Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.
CEO and Founder of DealRoom
The ability of M&A activity to weather some of the toughest headwinds over the past three years has been remarkable.
In the first half of the year, despite geopolitical turmoil, volatility in commodity prices, and a return to historic levels of inflation, global M&A activity still reached a total value of $2 trillion, spread across 2,274 deals.
With the caveat that almost all of these deals are still at the pending stage, below DealRoom looks at seven of the biggest recent M&A transactions and their implications for the merging companies.
When predicting the future of consumer software, looking at Microsoftâs acquisitions is rarely a bad place to start. In January of this year, it acquired the worldâs largest video game maker for $95 per share, in an all-cash transaction valued at $68.7 billion, suggesting to many that this was the beginning of a new phase for the gaming industry.
With the acquisition, Microsoft added a series of globally renowned franchises to its portfolio including Warcraft, Diablo, Call of Duty, Overwatch, and Candy Crush. Significantly, the deal also meant that Microsoft jumped into the worldâs third-largest gaming company by revenue slot, now just behind Tencent and Sony.
Whatâs the play behind the acquisition? Well, it looks as though Microsoft is betting that the future of gaming is on the cloud, and not on consoles (such as the Playstation). By bringing all of its stable of beloved games onto Game Pass, its flagship subscription service, it could become the go-to destination for gamers across the world.
In May of this year, the diversified semiconductor (and increasingly cloud-focused) manufacturer Broadcom acquired VMW are in a cash and stock deal worth $61 billion. Not for the first time after one of Broadcomâs major acquisitions, the market reacted negatively, with Broadcom stock falling almost 20% in the month after the deal.
One of the reasons for concern is the perceived different cultures at each of the companies. Broadcom has developed anâacquire-and-axeâ reputation in the software industry, acquiring firms before large staff layoffs and divestments of unwanted divisions. By contrast, VMWareis considered a company that adopts more of a âfail often, fail wellâmentality.
Time will tell on the culture. Certainly,VMWareâs CEO has been keen to play up the merits of the deal, noting that itâs highly unlikely to go the way of previous Broadcom acquisitions, such as those of Symantec and CA Technologies over the past few years. And the synergies between VMWareâs software and Broadcomâs overall infrastructure could be significant.
Oracleâs acquisition of Cerner is big techâs latest foray into the healthcare system, promising better outcomes. In its news release for the acquisition of Cerner, Oracle outlined some worthy goals for the acquisition, including building cloud software systems that enable doctors to spend less time on admin and more with patients.
This is the biggest deal that Oracle has ever closed, and to re-emphasize, itâs not in an area which is a key strength. But the synergies could be huge: Healthcare now depends on data like few other industries, and where better to look after data than on the cloud? And there are few better to provide the tools for that than Oracle.
Reading into analystsâ take on the deal, it seems like its success will depend on Oracleâs ability to merge the data that it receives through the Cerner acquisition with that from outside the business. Big data tends to sit in silos in the healthcare industry. It is indeed a big challenge but not one you would bet against Oracle overcoming.
AMDâs acquisition of Xilinx in February of this year in an all-stock deal, usually considered the best way of generating value from an M&A transaction. However, a little over six months after the transaction was announced, AMDâs stock price on Nasdaq is trading at close to $75, close to 55% of where it was at the time the deal was announced.
In theory, this was a sensible play. In addition to being a stock only deal which was projected to be cash flow accretive in the first year, it gave AMD access to a portfolio of high leadership computing, graphics and adaptive SoC products. It also significantly expanded AMDâs IP portfolio. What was not to be optimistic about?
It appears that AMD shareholders simply believed that the company was giving away too much to acquire Xilinx. Analysts looking at the deal back inFebruary noted that although cash flow would increase, earnings per share would be down, at least partly explaining the preciptious subsequent fall.
The June merger between Prologis and Duke Realty in June of this year brings together two of the worldâs major logistics real estate companies. The transaction was valued at $26 billion including debt, and was paid for using Prologisâ equity. It cemented Prologis as the worldâs largest logistics real estate operator.
On closing the acquisition, the new firm - the name of which is yet to be decided - will have an astonishing portfolio of logistics property. This includes: 153 million square feet of property across18 US regions, 11 million square feet of development in progress, accounting for over $1.5 billion in investment, and 1,228 acres of land owned and under option.
The rationale here seems to be âbuy land; theyâre not making it anymore.â Whatâs interesting here is that warehouse stocks had been trending down in the first half of the year, in line with less optimistic forecasts from the eCommerce sector. Prologis and Duke were undeterred, and have effectively doubled down on a positive future for the sector.
The merger between Orange and Grupo MĂĄsMĂłvil creates a new leader in Spainâs cellular telephone market. Each of the companies will have equal governance rights in the new company (likely to be called Orange) and synergies from the deal have been estimated at âŹ450m per annum after a four-year post integration period.
Although neither of the two partners in the merger would say, this appears like a play for scale which would allow the new company to make inroads in neighbouring markets like Spain and France. Before that can happen, the new company can use the combined financial muscle of both companies to make much-needed investments in 5G and fibre.
Dutch Chemical Company Royal DSM announced in the second half of 2021 that it was moving away from petrochemicals and materials to focus on sustainable food and health products, and was selling its materials division as a result. Its transition has been speedy: In less than nine months, it had merged with Swiss flavours company Firmenich to create DSM-Firmenich.
The merger is the final step in DSMâs 20-year strategy shift away from petrochemicals and materials, in a remarkable turnaround. The newly formed company will combine DSMâs ingredients business with Firmenichâs taste business, creating an exciting new proposition for a high-growth segment of the food and beverage industry.
Collaboration is a word whose usage has spiked like few others since the start of the Covid-19 pandemic. Over the past 2.5years, few other words can have been cited as the motive as much as âcollaborationâ as the motive for multi-billion dollar deals. The latest in this long line is Adobeâs cash and stock acquisition of Figma.
Figma is a web-first collaborative design platform. Adobeâs rather grand mission is to:
âchange the world through digital experiences.â
With Figma, this comes down to design experiences: Web and mobile developers being able to easily manipulation graphics on screen, designers to sketch out prototypes faster, and more.
On the surface, this seems like a noble ambition: Bringing two complementary digital firms together to create a broader range of services for Adobe. But donât most people use Adobe already? And is Figma really worth $20 billion? Time will tell, but the market has reacted unfavorably - Adobeâs stock price has fallen 33% in less than a month on news of the deal.
Microsoftâs acquisition of Nuance is at once a play in ArtificialIntelligence and health. Having been founded in 1992, Nuance is one of the pioneers of Artificial Intelligence and its combination with the biggest tech firm in the world seems like a powerful one. Nuance was the team that built the backend for Appleâs Siri, so this deal may also have made Apple sit up.
But itâs probably its healthcare capabilities that most interestedMicrosoft. Like Oracle, Microsoft seems keen to grab as much of the estimated half-trillion dollar Total Addressable Market (TAM) in combining technology with health. And again similar to Oracle, Nuance works primarily in this area in speeding up doctorsâ administrative tasks.
Thereâs another reason to think this deal might well be a success: The two companies have been working together since 2019 on various collaborative health-tech projects. This should have given them ample opportunity to see if there was a cultural fit. If it does, the American healthcare industry be a bigger beneficiary than Microsoftâs shareholders.
The transaction that brought  Citrix into the Vista Equity Partners portfolio of companies (in partnership with Evergreen Partners) valued the company at $105 per share - a 30% premium. In a year where technology firms have taken a hit, it suggests that Vista Equity Partners could see something in the enterprise software maker that nobody else could.
Well, thatâs part of the story. In truth, Citrix share price had fallen by close to 50% over the previous two years. By bringing it into its portfolio of companies (Vista Equity Partners is solely focused on technology acquisitions), there may be some synergies to enjoy on day one, as well as a focused restructuring over the next year or two to extract value from the acquisition.
TD Bankâs acquisition of First Horizon looks like an acquisition backed by solid rationale. TD Bankâs major markets are in the northeast, while First Horizon is focused on the southeast. By bringing the two together, TD Bank should become a behemoth in commercial banking on the eastern coast of the United States.
TD Bank also creates a scale that it otherwise would have waited years to achieve: Assets of $614 billion, deposits of $469billion, 10.7 million customers, and around 1,500 branches. Best of all, the acquisition enables TD Bank to scale its market leading retail banking products, which should prove attractive to the growing number of high net wealth individuals in the southeast.
The ability of M&A activity to weather some of the toughest headwinds over the past three years has been remarkable.
In the first half of the year, despite geopolitical turmoil, volatility in commodity prices, and a return to historic levels of inflation, global M&A activity still reached a total value of $2 trillion, spread across 2,274 deals.
With the caveat that almost all of these deals are still at the pending stage, below DealRoom looks at seven of the biggest recent M&A transactions and their implications for the merging companies.
When predicting the future of consumer software, looking at Microsoftâs acquisitions is rarely a bad place to start. In January of this year, it acquired the worldâs largest video game maker for $95 per share, in an all-cash transaction valued at $68.7 billion, suggesting to many that this was the beginning of a new phase for the gaming industry.
With the acquisition, Microsoft added a series of globally renowned franchises to its portfolio including Warcraft, Diablo, Call of Duty, Overwatch, and Candy Crush. Significantly, the deal also meant that Microsoft jumped into the worldâs third-largest gaming company by revenue slot, now just behind Tencent and Sony.
Whatâs the play behind the acquisition? Well, it looks as though Microsoft is betting that the future of gaming is on the cloud, and not on consoles (such as the Playstation). By bringing all of its stable of beloved games onto Game Pass, its flagship subscription service, it could become the go-to destination for gamers across the world.
In May of this year, the diversified semiconductor (and increasingly cloud-focused) manufacturer Broadcom acquired VMW are in a cash and stock deal worth $61 billion. Not for the first time after one of Broadcomâs major acquisitions, the market reacted negatively, with Broadcom stock falling almost 20% in the month after the deal.
One of the reasons for concern is the perceived different cultures at each of the companies. Broadcom has developed anâacquire-and-axeâ reputation in the software industry, acquiring firms before large staff layoffs and divestments of unwanted divisions. By contrast, VMWareis considered a company that adopts more of a âfail often, fail wellâmentality.
Time will tell on the culture. Certainly,VMWareâs CEO has been keen to play up the merits of the deal, noting that itâs highly unlikely to go the way of previous Broadcom acquisitions, such as those of Symantec and CA Technologies over the past few years. And the synergies between VMWareâs software and Broadcomâs overall infrastructure could be significant.
Oracleâs acquisition of Cerner is big techâs latest foray into the healthcare system, promising better outcomes. In its news release for the acquisition of Cerner, Oracle outlined some worthy goals for the acquisition, including building cloud software systems that enable doctors to spend less time on admin and more with patients.
This is the biggest deal that Oracle has ever closed, and to re-emphasize, itâs not in an area which is a key strength. But the synergies could be huge: Healthcare now depends on data like few other industries, and where better to look after data than on the cloud? And there are few better to provide the tools for that than Oracle.
Reading into analystsâ take on the deal, it seems like its success will depend on Oracleâs ability to merge the data that it receives through the Cerner acquisition with that from outside the business. Big data tends to sit in silos in the healthcare industry. It is indeed a big challenge but not one you would bet against Oracle overcoming.
AMDâs acquisition of Xilinx in February of this year in an all-stock deal, usually considered the best way of generating value from an M&A transaction. However, a little over six months after the transaction was announced, AMDâs stock price on Nasdaq is trading at close to $75, close to 55% of where it was at the time the deal was announced.
In theory, this was a sensible play. In addition to being a stock only deal which was projected to be cash flow accretive in the first year, it gave AMD access to a portfolio of high leadership computing, graphics and adaptive SoC products. It also significantly expanded AMDâs IP portfolio. What was not to be optimistic about?
It appears that AMD shareholders simply believed that the company was giving away too much to acquire Xilinx. Analysts looking at the deal back inFebruary noted that although cash flow would increase, earnings per share would be down, at least partly explaining the preciptious subsequent fall.
The June merger between Prologis and Duke Realty in June of this year brings together two of the worldâs major logistics real estate companies. The transaction was valued at $26 billion including debt, and was paid for using Prologisâ equity. It cemented Prologis as the worldâs largest logistics real estate operator.
On closing the acquisition, the new firm - the name of which is yet to be decided - will have an astonishing portfolio of logistics property. This includes: 153 million square feet of property across18 US regions, 11 million square feet of development in progress, accounting for over $1.5 billion in investment, and 1,228 acres of land owned and under option.
The rationale here seems to be âbuy land; theyâre not making it anymore.â Whatâs interesting here is that warehouse stocks had been trending down in the first half of the year, in line with less optimistic forecasts from the eCommerce sector. Prologis and Duke were undeterred, and have effectively doubled down on a positive future for the sector.
The merger between Orange and Grupo MĂĄsMĂłvil creates a new leader in Spainâs cellular telephone market. Each of the companies will have equal governance rights in the new company (likely to be called Orange) and synergies from the deal have been estimated at âŹ450m per annum after a four-year post integration period.
Although neither of the two partners in the merger would say, this appears like a play for scale which would allow the new company to make inroads in neighbouring markets like Spain and France. Before that can happen, the new company can use the combined financial muscle of both companies to make much-needed investments in 5G and fibre.
Dutch Chemical Company Royal DSM announced in the second half of 2021 that it was moving away from petrochemicals and materials to focus on sustainable food and health products, and was selling its materials division as a result. Its transition has been speedy: In less than nine months, it had merged with Swiss flavours company Firmenich to create DSM-Firmenich.
The merger is the final step in DSMâs 20-year strategy shift away from petrochemicals and materials, in a remarkable turnaround. The newly formed company will combine DSMâs ingredients business with Firmenichâs taste business, creating an exciting new proposition for a high-growth segment of the food and beverage industry.
Collaboration is a word whose usage has spiked like few others since the start of the Covid-19 pandemic. Over the past 2.5years, few other words can have been cited as the motive as much as âcollaborationâ as the motive for multi-billion dollar deals. The latest in this long line is Adobeâs cash and stock acquisition of Figma.
Figma is a web-first collaborative design platform. Adobeâs rather grand mission is to:
âchange the world through digital experiences.â
With Figma, this comes down to design experiences: Web and mobile developers being able to easily manipulation graphics on screen, designers to sketch out prototypes faster, and more.
On the surface, this seems like a noble ambition: Bringing two complementary digital firms together to create a broader range of services for Adobe. But donât most people use Adobe already? And is Figma really worth $20 billion? Time will tell, but the market has reacted unfavorably - Adobeâs stock price has fallen 33% in less than a month on news of the deal.
Microsoftâs acquisition of Nuance is at once a play in ArtificialIntelligence and health. Having been founded in 1992, Nuance is one of the pioneers of Artificial Intelligence and its combination with the biggest tech firm in the world seems like a powerful one. Nuance was the team that built the backend for Appleâs Siri, so this deal may also have made Apple sit up.
But itâs probably its healthcare capabilities that most interestedMicrosoft. Like Oracle, Microsoft seems keen to grab as much of the estimated half-trillion dollar Total Addressable Market (TAM) in combining technology with health. And again similar to Oracle, Nuance works primarily in this area in speeding up doctorsâ administrative tasks.
Thereâs another reason to think this deal might well be a success: The two companies have been working together since 2019 on various collaborative health-tech projects. This should have given them ample opportunity to see if there was a cultural fit. If it does, the American healthcare industry be a bigger beneficiary than Microsoftâs shareholders.
The transaction that brought  Citrix into the Vista Equity Partners portfolio of companies (in partnership with Evergreen Partners) valued the company at $105 per share - a 30% premium. In a year where technology firms have taken a hit, it suggests that Vista Equity Partners could see something in the enterprise software maker that nobody else could.
Well, thatâs part of the story. In truth, Citrix share price had fallen by close to 50% over the previous two years. By bringing it into its portfolio of companies (Vista Equity Partners is solely focused on technology acquisitions), there may be some synergies to enjoy on day one, as well as a focused restructuring over the next year or two to extract value from the acquisition.
TD Bankâs acquisition of First Horizon looks like an acquisition backed by solid rationale. TD Bankâs major markets are in the northeast, while First Horizon is focused on the southeast. By bringing the two together, TD Bank should become a behemoth in commercial banking on the eastern coast of the United States.
TD Bank also creates a scale that it otherwise would have waited years to achieve: Assets of $614 billion, deposits of $469billion, 10.7 million customers, and around 1,500 branches. Best of all, the acquisition enables TD Bank to scale its market leading retail banking products, which should prove attractive to the growing number of high net wealth individuals in the southeast.
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