Over the weekend, the Securities and Exchange Commission (SEC) released the details of its settlement with Tesla CEO Elon Musk. The issue at hand stemmed from an August tweet in which Musk mused taking Tesla private; the SEC argued that Musk was misleading investors. As I am sure you have read by now, an agreement was reached involving a $20M fine for Musk, as well as forcing him to step down as chairman of the board, but remain CEO of Tesla.

This leads us to wonder, given the buyout boom of larger companies, will there be more large public entities that go private in the near future? Furthermore, what does this market look like over the last few years?

Public-to-private transactions

From 2015 through 2017, there was a 56% increase in public-to-private transactions, yet 2018 saw a sharp decline in activity. To understand the current market, let’s review the LTM June 30th period over the last three years.

From 2015 through 2017, there was a 56% increase in public-to-private transactions, yet 2018 saw a sharp decline in activity. To understand the current market, let’s review the LTM June 30th period over the last three years.

During the LTM June 2017 period, there was a 49% increase in public-to-private deals from the previous LTM June 30, 2016 period, with 112 public companies going private. Beyond being the most active twelve-month period, even more fascinating is Canada, as it was where 21% of the deals took place.

Seventy-five public-to-private deals took place during the LTM June 30, 2016. Once again, Canada was quite active with 16% of all deals.. Given this, it is understandable that Energy: Producers and Materials: Chemicals, Minerals, & plastics were the top performing subsectors in this period.

A Tweet by any other name

What may have been a shock a few years ago does not surprise us in today’s climate. Yet, it is fascinating to consider that a tweet – about whether Musk secured funding to bring his company private (harmless, or not) – can have much impact on a business. This illustrates how increasingly complicated public-to-private deals are becoming, as they experience a disproportionate amount of headline and regulatory risk, by default of being public companies.

Much of the M&A market is based on carefully calculated assumptions of a company’s value. It is both alarming and compelling that much of that “value” can be wiped out by a mere tweet, which then impacts the potential buyers and investors. Everything in this market is connected, leaving little room for error. This makes it all the more important for M&A participants to remain disciplined in their messaging and brand identity, particularly given how intricately linked that messaging is with valuations.

 

Last week’s deals today

Sept 24 – Sept 28

78 deals traded

 

Deal of the week

Private equity firm, Advent International sold Genoa Healthcare Holdings to UnitedHealth Group for $2.5B – the largest transaction last week. Genoa is based in Renton, WA and is a provider of pharmaceuticals and related monitoring services.

 

Most active subsectors
  • IT: Software & services
  • Food: Consumable food products
  • Services: Marketing & related
  • Financial: Services
  • Industrial: Equipment & products
Most active cities
  • Seattle
  • San Francisco
  • Dallas

 

 

 

Photo by Benjamin Balázs on Unsplash

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