JPMorgan's Simon Says Mergers Could Get Ugly With Hostile Deals

The merger boom is about to get ugly, according to one of Wall Street’s top dealmakers.

“I do think you are going to see an increase in unsolicited, hostile activity,” Kurt Simon, global chairman of mergers and acquisitions at JPMorgan Chase & Co., said at a conference Thursday. 

PPG Industries Inc.’s unwanted overtures to Akzo Nobel NV, as well as Kraft Heinz Co.’s rebuffed attempt to buy Unilever, underscore how companies are attempting to push ahead with deals in the face of opposition, whether it’s political pushback or shareholder resistance.

It’s proof that the takeover frenzy of the last two years is still going strong, despite factors that would seem to damp activity, Simon said at Tulane University’s Corporate Law Institute Conference in New Orleans.

Companies are pushing ahead with consolidation despite political gridlock in Washington and policy changes in China that make it harder for corporations there to buy overseas.

One thing in particular bodes well for dealmaking, Simon said. U.S. regulators -- whose pushback helped kill a “dramatic” $800 billion worth of deals last year -- are likely to be more welcoming of big transactions under the Trump administration.

“We do think we will see a more benign regulatory environment,” he said.

More Stability

Deals worth a total of about $3.8 trillion were agreed on in 2016, according to data compiled by JPMorgan. While that was the third-best year on record, volumes still fell about 17 percent from 2015’s record $4.6 trillion in deals.

A sharp drop-off in megadeals, worth $10 billion or more, as well as a slow down in health-care transactions, depressed activity last year. Big deals were down about 40 percent from the year earlier, while health-care M&A fell about 50 percent from the levels seen during the takeover frenzy in that industry in 2015, Simon said.

Investment bankers, who bring in fees advising companies on dealmaking, tend to be optimistic by nature. Simon gave the room full of 600 lawyers, law students, publicists and reporters a slew of reasons to be bullish on deals in 2017.

Economists are forecasting modest growth in gross domestic product, a lower unemployment rate and rising interest rates. At the same time, volatility is low and debt is relatively cheap and available. While stock prices are at all-time highs, the market is not “overbought,” he said.

“One thing our industry craves is stability,” Simon said. “We couldn’t ask for a more stable environment.”

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