The M&A train powered through instability this year, keeping a pace dealmakers worry won’t be maintained in 2020.
Global mergers and acquisitions weathered geopolitical tensions and roiling markets to post US$2.99 trillion in volume this year, a 1.5 per cent dip from 2018 though still the fifth-best year ever.
The number of deals this year through Friday dropped 4.2 per cent to 29,015, according to data compiled by Bloomberg. The biggest was United Technologies Corp.’s agreement in June to buy Raytheon Co., creating an aerospace and defense player worth more than US$100 billion.
“The current M&A market has proven to be unstoppable,” said Dusty Philip, Goldman Sachs Group Inc.’s co-head of global mergers and acquisitions. “Despite spikes in market volatility and macro concerns regarding trade and political uncertainty, we’ve seen a flurry of large scale M&A transactions in recent weeks.”
The bank’s “backlog is clearly up from the beginning of the year,” Philip said.
Goldman Sachs remained the top-ranked dealmaker in 2019, advising on 281 deals worth US$1 trillion, according to data compiled by Bloomberg.
JPMorgan Chase & Co., neck and neck with Morgan Stanley for the No. 2 slot, followed with 258 deals worth US$872 billion. Morgan Stanley advised on 233 deals worth US$813 billion.
While last year they were buoyed by a flush of private equity deals and transactions in the middle-market, this year was propped up by a rush of mega mergers. The top three investment banks were also helped as turmoil in Europe stung the region’s dealmakers.
Board rooms have plenty to worry about next year: the tumultuous U.S. presidential campaign, the U.K.’s Brexit deadlines, tariff-fueled trade tensions and regulatory regimes targeting the world’s largest companies.
There will likely be fewer large deals in 2020, partly because of regulatory issues, said Robert Kindler, Morgan Stanley’s global head of mergers and acquisitions. Kindler expects the number of transactions to be comparable to this year, even as volumes shrink.
“I don’t expect that in anticipation of the election there will a rush to do deals out of concern with the possibility of a change in administration,” he said. “I don’t think there’s that much of a difference between the current administration and what some of the Democratic candidates are saying.”
Some deal drivers have not let up, such as shareholders pushing for buyout paydays over stock buybacks. As global economic activity grows more subdued, companies seeking growth are fighting over fewer desirable assets.
Private equity firms, flush with an estimated US$1.4 trillion in dry powder, are benefiting from cheap financing and finding partners to buy bigger targets. The largest this year was the US$14.3 billion buyout of fiber network company Zayo Group Holdings Inc. announced in May, in which Stockholm-based private equity firm EQT AB joined Digital Colony Partners.
Several private equity firms have been circling Germany’s Thyssenkrupp AG, which could fetch more than 15 billion euros (US$16.7 billion), people familiar with the matter have said.
Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup Inc, expects a busy first half of the year.
“There’s support for strategic deals that are fairly priced — demand for high quality companies is strong across strategics and private equity,“ she said.
Health-care M&A volumes hit an all-time high in 2019, reaching $461 billion. Mega deals included Bristol-Myers Squibb Co. buying Celgene Corp. and AbbVie Inc. acquiring Allergan Plc.
Christina Dix, Bank of America Corp.’s head of health-care banking for Europe, the Middle East and Africa, said pharmaceutical companies will focus on optimizing their portfolios amid drug pricing pressure and U.S. health-care reform.
Jonathan Davis, an M&A partner at Kirkland & Ellis who advised AbbVie on the Allergan deal, said the deals pipeline is strong but he is watching whether companies show increased caution next year.
“There are a lot of positive conversations going on, but that is balanced by a few pronounced headwinds, including an upcoming election cycle and associated political and regulatory uncertainty, high valuations and recent choppiness in the credit markets.” Davis said.
To combat future market swings, companies are using stock to fund deals at the highest level in almost 20 years. Acquisitions by U.S. companies in which part of the payment is stock have surged 41 per cent to US$753 billion, higher than any previous full year since 2000.
Paying in stock, which ties a deal’s risk to the market, will remain a popular option to hard cash, said Anu Aiyengar, JPMorgan’s head of M&A for North America.
“When you have a large amount of uncertainty in the world,” she said, “one way to address that is to do stock for stock deals.”
Democrats at odds over ‘billionaires tax’ to fund sweeping Biden agenda
Senior Democrats in the U.S. Congress were at odds on Wednesday over a proposal to tax billionaires’ assets to help pay for President Joe Biden’s social and climate-change agenda, leaving it unclear if the idea had enough support to become law.
The Senate’s top tax writer, Finance Committee Chairman Ron Wyden, unveiled the idea early on Wednesday, but by afternoon his House of Representatives counterpart, Ways and Means Committee Chairman Richard Neal, said the idea appeared to be too complex to succeed.
Biden’s Democrats are struggling to reach consensus on the scope of a pair of bills worth about $3 trillion to rebuild the nation’s infrastructure, boost social spending and fight climate change. With the narrowest of margins in Congress, and unified Republican opposition, they need near 100% agreement within the caucus to pass anything.
Biden and Democratic congressional leaders have been scaling back their ambitions in order to keep skeptical centrists on board. Several media outlets reported that they dropped a provision on Wednesday that would have provided up to 12 weeks of paid family leave.
Aides in Congress said the billionaires tax, affecting roughly 700 taxpayers with over $1 billion in assets or $100 million in annual income for three consecutive years, would impose a 23.8% tax rate for long-term capital gains on tradable assets, whether or not they have been sold. It would also allow taxpayers to take deductions for losses on assets.
Neal, along with other Democrats had backed Biden’s original proposal, which would raise tax rates on companies and the wealthy, but that idea faces an uphill fight in the Senate.
Referring to the billionaires tax, Neal said: “It will be very difficult because of its complexity.”
He added that Democrats are discussing imposing a 3% surtax on taxpayers earning more than $10 million.
Senator Bernie Sanders, a leading progressive, said the billionaires tax was a “step in the right direction” but not nearly enough. “Every sensible revenue option seems to be destroyed,” he told reporters. Sanders met with Biden on Wednesday, a White House aide said.
The billionaires tax plan was put forth after Senate moderates voiced opposition to the idea of raising corporate tax rates.
“The president supports the billionaire tax,” said White House spokesperson Jen Psaki. “He looks forward to working with Congress and Chairman Wyden to make sure the highest-income Americans pay their fair share.”
Two other revenue proposals – a 15% corporate minimum tax https://www.reuters.com/world/us/details-emerge-corporate-minimum-tax-plan-us-senate-democrats-cnbc-2021-10-26 and tougher enforcement of existing tax laws – also enjoy backing from the White House and congressional Democrats.
Democratic Senator Joe Manchin, a centrist who has forced Biden to scale back the spending package, reacted with skepticism to the billionaires tax proposal as well.
“I don’t like the connotation that we are targeting different people,” he told reporters.
Manchin said he would support a minimum 15% tax on wealthy individuals, similar to the 15% corporate minimum tax that Democrats have proposed.
He and Democratic Senator Kyrsten Sinema, another centrist who has opposed various Democratic proposals, met behind closed doors with White House staffers for roughly two hours on Wednesday.
The minimum corporate tax would dovetail with a global corporate minimum tax recently agreed to by 136 countries https://www.reuters.com/business/finance/us-treasurys-yellen-confident-congress-will-pass-global-minimum-tax-2021-10-10 and aimed at corporations that pay little or no tax by gaming the international tax system.
It would apply to many large American companies, such as Apple Inc, Amazon.com Inc, JPMorgan Chase & Co and Johnson & Johnson.
Some experts say the billionaires tax could be difficult to enforce.
“Government staffers tend to be outmatched by the most sophisticated, best-resourced taxpayers out there,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, a Washington think tank.
Top White House tax expert David Kamin wrote favorably about a similar proposal in 2019 while serving as a law professor. But he also noted that it could create “distortions” by encouraging a shift in investments to privately held firms.
Tesla Inc Chief Executive Elon Musk, who early this week was worth https://www.reuters.com/business/autos-transportation/teslas-1-trillion-value-double-bonanza-musk-2021-10-25 about $230 billion, criticized the plan on Twitter.
“Who is best at capital allocation — government or entrepreneurs — is indeed what it comes down to,” he said. Tesla, an electric car maker, has reaped at least $3 billion https://subsidytracker.goodjobsfirst.org/prog.php?parent=tesla-inc in U.S. and local government support, according to Good Jobs First, a subsidy tracker.
Not all billionaires are opposed to the plan. George Soros, the investor and liberal activist, is supportive https://www.reuters.com/world/us/us-billionaire-tax-proposal-seems-unite-democrats-will-it-work-2021-10-26, his spokesperson told Reuters on Monday.
(Reporting by Richard Cowan and David Morgan; Additional reporting by David Lawder, Trevor Hunnicutt, Tim Ahmann and Christopher Gallagher; Writing by Andy Sullivan; Editing by Scott Malone, Howard Goller and Peter Cooney)
Facebook Can Be Toxic For Female Politicians, Company Documents Show – Forbes
In the run-up to Germany’s national election earlier this year, Facebook grew worried enough about the harassment faced by female politicians on its platform in that country to provide them with classes and other measures to protect themselves while using Facebook.
Calling the initiative “Strong Women, Strong Politics,” Facebook offered workshops about securing accounts from hacks; time with a psychologist if the digital abuse became too severe; and simplified reporting tools to report bad content. The project began in November 2020, and by February, 63 women had gone through some part of Facebook’s anti-harassment training, while 6 women had attended psychological counseling sessions.
Lending this support “aims to minimize the risk of bad experiences with our platforms,” reads an internal Facebook report from February detailing Project Strong Women, Strong Politics. “And thus reduce the risk of having to deal with newly elected officials who have just had a really negative experience on Facebook,” lawmakers who might then be more inclined to consider tougher regulations around what happens on Facebook.
The report on these efforts to combat harassment in Germany comes from documents provided by Facebook whistle-blower Frances Haugen to the Securities and Exchange Commission, which were also provided to Congress in redacted form by her legal team. The redacted versions received by Congress were obtained by a consortium of news organizations, including Forbes, a collection of documents popularly known as the Facebook Papers.
Facebook’s report reinforces what’s become a truism about the internet: Politics brings out the worst in people, and conversations around the subject tend to attract harmful conversations, especially when they’re about women running for office. And as the 2020 document from Facebook shows, it’s a common problem the world over—even in a country run by a female leader, Chancellor Angela Merkel, for the last 16 years.
An October 2020 study by the Institute for Strategic Dialogue, a British think tank that studies digital hate speech, puts this into sharp relief. It found that female politicians received 12% more abuse on Facebook than their male counterparts. Liberals got it the worst. Female Democratic politicians received ten times as much abuse as men did. But women in the GOP faced negativity, too: about twice as much as their male peers. Over a ten-day span in summer 2020, the think tank’s researchers tagged 146,140 abusive comments directed toward House Majority Leader Nancy Pelosi. No one got hated on more than Pelosi, and she had received three times as many toxic comments as the man who faced the heaviest onslaught: Republican Sen. Tim Scott (42,060 comments).
Politicians have called out Facebook for letting the abuse go on. In August 2020, Pelosi and 29 other female U.S. politicians sent a letter to Facebook CEO Mark Zuckerberg and published it publicly. “Unfortunately, women in politics face pervasive sexism, hate, harassment and threats of violence on your platform that make it more difficult for them to succeed in public life,” the letter reads. “We are imploring Facebook to do more to protect the ability of women to engage in democratic discourse and to foster a safe and empowering space for women.” Pelosi sent the letter after Facebook refused to take down a deep-fake video of her that was doctored to make her appear intoxicated.
Politicians talked about the problem, and there was widespread concern about it on the internet. Facebook didn’t like to acknowledge it publicly, though. (In a response to Pelosi’s letter, a company spokesperson said the company would “continue working with [the female politicians] to surface new solutions” for the concerns they highlighted.) As with much of the Facebook Papers, the company’s work on the harassment faced by German female politicians shows that it did understand the breadth of the problems facing women in office. (Facebook didn’t immediately respond to a request for comment for this story.)
For instance, Facebook already had data showing the need for its “Strong Women, Strong Politics” project in Germany. A month before the project started in November 2020, company research examined 195 comments made on Facebook pages belonging to female German politicians, according to a second newly released document among the Facebook Papers. That study’s rather understated conclusion? “The results were not spectacular.” In other words, female politicians had indeed drawn a great deal of hate: In those 195 comments, Facebook researchers concluded nearly 30% of them were abusive or harmful. Many of the toxic commentators had flocked to far-right Bundestag member Alice Wiedel, using her Facebook account as a nesting ground, where they exchanged ideas and views—while a main focus of attack came against Sevim Dagdelen, a liberal member with a Kurdish background.
“We all want our platforms to be a safe space where free expression and civic discourse coexist,” the report reads. “However, far too often, public figures, especially female public figures, often face unwanted harassment leading to uncivil fights.”
Can Hong Kong’s economy survive China’s political crackdown? – Al Jazeera English
Hong Kong, China – Rumours that the Hong Kong dollar will be unpegged from the United States dollar percolate through local brokerages. Thousands of middle-class families have sold their flats and cashed out for a new life abroad. Hong Kong’s powerful developers cringe when Beijing demands that they alleviate the territory’s housing shortage.
Over the past year, Hong Kong’s society has been torn apart by the Beijing-imposed national security law and changes to the electoral process designed to ensure only people deemed “patriots” can hold office in the territory.
Now attention is turning to whether its famously free economy and status as a global financial centre can survive.
Observers are not optimistic.
“Economic freedom without democracy and other freedoms is not stable in the long term,” said Fred McMahon, a resident fellow with the Fraser Institute, an independent non-partisan think-tank in Canada.
Last month, the institute’s annual report on economic freedom still crowned Hong Kong’s the freest economy in the world, but it pointed to the national security law and the city’s “descent into tyranny” as threats to holding on to the title for much longer.
“The key aspect of economic freedom is the rule of law, which doesn’t bow to power but enforces justice and independence of the government,” McMahon told Al Jazeera. However, for the Chinese Communist Party “the law is subservient to politics,” he added.
Last year, The Heritage Foundation, which for decades toasted the city as the poster child of laissez-faire economics, dumped Hong Kong from its ranking.
Within months of the security law coming into effect, Next Digital, a thriving business that published the popular pro-democracy Apple Daily, was forced to close after owner Jimmy Lai was accused of “colluding with a foreign power”, and the company’s assets were frozen.
While Lai is behind bars awaiting trial and has since been charged with other offences, businesspeople are wondering whether the tycoon’s prosecution under the new law proves to be a singular exception – or the proverbial canary in the coal mine.
“This is a special case that has put the international business community on guard,” said George Cautherley, vice chairman of the International Chamber of Commerce – Hong Kong. “They’re waiting to see if the government will go further than this and how this is going to evolve.”
Hong Kong’s economy still seems to be humming along for now, but Beijing’s recent mainland crackdowns on tech giants, tuition centres and debt-binging real-estate developers have raised suspicion about what might be in store.
Assuming history is any guide, it could be only a matter of time before Beijing extends its interest to Hong Kong’s economic affairs.
A case in point: The national security law was promulgated in mainland China only a few years before it was imposed on Hong Kong, bypassing the territory’s own elected legislature.
More recently, the city’s “big four” developers, faulted for some of the world’s highest home prices and smallest flats, were told to do their bit to solve the territory’s housing problems.
For businesspeople, there is also the spectre of the past: when China was a command economy and private ownership outlawed.
“Businesspeople are worried perhaps not so much as their own personal freedom as the value of their assets invested in Hong Kong and China,” said Joseph Lian, former commentator and top editor at the city’s business press who now teaches economics at Yamanashi Gakuin University in Japan. They “would be in for a tough ride”, he said.
Eye on Beijing
But it is not only the well-heeled who worry. Middle-class families convulsed by the crackdowns are also looking to protect their money and investments.
Tens of thousands of Hong Kong people who are planning to emigrate have put up the family flat – often their most valuable asset – for sale. Some – and not only those who are planning to leave – are also opening offshore bank accounts out of concern that the territory may soon be subject to the same kind of capital controls as the mainland.
The world’s longest and most costly quarantine mandate – between 14 and 21 days in a hotel for all residents returning from overseas – has also been weighing on the minds of business and once-regular travellers.
The European Chamber of Commerce warned earlier this month that many of its member companies were considering relocating some of their operations elsewhere – including Singapore – because of the mandate, which the local government has shown little willingness to relax even for the fully vaccinated.
Chief Executive Carrie Lam has hammered home her objective of aligning the city’s pandemic control with the mainland’s zero-COVID goal – whatever the cost.
But the price of an increasingly restricted economy could end up being hefty.
Hong Kong’s separate economic system has long underpinned its status both as China’s most important financial hub and a global one.
But with the territory on an ever-shorter leash from Beijing, Lian expects the investment dollars that propelled it into pre-eminence over the last half-century could soon give way to an influx of speculative funds, known as hot money.
“A mature financial centre has a lower proportion of hot money; Hong Kong may be going in the opposite direction,” said Lian. “It may still make money for a lot of people; casinos do, too, but that’s not what a financial centre is for.”
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