View from the City: how M&A has become a cloak-and-dagger operation during the pandemic
One of the biggest challenges about the M&A side of our business is the restrictions placed on our ability to talk openly about, quite frankly, some of the most exciting deals we’ve recently been involved in. From a buyer’s perspective this is understandable, especially if they’re publicly tradable – and indeed we have been getting a lot more of these players on the other side of the table. Sometimes it’s the sensitivities related to the territory or simply because the parties wish to retain a low profile. Which is perfectly understandable, even if it means we can only speak about it in muted undertones.
And that – given the majority of the ongoing deal flow in our sell-side M&A pipeline – is likely how the rest of this year, and likely the next few years, will pan out. While there will be myriad of publicly-facing deals, together with artfully crafted press releases addressed to shareholders and prospective investors, this year will be mainly punctuated by a lot of under-the-table deals with buyers and sellers on a need-to-know basis. Make no mistake, a lot of money will change hands this way, to the extent that this will rapidly become one of the new ways of expanding in gaming, and to a lesser extent, fintech.
Why is this the case? Even internally we had hedged our bets that the trend was towards more public – read louder – deals. But that was in the world BC (before coronavirus). Then the answer came from one of the buyers in a particularly large recent transaction. In no ambiguous terms, they said: “We want to rule the world, we just don’t want the world to know yet.”
That, pretty much, describes the state of M&A affairs in a socially distanced world. There’s money out there, lots of it by the looks of things, it just doesn’t want too much spotlight – for now. When all the (acquired) pieces move into place, there will be much fanfare about a new world order. And – continuing with the Tenet angle – if you know where to look, you will find more clues.
Take SPACs for example. What is their prime directive, other than a perfectly opaque container for some yet-to-be-announced umbrella vehicle? Or witness what’s happening across Southeast Asia, where medium and perfectly well-performing brands are being bought in quick succession by a few private entities. And, given the gradual lockdown of practically anything in Europe, the systematic acquisition of any assets with a revenue distribution that’s not wholly white, again from just a small buying pool?
Whatever the rest of the decade will look like, it’s clear that amid all the public fanfare for a decreasing number of large public deals this year’s developing story is focusing on rapidly acquiring good performing brands on a need-to-know-basis. And, given the undulating regulatory and industrial stance in Europe, this might not necessarily be a bad thing. Now, if only we could talk more about them…