November 24, 2025 • 37 mins
This week on the Market Maker podcast, Anthony and Piers spotlight Goldman Sachs' standout year in M&A, exploring how the bank has pulled ahead of rivals with a $1.3 trillion deal volume and a 34% market share. They break down the strategy behind Goldman's dominance, from boardroom relationships to sector expertise.
The episode also dives into the $25 billion all-stock "merger of equals" between AkzoNobel and Axalta, examining the rationale, synergies, and why the same deal failed back in 2017. Other stories include Apollo's failed Papa John's bid, Adobe’s acquisition of Semrush, Total Energies’ $6 billion European power play, and WPP's fall from grace amid takeover chatter and consolidation in the media space.
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Episode Transcript
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(00:00):
Hello and welcome back to the Market Maker podcast and new
week. So some new deals to review from
the past week and three things we're going to talk about.
We'll do a roundup of the big transactions on our radar and
also a few viewer requested stories.
Papa John is in there. Last last week, I, I learned
(00:20):
about you, Piers, something thatI didn't know, which was you're
a McDonald's over BK man. Although I did see Gordon Ramsay
on an advert for Burger King. He said it's his favorite
burger. So who's got a who's got a
better palate, Gordon Ramsay or Pierce Curran?
Listeners, what's that? Papa, it's.
(00:42):
Your loyalty. So.
So this week it's Papa John's orDomino's.
Neither. Oh come on, I know you're a
highbrow kind of guy, but if youneed.
To get down and dirty. I honestly, I don't think I've
ever had a Papa John's. Oh good, I'm a Papa John's all
day and Sunday Love Papa John's.I don't know what that says
(01:02):
about me, but. I'm sourdough sourdough pizza
from the bread stall on Northcote Road, so you know, you
just. So out of touch with the people,
OK, so that we'll talk about. We did have some questions about
that deal, Papa John and Apollo deal, the investment fund, but
then also Goldman Sachs M&A outperformance.
(01:23):
Goldman's has pulled away in theleague tables coming towards the
end of the year, of course. So we'll have a quick recap of
some of their flagship deals that avert them, those fee,
those fees and why it's advisoryflywheel is spending so hard
this year from a strategic pointof view.
And then the deep dive for this episode is the Axo Nobel Axalta
(01:44):
merger. That's $25 billion.
So it's called a coatings tie up.
This is basically Dulux if you're in the UK.
So, so paint what the combined company looks like.
Why this attempt at a merger of equals is landing now after it
failed just several years ago back in 2017.
So a quick run through some of the main headlines 1st and then
(02:09):
we'll get on to Goldman's. Palo Alto Networks is buying
observability. This is real tongue twisters
here that we've got, so I'll start that again.
Palo Alto Networks is buying observability platform
Chronosphere in a cash and stocktransaction 3.35 billion.
This is all about aiming to boltChronosphere's cloud native
(02:31):
observability stack on it's AI powered agentics engine, so it
can go from dashboards to real time.
So very much on the themes of our recent conversations on the
AI side. So this is that kind of
software. Part one you might be familiar
with Piers. Top Golf.
Callaway is selling a 60% stake in Top Golf business to private
(02:52):
private equity firm Leonard Green in a deal that values Top
Golf at about $1.1 billion and gives Callaway roughly 770
million in net proceeds to refocus on golf equipment and
apparel, pay down debt and return capitals to shareholders.
Advisors on that deal, it does include Goldman's as well as
Centerview Partners, Leonard Green advisors are moles.
(03:17):
And then the final three here onthe quick run through Total
Energies is investing $6 billionto buy a 50% of a European power
plant portfolio from the Czech investor EPH.
All stock deal valuing EPH stakeat €5.1 billion.
So this is all about using gas plants, batteries and some
biomass to ramp up electricity generation and accelerate free
(03:39):
cash flow. So this is kind of that big long
term bet around electronic vehicles and of course AI data
centers. Then the 4th deal, J&J, they're
buying Halda Therapeutics, just over 3 billion cash, adding
Halda's platform for oral targeted oncology drugs and it's
lead prostate cancer candidate. So this is all about
(04:00):
strengthening J and JS cancer pipeline, even though the deal
will dilute 2026 adjusted EPS. So if you didn't catch last
week's episode that was all focused on pharma and Pfizer.
It's interesting here just the value of these key drugs when
these pipelines are coming to anend.
(04:22):
And so they would need to take ahit almost to get advantage on
that lead prostate cancer candidate.
Then the final one, I'm sat beside my marketing team to my
right hand side. They'll like this one.
Adobe is acquiring Simrush for $1.9 billion all cash, picking
up his SEO and AI powered marketing platform so it can
(04:43):
help people like them. The chief marketing officers
track how their brands show up, not just in traditional search,
but across LLMS like ChatGPT, Gemini, Perplexity as part of
Adobe's wider AI push. So that'll be quite cool.
I'd definitely like to see that dashboard for sure.
It feels a bit invisible at the moment when you're trying to
(05:04):
track stuff and and Google Analytics seems quite archaic
these days now when you look at it in terms of people's
behaviors shifting. Centerview partners are the
advisor on SEM Rush. OK, just very quickly, a quick
response to some questions. We do love a good question.
So if you're listening on YouTube or Spotify, I know you
(05:24):
do have that function. So just just hit us up.
But this is 1 where Salvaba on YouTube said about Papa John's
Apollo deal, Dave's hot chicken 2 point O let's hear about it.
So you know, you asked we provide.
So the deal here very summary short form Apollo had an offer
(05:47):
to say Papa John's private at 64bucks a share at valued it at
just over $2 billion. It was kind of pitched as a kind
of fix it in private play and this coming from the model that
they had deployed with Dave. They saw chicken, which we
covered on this show a few months back.
What happened about a week ago before earnings, Apollo
(06:08):
basically walked away. They decided their numbers and
the backdrop didn't justify thatprice.
Papa John's fell over 20% and itjust sliced their market cap to
around 1.3 billion. You know you like that, Piers.
So why did that happen? Why did they pull out consumer
(06:30):
spending soft fast casual kind of is is is a little bit shaky
at the moment. Papa John has some real
operational issues, unit closures, restructuring, weak
earnings. In summary, 64 bucks is just too
rich given how big a a fix up job you'd need to do on this
this company. So as things stand, other PE
(06:52):
names are still circling, but not at the same price Apollo
was. So they thought chicken 2 point
O is on ice for for the moment. And then the final question
before we get to Goldman's is from Benedict Tamp on Spotify.
It's funny, isn't it? People on social never have
their real names. It's always like these, these
tongue twisters. They said they'd love to hear
(07:15):
something about WPP. If you're American, you might
not necessarily be aware of them.
They're pretty well known in theUK.
They're, they're kind of a British media institution almost
WPP. They've become an acquisition
target. And the reason why if they've
fallen, I didn't even realize they're 63% in the last year,
which is pretty crazy. So it's been a brutal year for
(07:36):
WPP. They plunged about nearly 20% in
a single day after another Q3 downgrade.
And they're trading at levels not seen since 1998.
Check this out. Their market cap of roughly 3
billion. It was 25 billion pre COVID.
I mean that has gone severely, severely wrong.
(07:59):
So the collapse in value, repeated profit warnings, client
losses lagging importantly for all businesses in AI data
capabilities has put yeah, that's that's hurt them big
time. So it's put them on the brink of
a FTSE ejection FTSE 100 index actually.
So reports are that have us has internally discussed a bid and
(08:21):
of course Apollo back again. KKR have run the numbers on
their assets even if any formal offers haven't materialized and
Hamas is now publicly downplaying talks at this point
in time. So shares have risen about 5 to
10% on the take of a chatter. But this is still a deeply out
of favour asset at the moment. So potentially one to watch at
(08:45):
the moment that's. Martin Sorrell, of course.
Or Sir Martin, I should say basically I kind of, he kind of
he actually made a small acquisition to start the company
off, but it was in like 1985. And then he kind of built it
into this mega global, but importantly old school like
(09:06):
traditional kind of marketing advertising shop.
Yeah, it's just not not gotten on this AI train.
And so, yeah, it's getting left behind.
Yeah, and I and I think I've gota few friends who work in the
industry in media and they're you know, the consolidation is
pretty fierce at the moment. So this kind of bummed out
(09:29):
valuation valuable media on theystill do possess and sector wide
consolidation is going on. This is more of a target than a
turn around story for sure. So definitely something's going
to happen soon. All right, well, let's go to
Goldman's then. So we're getting towards the end
of the year, some headlines in the FT earlier this week talking
(09:50):
about they're on the brink of their best M and a performance
in 24 years. So perhaps you could give us
some context on that, that number.
Yeah. I mean, obviously the market
broadly is firing eventually. Remember, this is really off the
back of Trump and the idea he'd come in and that the regulatory
(10:12):
environment would be relaxed. And so right, deal time and
there being a kind of pipeline of pent up deals just kind of
being held in the queue, waitingand waiting.
And we're we're finally seeing the release of that.
It's it's later than we thought it was going to be just because
of Trump's tariff chaos earlier in the year.
(10:33):
But really second-half of this year, it's really started to to
motor. So look conditions market wide
are very strong and actually we're looking at about a $3.8
trillion worth of deals for thisyear, which will be the best
year since the the boom year that we had post COVID in 2021.
So that's the broad conditions and and Goldman's are really
(10:58):
kind of making hay here. They're the ones that are
benefiting really more than most, certainly out of the big
guns, benefiting more than most from this boom.
And and actually right now it's quite amazing.
They've, they have advised on 34% of global M&A deals by value
(11:20):
this year, which is incredible right from a market share point
of view. Obviously you get multiple
players advising in one deal. You got the buy side advisor
advisors, you got the sell side advisors.
If it's a big deal, multiple advisors on both sides, right.
But still it's pretty impressive. 34%, that's up from
a 28% involvement in in deal flow by value in 2024.
(11:45):
So obviously that's a really positive metric from Goldman's
point of view. They're involved in more of the
deals. So that's actually the 34% and
that's its largest share of deals since 2015.
So obviously very strong. The, the kind of general
conditions, as I've mentioned have been a key catalyst and,
(12:07):
and, and actually it's the, it'sthe farmer space in particular.
We obviously spoke about this last week, but just generally
you're getting a huge number of deals coming through on the
farmer side. There's one that's coming late
on and it hasn't been finalized yet, but Siddara Therapeutics
are getting taken over by Merck,one of the big pharma, pharma
(12:30):
players. And that's a 9.2 billion deal.
That deal in itself. I'm pretty sure literally like a
couple of weeks ago they were talking about 6 billion and now
suddenly it's over 9 billion, right?
And if Goldman, if that deal does get announced and and right
it's a go, then that would push them above their 2015 benchmark
(12:52):
and actually would be their bestyear since 2001 for Goldman's.
So obviously that's good. So yeah, like in, in then in
terms of the actual fees that that they're kind of getting
generated. So year to date, it has advised
on nearly $1.3 trillion worth ofM&A deals and that is outpacing
(13:13):
their nearest rival JP by nearly360 billion.
So they're the only ones above the one trill level in terms of
deal values that they've advisedon, which again is really
obviously very impressive. Yeah.
And they're, they're kind of, they're tracking for
approximately 4.72 billion in advisory revenues for the full
(13:37):
year. That's, that's Morgan's.
I know they're, they're, so you've got to be careful with
these figures, right? They've advised on nearly 1.3
trillion of announced M&A deals.That's the value of the deals.
Obviously they're getting a slice and a percentage fee for
advising. So when you kind of add up the
(13:57):
maths, right, what's the money actually coming in through the
door, then we're looking at $4.7billion for the full year.
That's a 34% jump on last year. So yeah, obviously, generally
speaking, very strong. You mentioned the Sadara
Therapeutics, but obviously there's some big ones in the
(14:18):
year, namely the biggest was that LBO, the Electronic Arts
take private that that was a record breaker, an advisory fee,
$110 million. The other one was
Kimberly-Clark. So Goldman Centreview advised
Ken View on its 48.7 billion cash and stock sale to
(14:39):
Kimberly-Clark. That was another mega 1.
And then Goldman served as one of the Baker Hughes financial
advisors on its $13.6 billion acquisition of gas equipment
maker Chart Industries. But perhaps then we could just
break it down a little bit about, I mean, you mentioned
there this widening gulf betweena clear outlier and there's like
(15:05):
the peloton far behind, if you like lead with JP Morgan.
So why is Goldman so unique in this case?
What have they done that's allowed them to have that that
lead on the others? Well, I think there's a few
factors here, but I think look, whilst the market's been quiet,
I, I guess, well, let's, let's think about it from Aceo's point
(15:27):
of view. If you're wanting to do an
acquisition or if you're being acquired.
But if you're what, particularlyif you're wanting to kind of
lead an acquisition LED growth strategy, well then we, we are
in a pretty volatile environment, right?
Trump coming in, tariffs, you know, political risk.
(15:50):
And so if you're going to do a deal, you want just a solid,
safe pair of hands, you know, you want the the the guys that
have been around the block a million times and know what
they're doing. And, and actually, during the
quiet years, you know, you're still getting Goldman's
manoeuvre, right. And actually what they tend to
(16:13):
do is they're kind of embedding senior bankers with onto
corporate boards, right? And on, you know, they're onto
kind of their private equity sponsors and they're, they're
manoeuvring and positioning so that when these big strategic
calls come along, you know, likewhatever the EA deal, well then,
(16:34):
you know, they're already, they're actually in the room,
OK. They're not like hoping to get
calls to kind of be a part. They're, they're just part of
the conversation from the beginning.
And so they're first in line basically to be lead advisors.
And yeah, that kind of ties in obviously with them the
political sensitivity and cross-border risks.
(16:55):
And right, look, Goldman Sachs is a reputable name, you know,
across the planet. So their brand is obviously very
powerful here. I think they've got a really
what you describe as a a deep sector bench.
So thinking about their key players in Goldman's, they're
(17:15):
firstly cross, you know, specialist teams that cross, you
know, obviously the big guns like tech and pharma and energy
and financials and all the rest of it.
They have got specialist teams that are operating in all of
these fields. And that kind of just, I guess,
probably makes it easier if you're thinking about pitching
complex deals, you know, multi region transactions and you
(17:40):
know, you've got to be convincing clients to see both
the strategic angles and also then obviously there's execution
risks. And you know, why are Goldman's
better than rivals? Well, check out our kind of CV
and the deals that we've been involved with down the years and
the decades. So they've just kind of got a
deeper amount of of talent, hugetrack record, amazing brands,
(18:05):
you know, positioning strategically.
So they're right there at the front of the queue when the
moment hits one of the kind of. Main reasons, one thing I
thought was quite interesting because we talked about this
before, was in terms of the composition of some of these
investment bank players. So someone like a Goldman's is
almost as pureplay on the bulge bracket side as you'll get
(18:26):
because you've mentioned before about the emerging kind of the,
the split of the pie with MorganStanley and that they have quite
a big wealth asset management division as well.
Whereas JP is, you know, really diverse in terms of it being a
global universal bank. But it that that's interesting
because equity and debt underwriting.
So these other departments with in IDB or IBD being ECMDCM,
(18:53):
they've been squeezed a lot by as you had imagined automation,
tighter spreads, online trading,these sorts of things.
But when it comes to pure outright cold hearted M&A
advice? Like a shame it.
Like high touch, like you said, relationship driven, you know,
(19:14):
like you said, when you, you know when you've got a problem,
who you going to call? You know, you call Goldmans and
it seems like in this context ofthe climate we're in at the
moment, where as you said, the deal flow pipeline is, you know,
really coming to the boil at themoment and probably some more to
come if interest rates certainlyare going to get cut again
(19:36):
looming. Granted that the NVIDIA AI if
that has a severe shake out thatmight put you know, that might
that might be a consideration, but at the moment it would mean
that in this condition that theyexcel right, But they can that
can be a vulnerability as much as a superpower look.
(19:58):
They're less, you might say they're less diverse than as
you've said, obviously, certainly JP Morgan, but even
arguably Morgan Stanley with Morgan's kind of big kind of
wealth management arm. So it's a weakness when the M
and A market is dry, which it has been for a few years.
But then obviously when the market returns well, then
(20:18):
obviously it's a key strength. You know, Goldman's have always
been they they sit at the top ofthe league table when it comes
to percentage of M and a deal involvement by value.
You know, look back over the last 25 years, they are pretty
much I think probably apart froma couple of years just post
(20:38):
crisis where Morgan Stanley maybe were at the top literally
apart from two years in the last25 the top.
So when the market returns and there's perceived risks and you
want a safe pair of hands, then you know who you going to call
and they are absolutely flying. Okay.
(21:00):
So to just round it off then as four key takeaways on a
strategic basis. So it's the flywheel effect you
mentioned deep boardroom relationships that leads
ultimately then in the end, goodrelationships have good value
payouts, mega deal mandates, fatfeedback log as well compounding
into the self-sustaining kind oflead because of the wider
(21:23):
environment at the moment. The second thing is mega deals,
those ones we mentioned earlier,I mean these are mega i.e.
CEOs dusting off their $10 billion plus ideas.
Goldman's the default lead advisor league tables, they're
pulling away. They're, you know, it's not just
(21:44):
about value deal count. They're leading on both both
fronts at the moment. And then finally, CEOs wanting
more capability, adding deals, tilting the fee pull towards the
kind of the complex advisory worker, which Goldman's is, is
kind of known for. So cool.
Well, let's, let's finish then and let's talk about this Axo
(22:04):
Nobel exalter deal. It's called A and maybe we
haven't. You and I discussed one of these
types of scenarios before yet, which is an all stop merger of
equals. Yeah, it's we haven't had that
yet. Yeah.
I mean, and actually this is, it's an interesting one because
often, you know, people mainly we're talking about tech, you
(22:26):
know, or pharma as we have done,you know, they've, they've
perhaps been the big two sectors, you might say from a
sort of M and a story, certainlyfrom also from a macro story,
obviously technology and the AI boom.
And so most column inches are kind of made-up of that kind of
stuff. So this is a good sort of step
(22:46):
sideways into a different world.And this is just the world of
paint and it's just amazing how big these businesses are.
You know, this would create, if this goes through this merger,
it would create a $25 billion paint giant.
(23:07):
So yeah, it's interesting this you've got you've got obviously
Axon Nobel on the one side and Axe Alter on the other.
OK, This would be an all stock merger of equals.
It's not quite equal. It'll be 5545, but you know,
near enough but all stocks. So there's there's zero cash
here, which is obviously one benefit to getting a deal done.
(23:30):
You don't have the complicationsof having to add on a whole
nother process of raising finance, you know, I don't know,
issuing some corporate debt in order to stump up the money for
the purchase, right. This is just a share swap.
So yeah, you've got these two businesses now what?
The synergies are pretty interesting.
So Axel Nobel, they're a kind ofEuropean, well Dutch,
(23:54):
headquartered in Amsterdam and they do paints and coating.
And so you can think about the brands like Julux, which
everyone certainly in the UK will be very familiar with.
So we're talking about like decorative consumer facing type
paints. They also do performance and
kind of industrial coatings as well, right?
(24:15):
So European like consumer facingdecorative Dulux.
Then you got Axe alter US based headquartered in Philadelphia.
Now they're they're more like coatings for like industrial
applications. Think about cars and like
commercial vehicles. So they get painted, you know,
(24:37):
using Axe alters products. So there's quite a nice mix here
of you got a kind of geographical sort of synergies
here, you got like product, eventhough they're both within the
paint category, they've got goodproducts diversification through
there. And then the important one is
cost. So they've actually as part of
(24:57):
this deal they've identified they reckon they can save
between them $600 million worth of annual cost synergies and
they reckon that and like his his obviously the one of the key
risks of a deal like this where you've got 2 massive companies
together, there'll be 25 billionright?
Two massive companies coming together you've got execution
(25:20):
risk you know can you merge themyes.
All the clever analysts have said, oh, on paper, well, look,
there's 600 million cost synergies there for you crack
on. But for actually getting it done
is really difficult. But they're predicting they can
see those 600 million of savings, they can get 90% of
(25:41):
those done within three years ofof closing the deal.
Wow, that's crazy. Within three years.
Yeah. I mean, look, it sounds
ambitious. And so look, yeah, sounds great,
but definite risks for sure. But yeah, ultimately they're
looking to post deal create. Well, it would be combined,
(26:05):
they'd be a $17 billion revenue business with an EBITDAR at 3.3
billion. So that'd be a 20% margin.
That's that's kind of once the synergies are delivered, by the
way. So we often talk about this idea
of pro forma that just means, you know, hypothetically if
these two companies were merged bang straight away with all of
(26:27):
the savings done, then what would their combined numbers
look like? So they're they're targeting a
pro forma adjusted free cash flow of 1.5 billion per year.
And so, yeah, look, this is thisis the deal in terms of we'd
mentioned it's an all share deal, right?
So it's kind of a share swap. So what will happen is Axalta
(26:49):
shareholders, they will receive 0.6539 Axo Nobel shares for
everyone Axalta share that they own.
So it's an absolute pure share for share deal.
No cash. Axalta.
Well, I should say Axalta shareholders get 0 cash.
(27:11):
They just get Axo Nobel shares, right?
But Axo Nobel shareholders, they'll obviously just keep
their Axo Nobel shares. They'll get diluted as part of
the axe alter deal of course, but they're going to get a
dividend pre the closing of the deal.
So it probably looks like Axo Nobel have got some cash sat on
(27:32):
their balance sheet and so there's a dividend payout to the
Axo Nobel shareholders are sweetener.
Obviously their shareholding's going to get diluted, but
they'll be part of a bigger entity and it'll all wind up.
If you do the maths and kind of boil it all down, Axo Nobel
shareholders will own 55% of thecombined business and Axe Alter
(27:54):
will own 45. OK, so just a couple of
housekeeping points because thenI want to ask you, I said at the
top of the of the show that I think they've they've tried this
before, right And it and it failed.
So before we get there, those housekeeping points are Morgan
Stanley's the sole financial advisor to act.
So Nobel Lazard is actually advising the elite boutique, the
(28:16):
supervisory board and an exalteris Evercore and JP acting as Co
lead financial advisors on that deal.
The other point I thought was interesting is this is
cross-border. So Jewel headquarters in
Amsterdam and Philadelphia shares initially Jewel listed
and then the Yanks. The Yanks win in the end.
(28:37):
So the plan is transitioning to a single nicey listing after a
period. So not a loss here for Europe in
what otherwise is, you know, it's not a small company here.
It's just not maybe not a sexy 1, but it's definitely a a lost
for for the Dutch in that sense from terms of a listing
perspective in Europe. But explain to me then this this
(28:58):
2017 failed attempt and why did it not work then and it worked
now? Well, one last point, sorry,
just before we go 2017, The other consideration with these
deals, because you've got 2 businesses operating separately,
right? So you've got 2 CEOs, you've got
2 CFOs, you've got 2 of everything.
(29:20):
So what happens like from a management team perspective post
merger is often actually one of the key kind of stumbling blocks
to getting these deals done. There's a lot of egos in the
C-Suite, right? So they've actually agreed that
the CEO of the combined businesswill be the Axon Nobel CEO, Greg
(29:42):
Pugiom, the Axalta CEO is going to be deputy CEO of the combined
entity. So he's the one who's agreed to
kind of just take a little step down here, but perhaps to
appease Axolta, it's the Axolta CFO that's going to step up and
(30:03):
be the combined CFO guy called Karl Anderson.
So yeah, there there's also thatego thing in that management
team. It can literally that can be on
its own, just the thing that kills the deal.
But look, looks like they've sorted it out.
But yeah, but it's interesting. It's a bit like Deja Vu here
because eight years ago, and it was actually in N8 years ago in
(30:23):
2017 that these two were talking.
And you know, it kind of makes sense like from a consolidation
play because at the moment I think they're, they're, I think
they're third. I've forgotten my stats now.
I think Axon Nobel are third in terms of the largest player
(30:44):
globally in this kind of paint industry.
I believe Axe Alter might be 4thor 5th, you might Fact Check me
on that. But the combined entity will go
second. So it's very much a kind of
obviously lots of synergies as well.
But it's like the combined powerhouse will then step up the
rung in terms of the big global players.
So it kind of kind of makes sense that these two are talking
(31:07):
given the the kind of nice dovetail synergies we've we've
spoken about. But in 2017 there were a few
other things in the mix as to why they were talking.
It wasn't just a straight out AH, we've got amazing synergies.
You know, why don't we, why don't we go for it?
At the time, Axo had had a hostile approach from a company
(31:30):
called PPG. So they were juggling A hostile
$28 billion approach. And so often when you get a
hostile approach and you don't want to, I mean, the word
hostile obviously implies that it's, it's a deal you don't
really want or certainly the management team or the board
(31:51):
don't really want. Well, then there are tactics to
avoid that hostile bid. And one of them can be kind of a
defensive move where you separately go and start trying
to merge with someone else so that your shareholders can kind
of see that that merger direction deal would be more
(32:12):
favourable and better than this hostile takeover deal.
Because in the end, it's the shareholders that decide they
own the business, right? So Axo had this hostile thing,
which kind of pushed them a little bit towards talking with
Axe Alter. Axe Alter had also had
separately a cash bid from Japan's Nippon Paint.
(32:33):
And so basically X Alta were trying to, they were slightly
different. They were trying to strengthen
their bargaining position in theNippon deal by basically trying
to create some competitive tension by saying look, we've
got another got another potential deal in here with Axo.
So they were just trying to manoeuvre and, you know,
(32:54):
gamesmanship in that kind of that that deal with Nippon
paint. So it was quite a multifaceted
situation in 2017 where it just it wasn't just Axo talking to
Axe Alter. There were two others involved
from either side. And and so anyway, what happened
in the end was they just couldn't agree terms.
(33:17):
I think Kazaks Alter had this cash bid.
They were perhaps, you know, wanting a higher valuation than
AXO were willing to kind of agree with.
And so ultimately there was a valuation gap and so they walked
away. All right.
Well, look, let's to finish the show.
Let me just wrap up then everything that you've just said
(33:38):
there. So it's a little bit more
digestible to take away for any students thinking about the deal
mechanics here. So #1 synergies, undoubtedly.
So the deal is a clear example of M&A being used as a
deliberate tool to lock in that substantial amount of cost
energy there, 600 million circa amount you mentioned and boost
(34:00):
margins towards around the 20% level.
So systematically extracting efficiencies there would be
otherwise pretty impossible to achieve if you're going about it
from an organic perspective. So that's number one synergies
#2 cross-border. So merging Amsterdam and
Philadelphia into a single platform that does show how
cross-border combinations can stitch together plants, in this
(34:23):
case labs. You know, you think paint, you
kind of just think applying the paint.
But no, I mean there is some facts here.
I mean, I did see you know our fantastic researcher Saab he
what was the number here he had the merged company will operate
in 160 plus countries, 173 manufacturing sites, 91 R&D
(34:45):
facilities, 91 R&D facilities. It's it's.
Pretty crazy, right? That's insane.
So yeah, this kind of thing, stitching together plants, labs,
distribution across regions, giving the company new global
reach, global reach. The combined entity gives you
bargaining power with suppliers,hence the margin movement, and
(35:08):
then the ability to serve multinational customers as one
integrated supplier. We mentioned earlier who you're
going to call Goldman Sachs for advisory deals, who you're going
to call for your paint. Well, whether it's consumer
facing, as you said, or it's my,you know, my vehicles, for
example, in a more industrial sense, my manufacturing process,
I could go to both in one place and that can work on bigger
(35:29):
deals, more efficiency on the customer side as well as
supplier side #3 consolidation. You know, when you think about
the sector in itself, cost inflation, tough competition,
ever increasing demanding customers, I mean, I think that
goes across all sectors. So bringing together, as you
(35:50):
said, the ranking of #3 and #6 is about buying into cost
efficiencies and pricing power and R&D, which is critical
within this field as well in one, in one foul swoop.
And then finally, and I quite like this, you mentioned egos,
interesting that they could put egos aside when the money's
right, which is normally the case that the same deal logic
(36:13):
that failed in 2017 now has a better chance of rewarding
shareholders because of a key thing.
And this is where I think for any young person listening to
this, thinking about this from acareer perspective, it's not a
just about the synergies and thethe financial kind of metrics
that define that the successor not of this deal.
(36:33):
It's also the macro overlay of which at that point in time
where are we. So you know, it's kind of that
kind of cost as well as the capital markets backdrop and
that shifted over the last eightyears or so.
And so it's management's job to recognize where the conditions
have changed, align and rerun those strategic plays at the
(36:56):
right moment in time. So, but yeah, they put put the
egos aside for now. So great stuff.
Well, as mentioned before, any questions at all, any opinions,
anything like that, please do just drop us a comment.
Let us know. We'd love to interact with you
on Spotify, YouTube, wherever you might be listening.
But have a fantastic week ahead and thank you very much, Piers.
(37:17):
Thanks a lot.
Hello and welcome back to the Market Maker podcast and new
week. So some new deals to review from
the past week and three things we're going to talk about.
We'll do a roundup of the big transactions on our radar and
also a few viewer requested stories.
Papa John is in there. Last last week, I, I learned
(00:20):
about you, Piers, something thatI didn't know, which was you're
a McDonald's over BK man. Although I did see Gordon Ramsay
on an advert for Burger King. He said it's his favorite
burger. So who's got a who's got a
better palate, Gordon Ramsay or Pierce Curran?
Listeners, what's that? Papa, it's.
(00:42):
Your loyalty. So.
So this week it's Papa John's orDomino's.
Neither. Oh come on, I know you're a
highbrow kind of guy, but if youneed.
To get down and dirty. I honestly, I don't think I've
ever had a Papa John's. Oh good, I'm a Papa John's all
day and Sunday Love Papa John's.I don't know what that says
(01:02):
about me, but. I'm sourdough sourdough pizza
from the bread stall on Northcote Road, so you know, you
just. So out of touch with the people,
OK, so that we'll talk about. We did have some questions about
that deal, Papa John and Apollo deal, the investment fund, but
then also Goldman Sachs M&A outperformance.
(01:23):
Goldman's has pulled away in theleague tables coming towards the
end of the year, of course. So we'll have a quick recap of
some of their flagship deals that avert them, those fee,
those fees and why it's advisoryflywheel is spending so hard
this year from a strategic pointof view.
And then the deep dive for this episode is the Axo Nobel Axalta
(01:44):
merger. That's $25 billion.
So it's called a coatings tie up.
This is basically Dulux if you're in the UK.
So, so paint what the combined company looks like.
Why this attempt at a merger of equals is landing now after it
failed just several years ago back in 2017.
So a quick run through some of the main headlines 1st and then
(02:09):
we'll get on to Goldman's. Palo Alto Networks is buying
observability. This is real tongue twisters
here that we've got, so I'll start that again.
Palo Alto Networks is buying observability platform
Chronosphere in a cash and stocktransaction 3.35 billion.
This is all about aiming to boltChronosphere's cloud native
(02:31):
observability stack on it's AI powered agentics engine, so it
can go from dashboards to real time.
So very much on the themes of our recent conversations on the
AI side. So this is that kind of
software. Part one you might be familiar
with Piers. Top Golf.
Callaway is selling a 60% stake in Top Golf business to private
(02:52):
private equity firm Leonard Green in a deal that values Top
Golf at about $1.1 billion and gives Callaway roughly 770
million in net proceeds to refocus on golf equipment and
apparel, pay down debt and return capitals to shareholders.
Advisors on that deal, it does include Goldman's as well as
Centerview Partners, Leonard Green advisors are moles.
(03:17):
And then the final three here onthe quick run through Total
Energies is investing $6 billionto buy a 50% of a European power
plant portfolio from the Czech investor EPH.
All stock deal valuing EPH stakeat €5.1 billion.
So this is all about using gas plants, batteries and some
biomass to ramp up electricity generation and accelerate free
(03:39):
cash flow. So this is kind of that big long
term bet around electronic vehicles and of course AI data
centers. Then the 4th deal, J&J, they're
buying Halda Therapeutics, just over 3 billion cash, adding
Halda's platform for oral targeted oncology drugs and it's
lead prostate cancer candidate. So this is all about
(04:00):
strengthening J and JS cancer pipeline, even though the deal
will dilute 2026 adjusted EPS. So if you didn't catch last
week's episode that was all focused on pharma and Pfizer.
It's interesting here just the value of these key drugs when
these pipelines are coming to anend.
(04:22):
And so they would need to take ahit almost to get advantage on
that lead prostate cancer candidate.
Then the final one, I'm sat beside my marketing team to my
right hand side. They'll like this one.
Adobe is acquiring Simrush for $1.9 billion all cash, picking
up his SEO and AI powered marketing platform so it can
(04:43):
help people like them. The chief marketing officers
track how their brands show up, not just in traditional search,
but across LLMS like ChatGPT, Gemini, Perplexity as part of
Adobe's wider AI push. So that'll be quite cool.
I'd definitely like to see that dashboard for sure.
It feels a bit invisible at the moment when you're trying to
(05:04):
track stuff and and Google Analytics seems quite archaic
these days now when you look at it in terms of people's
behaviors shifting. Centerview partners are the
advisor on SEM Rush. OK, just very quickly, a quick
response to some questions. We do love a good question.
So if you're listening on YouTube or Spotify, I know you
(05:24):
do have that function. So just just hit us up.
But this is 1 where Salvaba on YouTube said about Papa John's
Apollo deal, Dave's hot chicken 2 point O let's hear about it.
So you know, you asked we provide.
So the deal here very summary short form Apollo had an offer
(05:47):
to say Papa John's private at 64bucks a share at valued it at
just over $2 billion. It was kind of pitched as a kind
of fix it in private play and this coming from the model that
they had deployed with Dave. They saw chicken, which we
covered on this show a few months back.
What happened about a week ago before earnings, Apollo
(06:08):
basically walked away. They decided their numbers and
the backdrop didn't justify thatprice.
Papa John's fell over 20% and itjust sliced their market cap to
around 1.3 billion. You know you like that, Piers.
So why did that happen? Why did they pull out consumer
(06:30):
spending soft fast casual kind of is is is a little bit shaky
at the moment. Papa John has some real
operational issues, unit closures, restructuring, weak
earnings. In summary, 64 bucks is just too
rich given how big a a fix up job you'd need to do on this
this company. So as things stand, other PE
(06:52):
names are still circling, but not at the same price Apollo
was. So they thought chicken 2 point
O is on ice for for the moment. And then the final question
before we get to Goldman's is from Benedict Tamp on Spotify.
It's funny, isn't it? People on social never have
their real names. It's always like these, these
tongue twisters. They said they'd love to hear
(07:15):
something about WPP. If you're American, you might
not necessarily be aware of them.
They're pretty well known in theUK.
They're, they're kind of a British media institution almost
WPP. They've become an acquisition
target. And the reason why if they've
fallen, I didn't even realize they're 63% in the last year,
which is pretty crazy. So it's been a brutal year for
(07:36):
WPP. They plunged about nearly 20% in
a single day after another Q3 downgrade.
And they're trading at levels not seen since 1998.
Check this out. Their market cap of roughly 3
billion. It was 25 billion pre COVID.
I mean that has gone severely, severely wrong.
(07:59):
So the collapse in value, repeated profit warnings, client
losses lagging importantly for all businesses in AI data
capabilities has put yeah, that's that's hurt them big
time. So it's put them on the brink of
a FTSE ejection FTSE 100 index actually.
So reports are that have us has internally discussed a bid and
(08:21):
of course Apollo back again. KKR have run the numbers on
their assets even if any formal offers haven't materialized and
Hamas is now publicly downplaying talks at this point
in time. So shares have risen about 5 to
10% on the take of a chatter. But this is still a deeply out
of favour asset at the moment. So potentially one to watch at
(08:45):
the moment that's. Martin Sorrell, of course.
Or Sir Martin, I should say basically I kind of, he kind of
he actually made a small acquisition to start the company
off, but it was in like 1985. And then he kind of built it
into this mega global, but importantly old school like
(09:06):
traditional kind of marketing advertising shop.
Yeah, it's just not not gotten on this AI train.
And so, yeah, it's getting left behind.
Yeah, and I and I think I've gota few friends who work in the
industry in media and they're you know, the consolidation is
pretty fierce at the moment. So this kind of bummed out
(09:29):
valuation valuable media on theystill do possess and sector wide
consolidation is going on. This is more of a target than a
turn around story for sure. So definitely something's going
to happen soon. All right, well, let's go to
Goldman's then. So we're getting towards the end
of the year, some headlines in the FT earlier this week talking
(09:50):
about they're on the brink of their best M and a performance
in 24 years. So perhaps you could give us
some context on that, that number.
Yeah. I mean, obviously the market
broadly is firing eventually. Remember, this is really off the
back of Trump and the idea he'd come in and that the regulatory
(10:12):
environment would be relaxed. And so right, deal time and
there being a kind of pipeline of pent up deals just kind of
being held in the queue, waitingand waiting.
And we're we're finally seeing the release of that.
It's it's later than we thought it was going to be just because
of Trump's tariff chaos earlier in the year.
(10:33):
But really second-half of this year, it's really started to to
motor. So look conditions market wide
are very strong and actually we're looking at about a $3.8
trillion worth of deals for thisyear, which will be the best
year since the the boom year that we had post COVID in 2021.
So that's the broad conditions and and Goldman's are really
(10:58):
kind of making hay here. They're the ones that are
benefiting really more than most, certainly out of the big
guns, benefiting more than most from this boom.
And and actually right now it's quite amazing.
They've, they have advised on 34% of global M&A deals by value
(11:20):
this year, which is incredible right from a market share point
of view. Obviously you get multiple
players advising in one deal. You got the buy side advisor
advisors, you got the sell side advisors.
If it's a big deal, multiple advisors on both sides, right.
But still it's pretty impressive. 34%, that's up from
a 28% involvement in in deal flow by value in 2024.
(11:45):
So obviously that's a really positive metric from Goldman's
point of view. They're involved in more of the
deals. So that's actually the 34% and
that's its largest share of deals since 2015.
So obviously very strong. The, the kind of general
conditions, as I've mentioned have been a key catalyst and,
(12:07):
and, and actually it's the, it'sthe farmer space in particular.
We obviously spoke about this last week, but just generally
you're getting a huge number of deals coming through on the
farmer side. There's one that's coming late
on and it hasn't been finalized yet, but Siddara Therapeutics
are getting taken over by Merck,one of the big pharma, pharma
(12:30):
players. And that's a 9.2 billion deal.
That deal in itself. I'm pretty sure literally like a
couple of weeks ago they were talking about 6 billion and now
suddenly it's over 9 billion, right?
And if Goldman, if that deal does get announced and and right
it's a go, then that would push them above their 2015 benchmark
(12:52):
and actually would be their bestyear since 2001 for Goldman's.
So obviously that's good. So yeah, like in, in then in
terms of the actual fees that that they're kind of getting
generated. So year to date, it has advised
on nearly $1.3 trillion worth ofM&A deals and that is outpacing
(13:13):
their nearest rival JP by nearly360 billion.
So they're the only ones above the one trill level in terms of
deal values that they've advisedon, which again is really
obviously very impressive. Yeah.
And they're, they're kind of, they're tracking for
approximately 4.72 billion in advisory revenues for the full
(13:37):
year. That's, that's Morgan's.
I know they're, they're, so you've got to be careful with
these figures, right? They've advised on nearly 1.3
trillion of announced M&A deals.That's the value of the deals.
Obviously they're getting a slice and a percentage fee for
advising. So when you kind of add up the
(13:57):
maths, right, what's the money actually coming in through the
door, then we're looking at $4.7billion for the full year.
That's a 34% jump on last year. So yeah, obviously, generally
speaking, very strong. You mentioned the Sadara
Therapeutics, but obviously there's some big ones in the
(14:18):
year, namely the biggest was that LBO, the Electronic Arts
take private that that was a record breaker, an advisory fee,
$110 million. The other one was
Kimberly-Clark. So Goldman Centreview advised
Ken View on its 48.7 billion cash and stock sale to
(14:39):
Kimberly-Clark. That was another mega 1.
And then Goldman served as one of the Baker Hughes financial
advisors on its $13.6 billion acquisition of gas equipment
maker Chart Industries. But perhaps then we could just
break it down a little bit about, I mean, you mentioned
there this widening gulf betweena clear outlier and there's like
(15:05):
the peloton far behind, if you like lead with JP Morgan.
So why is Goldman so unique in this case?
What have they done that's allowed them to have that that
lead on the others? Well, I think there's a few
factors here, but I think look, whilst the market's been quiet,
I, I guess, well, let's, let's think about it from Aceo's point
(15:27):
of view. If you're wanting to do an
acquisition or if you're being acquired.
But if you're what, particularlyif you're wanting to kind of
lead an acquisition LED growth strategy, well then we, we are
in a pretty volatile environment, right?
Trump coming in, tariffs, you know, political risk.
(15:50):
And so if you're going to do a deal, you want just a solid,
safe pair of hands, you know, you want the the the guys that
have been around the block a million times and know what
they're doing. And, and actually, during the
quiet years, you know, you're still getting Goldman's
manoeuvre, right. And actually what they tend to
(16:13):
do is they're kind of embedding senior bankers with onto
corporate boards, right? And on, you know, they're onto
kind of their private equity sponsors and they're, they're
manoeuvring and positioning so that when these big strategic
calls come along, you know, likewhatever the EA deal, well then,
(16:34):
you know, they're already, they're actually in the room,
OK. They're not like hoping to get
calls to kind of be a part. They're, they're just part of
the conversation from the beginning.
And so they're first in line basically to be lead advisors.
And yeah, that kind of ties in obviously with them the
political sensitivity and cross-border risks.
(16:55):
And right, look, Goldman Sachs is a reputable name, you know,
across the planet. So their brand is obviously very
powerful here. I think they've got a really
what you describe as a a deep sector bench.
So thinking about their key players in Goldman's, they're
(17:15):
firstly cross, you know, specialist teams that cross, you
know, obviously the big guns like tech and pharma and energy
and financials and all the rest of it.
They have got specialist teams that are operating in all of
these fields. And that kind of just, I guess,
probably makes it easier if you're thinking about pitching
complex deals, you know, multi region transactions and you
(17:40):
know, you've got to be convincing clients to see both
the strategic angles and also then obviously there's execution
risks. And you know, why are Goldman's
better than rivals? Well, check out our kind of CV
and the deals that we've been involved with down the years and
the decades. So they've just kind of got a
deeper amount of of talent, hugetrack record, amazing brands,
(18:05):
you know, positioning strategically.
So they're right there at the front of the queue when the
moment hits one of the kind of. Main reasons, one thing I
thought was quite interesting because we talked about this
before, was in terms of the composition of some of these
investment bank players. So someone like a Goldman's is
almost as pureplay on the bulge bracket side as you'll get
(18:26):
because you've mentioned before about the emerging kind of the,
the split of the pie with MorganStanley and that they have quite
a big wealth asset management division as well.
Whereas JP is, you know, really diverse in terms of it being a
global universal bank. But it that that's interesting
because equity and debt underwriting.
So these other departments with in IDB or IBD being ECMDCM,
(18:53):
they've been squeezed a lot by as you had imagined automation,
tighter spreads, online trading,these sorts of things.
But when it comes to pure outright cold hearted M&A
advice? Like a shame it.
Like high touch, like you said, relationship driven, you know,
(19:14):
like you said, when you, you know when you've got a problem,
who you going to call? You know, you call Goldmans and
it seems like in this context ofthe climate we're in at the
moment, where as you said, the deal flow pipeline is, you know,
really coming to the boil at themoment and probably some more to
come if interest rates certainlyare going to get cut again
(19:36):
looming. Granted that the NVIDIA AI if
that has a severe shake out thatmight put you know, that might
that might be a consideration, but at the moment it would mean
that in this condition that theyexcel right, But they can that
can be a vulnerability as much as a superpower look.
(19:58):
They're less, you might say they're less diverse than as
you've said, obviously, certainly JP Morgan, but even
arguably Morgan Stanley with Morgan's kind of big kind of
wealth management arm. So it's a weakness when the M
and A market is dry, which it has been for a few years.
But then obviously when the market returns well, then
(20:18):
obviously it's a key strength. You know, Goldman's have always
been they they sit at the top ofthe league table when it comes
to percentage of M and a deal involvement by value.
You know, look back over the last 25 years, they are pretty
much I think probably apart froma couple of years just post
(20:38):
crisis where Morgan Stanley maybe were at the top literally
apart from two years in the last25 the top.
So when the market returns and there's perceived risks and you
want a safe pair of hands, then you know who you going to call
and they are absolutely flying. Okay.
(21:00):
So to just round it off then as four key takeaways on a
strategic basis. So it's the flywheel effect you
mentioned deep boardroom relationships that leads
ultimately then in the end, goodrelationships have good value
payouts, mega deal mandates, fatfeedback log as well compounding
into the self-sustaining kind oflead because of the wider
(21:23):
environment at the moment. The second thing is mega deals,
those ones we mentioned earlier,I mean these are mega i.e.
CEOs dusting off their $10 billion plus ideas.
Goldman's the default lead advisor league tables, they're
pulling away. They're, you know, it's not just
(21:44):
about value deal count. They're leading on both both
fronts at the moment. And then finally, CEOs wanting
more capability, adding deals, tilting the fee pull towards the
kind of the complex advisory worker, which Goldman's is, is
kind of known for. So cool.
Well, let's, let's finish then and let's talk about this Axo
(22:04):
Nobel exalter deal. It's called A and maybe we
haven't. You and I discussed one of these
types of scenarios before yet, which is an all stop merger of
equals. Yeah, it's we haven't had that
yet. Yeah.
I mean, and actually this is, it's an interesting one because
often, you know, people mainly we're talking about tech, you
(22:26):
know, or pharma as we have done,you know, they've, they've
perhaps been the big two sectors, you might say from a
sort of M and a story, certainlyfrom also from a macro story,
obviously technology and the AI boom.
And so most column inches are kind of made-up of that kind of
stuff. So this is a good sort of step
(22:46):
sideways into a different world.And this is just the world of
paint and it's just amazing how big these businesses are.
You know, this would create, if this goes through this merger,
it would create a $25 billion paint giant.
(23:07):
So yeah, it's interesting this you've got you've got obviously
Axon Nobel on the one side and Axe Alter on the other.
OK, This would be an all stock merger of equals.
It's not quite equal. It'll be 5545, but you know,
near enough but all stocks. So there's there's zero cash
here, which is obviously one benefit to getting a deal done.
(23:30):
You don't have the complicationsof having to add on a whole
nother process of raising finance, you know, I don't know,
issuing some corporate debt in order to stump up the money for
the purchase, right. This is just a share swap.
So yeah, you've got these two businesses now what?
The synergies are pretty interesting.
So Axel Nobel, they're a kind ofEuropean, well Dutch,
(23:54):
headquartered in Amsterdam and they do paints and coating.
And so you can think about the brands like Julux, which
everyone certainly in the UK will be very familiar with.
So we're talking about like decorative consumer facing type
paints. They also do performance and
kind of industrial coatings as well, right?
(24:15):
So European like consumer facingdecorative Dulux.
Then you got Axe alter US based headquartered in Philadelphia.
Now they're they're more like coatings for like industrial
applications. Think about cars and like
commercial vehicles. So they get painted, you know,
(24:37):
using Axe alters products. So there's quite a nice mix here
of you got a kind of geographical sort of synergies
here, you got like product, eventhough they're both within the
paint category, they've got goodproducts diversification through
there. And then the important one is
cost. So they've actually as part of
(24:57):
this deal they've identified they reckon they can save
between them $600 million worth of annual cost synergies and
they reckon that and like his his obviously the one of the key
risks of a deal like this where you've got 2 massive companies
together, there'll be 25 billionright?
Two massive companies coming together you've got execution
(25:20):
risk you know can you merge themyes.
All the clever analysts have said, oh, on paper, well, look,
there's 600 million cost synergies there for you crack
on. But for actually getting it done
is really difficult. But they're predicting they can
see those 600 million of savings, they can get 90% of
(25:41):
those done within three years ofof closing the deal.
Wow, that's crazy. Within three years.
Yeah. I mean, look, it sounds
ambitious. And so look, yeah, sounds great,
but definite risks for sure. But yeah, ultimately they're
looking to post deal create. Well, it would be combined,
(26:05):
they'd be a $17 billion revenue business with an EBITDAR at 3.3
billion. So that'd be a 20% margin.
That's that's kind of once the synergies are delivered, by the
way. So we often talk about this idea
of pro forma that just means, you know, hypothetically if
these two companies were merged bang straight away with all of
(26:27):
the savings done, then what would their combined numbers
look like? So they're they're targeting a
pro forma adjusted free cash flow of 1.5 billion per year.
And so, yeah, look, this is thisis the deal in terms of we'd
mentioned it's an all share deal, right?
So it's kind of a share swap. So what will happen is Axalta
(26:49):
shareholders, they will receive 0.6539 Axo Nobel shares for
everyone Axalta share that they own.
So it's an absolute pure share for share deal.
No cash. Axalta.
Well, I should say Axalta shareholders get 0 cash.
(27:11):
They just get Axo Nobel shares, right?
But Axo Nobel shareholders, they'll obviously just keep
their Axo Nobel shares. They'll get diluted as part of
the axe alter deal of course, but they're going to get a
dividend pre the closing of the deal.
So it probably looks like Axo Nobel have got some cash sat on
(27:32):
their balance sheet and so there's a dividend payout to the
Axo Nobel shareholders are sweetener.
Obviously their shareholding's going to get diluted, but
they'll be part of a bigger entity and it'll all wind up.
If you do the maths and kind of boil it all down, Axo Nobel
shareholders will own 55% of thecombined business and Axe Alter
(27:54):
will own 45. OK, so just a couple of
housekeeping points because thenI want to ask you, I said at the
top of the of the show that I think they've they've tried this
before, right And it and it failed.
So before we get there, those housekeeping points are Morgan
Stanley's the sole financial advisor to act.
So Nobel Lazard is actually advising the elite boutique, the
(28:16):
supervisory board and an exalteris Evercore and JP acting as Co
lead financial advisors on that deal.
The other point I thought was interesting is this is
cross-border. So Jewel headquarters in
Amsterdam and Philadelphia shares initially Jewel listed
and then the Yanks. The Yanks win in the end.
(28:37):
So the plan is transitioning to a single nicey listing after a
period. So not a loss here for Europe in
what otherwise is, you know, it's not a small company here.
It's just not maybe not a sexy 1, but it's definitely a a lost
for for the Dutch in that sense from terms of a listing
perspective in Europe. But explain to me then this this
(28:58):
2017 failed attempt and why did it not work then and it worked
now? Well, one last point, sorry,
just before we go 2017, The other consideration with these
deals, because you've got 2 businesses operating separately,
right? So you've got 2 CEOs, you've got
2 CFOs, you've got 2 of everything.
(29:20):
So what happens like from a management team perspective post
merger is often actually one of the key kind of stumbling blocks
to getting these deals done. There's a lot of egos in the
C-Suite, right? So they've actually agreed that
the CEO of the combined businesswill be the Axon Nobel CEO, Greg
(29:42):
Pugiom, the Axalta CEO is going to be deputy CEO of the combined
entity. So he's the one who's agreed to
kind of just take a little step down here, but perhaps to
appease Axolta, it's the Axolta CFO that's going to step up and
(30:03):
be the combined CFO guy called Karl Anderson.
So yeah, there there's also thatego thing in that management
team. It can literally that can be on
its own, just the thing that kills the deal.
But look, looks like they've sorted it out.
But yeah, but it's interesting. It's a bit like Deja Vu here
because eight years ago, and it was actually in N8 years ago in
(30:23):
2017 that these two were talking.
And you know, it kind of makes sense like from a consolidation
play because at the moment I think they're, they're, I think
they're third. I've forgotten my stats now.
I think Axon Nobel are third in terms of the largest player
(30:44):
globally in this kind of paint industry.
I believe Axe Alter might be 4thor 5th, you might Fact Check me
on that. But the combined entity will go
second. So it's very much a kind of
obviously lots of synergies as well.
But it's like the combined powerhouse will then step up the
rung in terms of the big global players.
So it kind of kind of makes sense that these two are talking
(31:07):
given the the kind of nice dovetail synergies we've we've
spoken about. But in 2017 there were a few
other things in the mix as to why they were talking.
It wasn't just a straight out AH, we've got amazing synergies.
You know, why don't we, why don't we go for it?
At the time, Axo had had a hostile approach from a company
(31:30):
called PPG. So they were juggling A hostile
$28 billion approach. And so often when you get a
hostile approach and you don't want to, I mean, the word
hostile obviously implies that it's, it's a deal you don't
really want or certainly the management team or the board
(31:51):
don't really want. Well, then there are tactics to
avoid that hostile bid. And one of them can be kind of a
defensive move where you separately go and start trying
to merge with someone else so that your shareholders can kind
of see that that merger direction deal would be more
(32:12):
favourable and better than this hostile takeover deal.
Because in the end, it's the shareholders that decide they
own the business, right? So Axo had this hostile thing,
which kind of pushed them a little bit towards talking with
Axe Alter. Axe Alter had also had
separately a cash bid from Japan's Nippon Paint.
(32:33):
And so basically X Alta were trying to, they were slightly
different. They were trying to strengthen
their bargaining position in theNippon deal by basically trying
to create some competitive tension by saying look, we've
got another got another potential deal in here with Axo.
So they were just trying to manoeuvre and, you know,
(32:54):
gamesmanship in that kind of that that deal with Nippon
paint. So it was quite a multifaceted
situation in 2017 where it just it wasn't just Axo talking to
Axe Alter. There were two others involved
from either side. And and so anyway, what happened
in the end was they just couldn't agree terms.
(33:17):
I think Kazaks Alter had this cash bid.
They were perhaps, you know, wanting a higher valuation than
AXO were willing to kind of agree with.
And so ultimately there was a valuation gap and so they walked
away. All right.
Well, look, let's to finish the show.
Let me just wrap up then everything that you've just said
(33:38):
there. So it's a little bit more
digestible to take away for any students thinking about the deal
mechanics here. So #1 synergies, undoubtedly.
So the deal is a clear example of M&A being used as a
deliberate tool to lock in that substantial amount of cost
energy there, 600 million circa amount you mentioned and boost
(34:00):
margins towards around the 20% level.
So systematically extracting efficiencies there would be
otherwise pretty impossible to achieve if you're going about it
from an organic perspective. So that's number one synergies
#2 cross-border. So merging Amsterdam and
Philadelphia into a single platform that does show how
cross-border combinations can stitch together plants, in this
(34:23):
case labs. You know, you think paint, you
kind of just think applying the paint.
But no, I mean there is some facts here.
I mean, I did see you know our fantastic researcher Saab he
what was the number here he had the merged company will operate
in 160 plus countries, 173 manufacturing sites, 91 R&D
(34:45):
facilities, 91 R&D facilities. It's it's.
Pretty crazy, right? That's insane.
So yeah, this kind of thing, stitching together plants, labs,
distribution across regions, giving the company new global
reach, global reach. The combined entity gives you
bargaining power with suppliers,hence the margin movement, and
(35:08):
then the ability to serve multinational customers as one
integrated supplier. We mentioned earlier who you're
going to call Goldman Sachs for advisory deals, who you're going
to call for your paint. Well, whether it's consumer
facing, as you said, or it's my,you know, my vehicles, for
example, in a more industrial sense, my manufacturing process,
I could go to both in one place and that can work on bigger
(35:29):
deals, more efficiency on the customer side as well as
supplier side #3 consolidation. You know, when you think about
the sector in itself, cost inflation, tough competition,
ever increasing demanding customers, I mean, I think that
goes across all sectors. So bringing together, as you
(35:50):
said, the ranking of #3 and #6 is about buying into cost
efficiencies and pricing power and R&D, which is critical
within this field as well in one, in one foul swoop.
And then finally, and I quite like this, you mentioned egos,
interesting that they could put egos aside when the money's
right, which is normally the case that the same deal logic
(36:13):
that failed in 2017 now has a better chance of rewarding
shareholders because of a key thing.
And this is where I think for any young person listening to
this, thinking about this from acareer perspective, it's not a
just about the synergies and thethe financial kind of metrics
that define that the successor not of this deal.
(36:33):
It's also the macro overlay of which at that point in time
where are we. So you know, it's kind of that
kind of cost as well as the capital markets backdrop and
that shifted over the last eightyears or so.
And so it's management's job to recognize where the conditions
have changed, align and rerun those strategic plays at the
(36:56):
right moment in time. So, but yeah, they put put the
egos aside for now. So great stuff.
Well, as mentioned before, any questions at all, any opinions,
anything like that, please do just drop us a comment.
Let us know. We'd love to interact with you
on Spotify, YouTube, wherever you might be listening.
But have a fantastic week ahead and thank you very much, Piers.
(37:17):
Thanks a lot.
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