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Best Global M&A house: Morgan Stanley |
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Also nominated: Goldman Sachs and JPMorgan |
Euromoney catches up with Rob Kindler, vice-chairman and global head of M&A at Morgan Stanley, shortly after his return to New York from a celebration dinner for Sanofi-Aventis’s $20.9 billion acquisition of Genzyme, the deal of the year in the healthcare sector. It was noteworthy in several aspects, not least that it began as a hostile, unsolicited offer. Such deals are still quite rare as the recovery in the M&A market begins to gather momentum and acquirers are cautious about being drawn into bidding contests. They are also wary of the reaction of their own shareholders to proposed deals where the target has not been won around to the industrial logic and the outcome is uncertain.
Sanofi-Aventis was clearly pleased with the result of this particular transaction. It chose as its venue for the celebration dinner the palace of Versailles.
Kindler is proud of his firm’s role on the deal, even though Morgan Stanley didn’t initiate it. JPMorgan and Evercore advised Sanofi-Aventis and Morgan Stanley was brought in after the ball was already rolling. Investment bankers tend to look down their noses at banks brought into the advisory roster after a deal has been launched if they then try to claim credit as a leader of it. But on this deal, Kindler insists: “Sanofi-Aventis will tell you that our efforts were integral to getting that deal done and in particular to bridging the valuation gap to obtain agreement from the target’s board that we were offering value to their shareholders.”
Central to the eventual offer was the granting of contingent-value rights to Genzyme shareholders giving them continued financial upside in relation to one of the company’s most promising drugs under development, Lemtrada, used in the treatment of multiple sclerosis and not yet approved by the US Food and Drug Administration.
The contingent-value rights were constructed to trigger payments to selling Genzyme shareholders on the passing of certain key milestones including FDA approval and certain sales targets. They were designed so that selling shareholders, who also received $74 a share in cash, up from an initial bid of $69, could detach them and sell them. They trade on Nasdaq.
Kindler says: “We had demonstrated our ability on other deals to construct and value contingent rights and in the case of valuing this highly prized drug [Lemtrada], they were crucial.”
It shows the value in M&A of a capacity for innovation and nimble thinking as well as of a long-nurtured set of corporate relationships. Morgan Stanley’s competitors quietly admit that the bank has maintained this franchise well in the face of assault from universal and other banks with bigger lending, debt capital markets and risk management franchises. For the period under review for these awards, Morgan Stanley soared to the top of the global M&A advisory league tables, advising on 380 deals worth $671 billion, well ahead of its short-listed contenders, JPMorgan, with 334 deals worth $619 billion, and Goldman Sachs with 377 deals worth $583 billion.
Kindler says: “We had a year when lots of our clients, many of whom we have covered consistently for decades, were very active. We just seemed to be on everything.”
The bank advised Deutsche Telekom on a large and potentially transformative $39 billion cash and stock transaction selling T-Mobile USA to AT&T while at the same time taking an approximately 8% stake in AT&T. This is the largest M&A transaction in European telecoms and in Germany overall since 2001.
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“We had a year when lots of our clients, many of whom we have covered consistently for decades, were very active” |
There’s been no celebration dinner yet for that deal in a glittering European palace. It has yet to close and might even be subject to US regulatory hold-ups.
Kindler says: “Although there is a high degree of confidence that the deal will clear on anti-trust grounds, the regulatory aspects are certainly complex. One of the unique things about that deal is that we have negotiated break-up fees in the event that it does not get done for any reason whatever, including regulatory non-approval. Those fees include not just $3 billion in cash but also the granting of spectrum and roaming capacity to the value of another $3 billion. On the day it was announced Deutsche Telekom’s stock rated up. From a seller’s perspective, I’d say that is the deal of the year.”
Morgan Stanley advised long-standing client Comcast on another $31 billion deal, the combination with GE in a joint venture encompassing the two companies’ media assets, bringing together content creation and distribution capabilities, creating a leading media and entertainment company.
It also advised another long-standing client, International Power, on the acquisition of GDF Suez Energy for $25.1 billion. The combined entity becomes a global leader in independent power generation with enhanced exposure to high-growth economies. Morgan Stanley had multiple roles, acting as joint financial adviser, sponsor and corporate broker to International Power.
