:10:58:06 in a sense that America's open for business, 00:10:58:06 - 00:11:00:13 then I think there's a very real prospect 00:11:00:13 - 00:11:02:07 that in the latter part of this year, 00:11:02:07 - 00:11:04:22 we start to see some improved volumes 00:11:04:22 - 00:11:07:07 and moving into 2025 potentially 00:11:07:07 - 00:11:08:12 significantly improved volumes. 00:11:08:12 - 00:11:10:18 - Yeah, well I'm rooting for that as I'm sure you are 00:11:10:18 - 00:11:13:04 because cross-border activity in particular has been a real 00:11:13:04 - 00:11:14:07 hallmark of our firm 00:11:14:07 - 00:11:16:19 and would love to see more activity all across the board. 00:11:16:19 - 00:11:18:20 So with that David, I want to thank you 00:11:18:20 - 00:11:21:07 for taking the time out of your day to talk with us today 00:11:21:07 - 00:11:22:20 and I look forward to the next occasion. 00:11:22:20 - 00:11:25:22 - Absolutely. Nice to see you, Kevin.