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00:00-- FIRST OF ALL WHAT ARE WE EXPECTING TO MERGE IN 2020, GIVEN THE ACTIVITY LEVELS WE HAVE HAD OVER THE LAST FEW YEARS? FRANK: THERE IS A HUGE BACKLOG IN M & A, PARTICULARLY ON THE CROSS-BORDER SIDE. THERE HAS BEEN VERY LITTLE M & A ACTIVITY IN EUROPE, VERY LITTLE ACTIVITY IN ASIA. IN 2019, IT WAS A STORY OF MEGA DEALS IN NORTH AMERICA, SOME CROSS-BORDER WHICH I WOULD HAVE THOUGHT WERE A LOT. BY AND LARGE, CROSS-BORDER WAS SLOW, EUROPE WAS SLOW BECAUSE OF BREXIT. ASIA WAS SLOW BECAUSE OF THE TRADE WARS, AND THAT IS WHERE WE WILL SEE ACTIVITY THIS YEAR. FRANCINE: HOW DO WE KNOW IF IT IS A GOOD M & A MERGER, MEANING ONE COMPANY LOOKS AT ANOTHER SAYING, I CAN GROW IT AND MAKE IT FIT WITH WHAT I HAVE, OR A COMPANY IS DESPERATE AND WILL GROW TO MAKE THEM BETTER? FRANK: IT IS A HARD EQUATION TO FIGURE OUT FROM THE OUTSIDE. I KNOW FROM BEING INSIDE THE DEAL THAT SOMETIMES THEY KNOW THEIR OWN BUSINESSES WITHERING, SO THEY USE THE CASH IN LEVERAGE THEY HAVE TO ACQUIRE A NEW BUSINESS. IT MAY LOOK LIKE THEY HAVE NOT EXPANDED WHEN IN FACT THEY HAVE CREATED SHAREHOLDER VALUE BECAUSE THEY HAVE REPLACED REVENUE AND PROFITS THEY WOULD HAVE NATURALLY LOST. A DEAL MIGHT HAVE BEEN A GREAT DEAL, A VISION MIGHT HAVE BEEN A GREAT VISION FOR THE COMBINATION , BUT A LOT OF IT IS EXECUTION POST CLOSING. ONE OF THE THINGS THAT IS VERY IMPORTANT IS THAT WHEN THE CLIENT MAKES A DECISION TO GO FORWARD WITH A TRANSACTION, NOT ONLY DO THEY PAY THE RIGHT PRICE, DO NOT OVERPAY, BUT MAKE SURE THEY HAVE A PLAN WHERE THEY ARE GOING TO START INTEGRATING FROM DAY ONE. FRANCINE: TOM WAS ASKING EARLIER ON ABOUT ANIMAL SPIRITS. HOW WOULD YOU DESCRIBE ANIMAL POLITICS? IS IT VOLATILITY IN THE MARKETS THAT MEANS CHIEF EXECUTIVES SHY AWAY FROM M & A? FRANK: IT IS INTERESTING BECAUSE WHEN I LEFT FOR THE HOLIDAYS, EVERYBODY WAS SAYING WE ARE GOING TO TALK THE FIRST WEEK OF JANUARY, AND THEN EVERYTHING THAT WAS GOING ON WITH IRAN AND PEOPLE SORT OF PUT OFF THOSE CALLS AND MEETINGS. SUDDENLY, THIS PAST WEEK , EVERYBODY IS WANTING TO TALK AGAIN, SO ANIMAL SPIRITS ARE UP. AS I MENTIONED WITH THE CHINA TRADE DEAL HAVING BEEN RESOLVED, OR AT LEAST THE FIRST STAGE HAVING BEEN RESOLVED BRINGS IT COMING SOON. CEO ' S WANT TO DO DEALS. IN THE U.S. AND WESTERN EUROPE, WE ARE IN A SLOW GROWTH ENVIRONMENT AND THE ONLY WAY TO OBTAIN GROWTH IN AN ENVIRONMENT LIKE THIS IS TO HAVE AN GROWTH, AND -- INORGANIC GROWTH AND M & A IS THE BEST WAY FOR THAT THERE IS INCENTIVES FOR CEOS TO LOOK AT DOING MAJOR TRANSACTIONS. FRANCINE: DO YOU THINK THE SHARE PRICES FOR COMPANIES ARE A HINDRANCE TO THIS CONSOLIDATION

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M&A Specialist Aquila Sees Huge Backlog at Start of 2020

Frank Aquila, partner at Sullivan & Cromwell, discusses his M&A market outlook for 2020. He speaks with Bloomberg’s Francine Lacqua on "Bloomberg Surveillance." (Source: Bloomberg)

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