Demand for M&A insurance grows

BY Richard Summerfield

There has been a notable increase in demand for M&A insurance, according to a new report from Aon.

The report, ‘Insurance for M&A: a coming of age and an exciting future ahead’, notes that following a decline in M&A activity after the 2008 financial crisis, the volume of deals reached pre-recession values in 2015 and has increased ever since. The recent economic environment has been favourable for M&A, as interest rates have remained low, company balance sheets are stronger, and deal activity has risen significantly among private equity firms.

According to the report, 3200 deals were transacted globally using warranty and indemnity (W&I) insurance in 2018. W&I insurance is the largest insurance product by premium volume, however buyers and sellers are also looking to tax insurance, litigation and contingency insurance, and bespoke products that include environmental or cyber policies. The market value for transactional liability solutions reached $2.3bn in 2018, a 35 percent increase from 2014.

“Buyers, sellers, and legal and professional service firms are fully aware of the value of insurance during the transaction process, and this has culminated with improved infrastructure within the insurance market,” said Alistair Lester, chief executive of Aon M&A and Transaction Solutions for EMEA. “Insureds now have access to more sophisticated products, a wider choice of providers, larger coverage limits, lower premiums, and services such as capital advisory and consultancy.”

“For an insurer or an MGA, working out how best to capture the opportunities begins with an understanding of the likely evolution of the marketplace. We have developed forecasts for the growth of the marketplace in Europe, including the products that will dominate, evolutions in coverage and how local markets will operate,” said Rohan Dixon, chief executive and president of Aon Inpoint. “This enables us to help insurers identify where the opportunities are, how to access them and how they can improve their capabilities and offerings to better serve buyers and sellers in the M&A environment.”

Report: Insurance for M&A: a coming of age and an exciting future ahead

Blackstone takes £3bn majority stake in MagicLab

BY Fraser Tennant

As part of its push to invest in companies with robust growth profiles, PE firm Blackstone is to acquire a majority stake in dating app startup MagicLab for $3bn.

Founded in 2006 by its chief executive Andrey Andreev, MagicLab’s suite of brands – which includes the dating and social networking apps Bumble and Badoo – has connected and transformed the lives of over 500 million people around the world across dating, social and business.

Constantly seeking new ways to drive long-term growth, Mr Andreev has been at the forefront of innovation in the dating industry and has continued to invest in finding the most talented entrepreneurs and tech visionaries to mentor.

“Blackstone presented MagicLab with a great opportunity to further develop the brands and platform, and I am confident Blackstone will take MagicLab to the next level in terms of growth and expansion,” said Mr Andreev. “I am incredibly proud of the company, and of how we have connected millions of people around the world.”

As part of the acquisition, Mr Andreev will be selling his stake and stepping down from the business. He will be replaced as chief executive by Whitney Wolfe Herd, founder and chief executive of Bumble, who, together with Blackstone, will work to accelerate the business’ growth even further.

“At MagicLab, I have had the pleasure of working with some of the best and most talented entrepreneurs,” continues Mr Andreev. “My aim now is to ensure a smooth and successful transition before I embark on a new business venture in search of innovative leaders with new and exciting ideas. I am grateful for all the support of my partners and employees over the years as we could not have gotten to this point without them. I wish MagicLab and Blackstone every success.”

Mr Wolfe Herd added: “This transaction is an incredibly important and exciting moment for Bumble and the MagicLab group of brands and team members. Blackstone is world-class at maximising the success of entrepreneur-led companies, which presents a tremendous opportunity.”

Martin Brand, a senior managing director at Blackstone, concluded: “We look forward to partnering with MagicLab to help fuel the company’s continued expansion in the years ahead.”

News: Blackstone acquires dating apps Bumble, Badoo

Stryking the Wright deal

BY Richard Summerfield

Medical device manufacturer Stryker Corp has announced that it will acquire smaller rival Wright Medical Group in a deal worth $5.4bn, including convertible notes.

Under the terms of the deal, Wright shareholders will receive $30.75 in cash per share, giving the deal an equity value of $4bn. The agreed price represents a premium of 39.7 percent to the company’s close price on Friday. The boards of both companies have approved the deal, which is expected to close in the second half of 2020, subject to customary closing conditions and pending regulatory approval.

“This acquisition enhances our global market position in trauma & extremities, providing significant opportunities to advance innovation, improve outcomes and reach more patients,” said Kevin Lobo, chairman and chief executive of Stryker. “Wright Medical has built a successful business, and we look forward to welcoming their team to Stryker.”

“We believe this transaction will provide truly unique opportunities and will create significant value for our shareholders, customers and employees,” said Robert Palmisano, executive director, chief executive and president of Wright Medical. “By merging our complementary strengths and collective resources, we will be able to advance our broad platform of extremities and biologics technologies with one of the world’s leading medical technology companies that shares our vision of delivering breakthrough and innovative solutions to improve patient outcomes.”

By acquiring Wright Medical, Stryker will expand its “trauma and extremities business” through Wright Medical's “highly complementary product portfolio and customer base”, the companies said in a statement. Stryker also believes the deal will strengthen its trauma and extremities business in “the fastest growing segments in orthopaedics”.

Founded in 1950, Wright Medical manufactures implants to treat injuries to parts of the body including the shoulders, elbows and ankles, and has recorded global sales approaching $1bn.

The deal is the latest in a series of mergers in the medical device industry. In recent years, 3M agreed to buy wound-care maker Acelity for $6.7bn including debt, and Boston Scientific acquired BTG for £3.3bn in cash. 

News: Stryker boosts bone implants with $4 billion Wright Medical buyout

China-driven M&A in North America plummets in 2019, reveals new report

BY Fraser Tennant

M&A activity in North America instigated by Chinese investors dropped sharply in 3Q 2019, according to a new report by Pitchbook.

In its ‘3Q 2019 North American M&A Report’, the financial information and technology provider reveals that a little over $20bn worth of North American M&A deals with Chinese acquirers have been consummated in 2019 through 3Q –  a massive downturn from the $298.5bn that was invested in 2016.

According to the report, the plummeting M&A activity by Chinese acquirers is due to the increasingly tense relationship between the US and China being played out in the trade war, with a seemingly unending series of tit-for-tat tariffs the order of the day in recent years.

“M&A has been one of the areas hit hardest by the trade war, with deal value for North American target companies with a Chinese acquirer on pace to fall by over 90 percent since peaking in 2016,” states the report. “The US/China trade war rages on and has led to a precipitous decline in cross-border activity, with far fewer Chinese companies willing or able to acquire US companies.”

Furthermore, not only have American and Chinese companies avoided doing deals together, but the US government has occasionally prevented deals, with the Committee on Foreign Investment in the US (CFIUS) blocking a number of major transactions, such as Singapore-based Broadcom’s $100bn-plus attempt to purchase Qualcomm, reportedly on national security grounds.

Beyond the waning M&A activity between the two economic powerhouses, the report notes that North American M&A activity continues apace, with 3Q 2019 seeing robust deal flow totalling over $600bn. Drilling down, eight deals above $10bn closed during the quarter, accounting for over one-third of total deal value.

“In 2019 to date, we have seen over 8000 deals close with an accumulative value of nearly $1.6 trillion, approximately on pace with the first three quarters of 2018,” adds the report. “Much of this quarter’s total value was attributed to just a few colossal deals, such as such as Bristol-Myers Squibb’s  $74bn acquisition of Celgene and BB&T’s $66bn acquisition of SunTrust Bank.”

The report concludes: “We expect M&A value to end the year on a high note, barring any broader economic slowdown.”

Report: 3Q 2019 North American M&A Report

Prologis takes Liberty

BY Richard Summerfield

Prologis Inc has agreed to acquire its rival, industrial real-estate firm Liberty Property Trust, in an all stock deal valued at around $12.6bn, including the assumption of debt.

Under the terms of the deal, Liberty shareholders would receive 0.675 times a Prologis share for each unit they hold, about $61 a share. The deal is expected to close in the first quarter of 2020.

The deal is expected to generate immediate savings of around $120m from administrative costs, operating leverage, lower interest expense and lease adjustments, the companies said in a statement. The acquisition will also bolster Prologis’ presence in a number of target markets, such as Lehigh Valley, Chicago, Houston, Central PA, New Jersey and Southern California.

In order to complete the deal, Prologis has announced that it plans to dispose of approximately $3.5bn of assets on a pro rata share basis. This includes $2.8bn of non-strategic logistics properties and $700m of office properties.

“Liberty and Prologis represent two of the finest teams of real estate professionals and two of the finest portfolios of industrial real estate ever assembled,” said Bill Hankowsky, chairman and chief executive of Liberty. "The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain and enhance value creation for our combined shareholders. It is a testament to Liberty’s outstanding teams of professionals, both present and past.”

“Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” said Eugene F. Reilly, chief investment officer at Prologis. “We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”

“Liberty’s logistics assets are highly complementary to our US portfolio and this acquisition increases our holdings and growth potential in several key markets,” said Hamid R. Moghadam, chairman and chief executive at Prologis. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”

The companies have also identified future synergies with the potential to generate approximately $60m in annual savings, including $10m from revenue synergies and $50m from incremental development value creation.

News: Prologis to buy warehouse rival Liberty in $12.6 billion deal