$3.3bn deal sees Gartner and CEB join forces to create leading research and advisery company

BY Fraser Tennant

In a deal that creates the world’s leading global research and advisory company, Gartner, Inc. has announced its intention to acquire CEB Inc. in a transaction with a total enterprise value of $3.3bn.

The definitive agreement between Gartner, the world's leading information technology research and advisory company, and CEB, the industry leader in providing best practice and talent management insights , will see Gartner acquire all of the outstanding shares of CEB in a cash and stock transaction valued at approximately $2.6bn, which includes Gartner’s assumption of approximately $700m in CEB net debt.

Furthermore, under the terms of the agreement, CEB shareholders will receive $54.00 in cash and 0.2284 shares of Gartner common stock for each share of CEB common stock they own, implying 70 percent cash and 30 percent stock consideration for the offer.

“We are excited about joining forces with CEB, a world-class company we have long admired”, said Gene Hall, chief executive of Gartner. “Our highly complementary business models will create the leading global research and advisory company for all major functions in the enterprise. We look forward to working with CEB’s highly talented teams to leverage our global reach and apply Gartner’s proven operational and sales execution capabilities at scale to accelerate growth across CEB’s businesses.”

The deal will also see Gartner’s existing syndicated research and advisory services being introduced to CEB’s clients in a broad range of functional areas that extend well beyond Gartner’s existing IT, marketing and supply chain roles. In addition, CEB’s best practice and talent management insights will be introduced to Gartner clients worldwide. 

“We have long admired Gartner for its impact on clients and track record of growth,” said Tom Monahan, chairman and chief executive  of CEB. “We’re pleased to reach this agreement, which offers compelling benefits to CEB shareholders, clients and employees. CEB shareholders will receive substantial and immediate value for their investment while benefiting from the upside and strong growth prospects of the combined company.”

The transaction has been unanimously approved by the boards of both companies and is expected to close in the first half of 2017.

Mr Monahan concluded: “The combined company will have unmatched insight into technology, talent and the other drivers of corporate performance, and we look forward to working with the Gartner team to accelerate our growth and scale our impact on members and clients.”

News: IT Research Firm Gartner Is Buying CEB for $2.6 Billion

Global M&A activity down 18 percent in 2016 says new review

BY Fraser Tennant

The volume of global mergers & acquisitions (M&A) activity in 2016 fell 18 percent from the record high seen in 2015, according to a review published this week by Dealogic.

Moreover, the fall – from $4.66 trillion in 2015 to $3.84 trillion in 2016 – followed three consecutive year-on-year increases. And while volume fell 18 percent, M&A revenue was down by only 2 percent.

Among the key M&A trends and developments highlighted by Dealogic are: (i) cross-border M&A activity being down 3 percent globally year-on-year; (ii) China outbound volume hitting a record high of $225.4bn; (iii) US inbound M&A also hit a record high, with a total of $486.3bn; (iv) 4Q global M&A hitting the $1 trillion mark in the first week of December, the biggest quarter since 4Q 2015 and only the tenth time that quarterly volume has surpassed the trillion mark.

Looking to M&A volume in Europe, targeted M&A of $903.1bn was down 13 percent from the $1.03 trillion announced in 2015 – the lowest total since 2013 ($760.3bn). Among the notable deals in the region was the $47bn pending bid by Qualcomm for NXP Semiconductors (announced in October 2016), the biggest US acquisition of a European company on record.

Towards the end of the year (October 2016) there was a late surge in big deals, with five transactions announced worth $20bn or more. Topping the list was AT&T’s $107.9bn bid for Time Warner (announced on 22 October), the seventh largest M&A transaction on record and the biggest deal announced in 2016. In second place was Bayer’s $66.3bn acquisition of Monsanto. Overall, October 2016 saw a record monthly high of $600.8bn.  

Like 2015, technology was once again the top sector (for only the second time on record) with a total of $612.9bn in 2016, short of the record high of $691.4bn the previous year. And for the first time since 2012, healthcare M&A activity fell outside the top three, ranking fourth for global M&A volume, with $320.9bn.

Goldman Sachs led the global M&A volume ranking with $970.4bn, followed by Morgan Stanley and JPMorgan with $866.0bn and $823bn respectively. Goldman Sachs also topped the global M&A revenue ranking with a 10.1 percent wallet share.

Finally, in terms of withdrawn transactions, M&A volume of $837.3bn in 2016 was the highest since 2008 ($948.5bn), with the years seeing two of the top five $100bn-plus withdrawn deals on record. These were Pfizer’s $160bn bid for Allergan (withdrawn in April 2016) and Honeywell International’s $102.8bn bid for United Technologies (withdrawn in March 2016).

Report: Dealogic – Global M&A Review: Full Year 2016

Chinese dealmaking to defy regulatory scrutiny

BY Richard Summerfield

The Chinese economy has been in a state of flux in recent years. With the national economy being retooled and Chinese firms looking overseas for merger and acquisition opportunities, one could be forgiven for thinking that dealmaking activity within the country would be waning.

However, a new report from A.M. Best,'Chinese Mergers & Acquisitions Activity Continues Amid Evolving Regulatory and Policy Environment', suggests that activity in the country will continue, despite a number of challenges. Though activity may slow in the coming year due to an uncertain economic outlook and evolving government policies in China and overseas markets, dealmaking will continue regardless.

“The number of both outbound and domestic deals is expected to continue to grow, although depreciation pressure on the yuan and eroding foreign currency reserves may cause some downside impact on outbound deals,” notes the report.

Dealmaking in overseas real estate has proved particularly attractive to Chinese acquirers in recent years. While private enterprises have been active in jurisdictions including the US, Europe and South Korea, state owned enterprises have also begun to pursue overseas deals.

With  more Chinese firms pursuing overseas opportunities, regulatory challenges will need to be overcome, particularly for those active in the US. Accordingly, the report warns Chinese acquirers to be mindful of complying with extensive regulations. It highlights Anbang’s withdrawal of its application for approval for its Fidelity & Guaranty Life deal as a key example of the increased regulatory scrutiny facing Chinese firms. In 2016, Anbang’s deal for Fidelity collapsed after New York regulators required additional information on the deal’s funding and shareholder structure.

The report also highlights Anbang’s aborted $14bn bid for Starwood Hotels & Resort Worldwide Inc., as well as Fosun’s unsuccessful purchase agreement for Israeli insurer Phoenix Holdings Ltd as examples of outbound Chinese deals which collapsed under regulatory scrutiny.

Though 2017 will likely see Chinese firms encounter more regulatory difficulty, dealmaking is set to continue. That said, depreciation pressure on the yuan and the eroding of foreign currency reserves may have an impact on outbound deals.

Report: Chinese Mergers & Acquisitions Activity Continues Amid Evolving Regulatory and Policy Environment

Linde and Praxair announce $65bn merger

BY Richard Summerfield

Multinational chemical company Linde AG and US rival Praxair, Inc have announced a $65bn merger of equals via an all-stock transaction. Under the terms of the merger, existing Linde and Praxair shareholders would each own about 50 percent of the newly combined company, according to a joint statement announcing the deal.

Merger talks between the two companies had collapsed earlier this year; however they were revived following the dismissal of Linde’s finance director Georg Denoke. The merger, like many of the industry consolidation deals announce in 2016, is expected to encounter some tough regulatory scrutiny.

The two companies have pursued a merger in order to create a new industry leader from two regional giants. Linde’s business focuses primarily on Europe and Asia, while Praxair is more dominant in the US and Latin America. Linde is currently the industry’s second biggest specialty gas provider; Praxair is the third biggest. According to data from the companies, a combined Linde-Praxair combination would generate around $30bn in annual sales before divestitures.

The companies have also identified considerable cost savings as being a key driver behind the deal, targeting annual cost savings of around $1bn.

"The strategic combination between Linde and Praxair would leverage the complementary strengths of each across a larger global footprint and create a more resilient portfolio with increased exposure to long-term macro growth trends," said Steve Angel, Praxair’s chairman and chief executive. "We consider this to be a true strategic merger, as it brings together the capabilities, talented people and best-in-class processes of both companies, creating a unique and compelling opportunity for all of our stakeholders."

"Under the Linde brand, we want to combine our companies’ business and technology capabilities and form a global industrial gas leader. Beyond the strategic fit, the compelling, value-creating combination would achieve a robust balance sheet and cash flow and generate financial flexibility to invest in our future," said Professor Dr. Aldo Belloni, chief executive of Linde.

Mr Angel will become chief executive of the new company. Linde’s chairman Wolfgang Reitzle will continue in that role. The new board will have equal representation from both companies.

News: Linde, Praxair agree $65 billion merger outline, ambitious cost savings

Cyber attack aftermath a big issue for global organisations

BY Fraser Tennant

Global organisations are more adept than ever at detecting a cyber attack but are struggling to cope with the aftermath of a breach, according to a new survey by EY.

In ‘Path to cyber resilience: Sense, resist, react’, EY’s 19th Global Information Security Survey (GISS) 2016-17, some of the most compelling cyber security issues facing businesses in today’s digital ecosystem are examined, with respondents indicating that cyber security threats, such as malware, phishing, cyber security to steal financial information, or cyber attacks to steal intellectual property or data, are on the rise.

EY’s findings show that although 50 percent of the 1735 global organisations surveyed said they could detect a sophisticated cyber attack – due to investments in cyber threat intelligence to predict what they can expect from an attack, continuous monitoring mechanisms, security operations centres (SOC) and active defence mechanisms – 86 percent said that, despite these investments, their cyber security function does not fully meet their organisation's needs.

Additionally, 64 percent of organisations stated that they did not have a formal threat intelligence programme or had only an informal one at best. When it came to the matter of identifying vulnerabilities, 55 percent of respondents said they did not have vulnerability identification capabilities or had only informal capabilities. Moreover, 44 percent indicated they did not have a SOC to continuously monitor for cyber attacks.

"Organisations have come a long way in preparing for a cyber breach, but as fast as they improve, cyber attackers come up with new tricks,” said Paul van Kessel, EY global advisory cyber security leader. “Organisations therefore need to sharpen their senses and upgrade their resistance to attacks. They also need to think beyond just protection and security to 'cyber resilience' – an organisation-wide response that helps them prepare for and fully address these inevitable cyber security incidents.

When asked about any recent cyber security incidents, 57 percent of respondents said they had experienced an incident. Furthermore, 48 percent cited outdated information security controls or architecture as their highest vulnerability – a 34 percent increase on the findings of the 2015 survey.

Mr van Kessel continued: “In the event of an attack organisations need to have a plan and be prepared to repair the damage quickly. If not, they put their customers, employees, vendors and ultimately their own future, at risk."

Report: ‘Path to cyber resilience: Sense, resist, react’.