JPMorgan's Purcell Says Three Deals Died on Him Since Trump WonBy and
Trump win had a ‘chilling effect’ on M&A, Purcell says
Sompo’s Frudd sees more international buyers seeking deals
John Purcell, an investment banker at JPMorgan Chase & Co. for the insurance industry, said it’s become harder to put mergers and acquisitions together because companies that were thinking about deals have been confronting increased uncertainty since Donald Trump was elected president.
Trump’s win “had a chilling effect on deal activity,” Purcell said Wednesday at a conference held by S&P Global Ratings in New York. “Personally, I’ve had three M&A deals die since Trump was elected.”
There have been about $554 billion of takeovers across all industries involving U.S. acquirers or targets announced this year through May, according to data compiled by Bloomberg. That’s down from more than $600 billion in the same period of 2016.
Purcell didn’t identify the companies that backed away from combinations. He said one potential transaction would have been an inversion, or a type of deal in which a U.S. company takes on the headquarters of a non-U.S. firm where taxes are lower. Trump won support in the campaign with his promises to stand up for the country’s taxpayers.
The other two involved non-U.S. buyers, Purcell said, adding that there were “handshake” agreements on valuations before Trump’s November win. After the election, there was too much uncertainty, he said.
“It created a dynamic where it was impossible really to come up with a contractual provision or price-adjustment mechanism” to account for uncertainties about taxes, he said.
“So everybody went pencils down.”
There has been a years-long trend toward consolidation in the insurance industry, much of it involving buyers pushing into the Bermuda market to diversify risks or gain scale. Japan’s Sompo Holdings Inc. bought Endurance Specialty Holdings Ltd. this year. And Exor, led by Italy’s billionaire Agnelli family, acquired PartnerRe in 2016. Both deals were valued at about $6 billion.
“The drive is that exportation of capital, and overseas earnings,” Nigel Frudd, the head of global M&A at Sompo said at the conference, discussing the trend for cross-border deals. “That is still going to continue.”
Purcell said another trend could be an increase of deals that are backed by outside capital, such as pension funds or private-equity firms, rather than transactions involving a company taking out a smaller rival. Last month, funds affiliated with Blackstone Group LP were part of an investor group that agreed to pay $1.84 billion to buy Fidelity & Guaranty Life. Also involved in the purchase is CF Corp., a Las Vegas-based special purpose acquisition company that went public last year, and counts former top Blackstone dealmaker Chinh Chu as a key executive.
"I’m personally seeing a lot more of those types of deals than I am seeing sort of the more traditional, meat-and-potatoes M&A deals,” Purcell said.
— With assistance by Brooke Sutherland