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    ADBE   US00724F1012

ADOBE INC.

(ADBE)
  Report
Delayed Nasdaq  -  04:00 2022-11-28 pm EST
328.97 USD   -1.59%
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Global dealmaking plunges as financing market hits rock bottom

09/30/2022 | 03:04am EST
Illustration shows figurines in front of Adobe logo

NEW YORK/LONDON (Reuters) - Global M&A shrank for the third consecutive quarter as rising interest rates forced lenders to pull back from financing large deals and the soaring dollar failed to spur U.S. companies into snapping up foreign targets amid persisting geopolitical tensions.

A steep fall in large private-equity buyouts contributed to the slowdown in global dealmaking, with third-quarter activity dropping 54% to $716.62 billion from $1.56 trillion in the same period last year, according to Dealogic data.

Dealmakers are facing resistance when they pitch deals to their clients as annual volumes have so far lost 33%, with $2.97 trillion of announced deals this year.

"The backup in the leveraged finance market along with the lengthened timeline of regulatory reviews for many transactions has had an impact on dealmaking," said Cary Kochman, global co-head of M&A at Citigroup Inc.

M&A volumes in the United States plunged by nearly 63% in the third quarter to $255.89 billion as the rising cost of debt forced companies to postpone their pursuit of transformative buyouts.

Plagued by spiraling inflation, European M&A activity suffered a 42% contraction in the third quarter while Asia-Pacific was down 52%, according to Dealogic.

"In today's markets, most banks don't feel comfortable underwriting a financing package of 3 to 4 billion euros for a private equity deal in Europe," said Guillermo Baygual, co-head of EMEA M&A at JPMorgan.

"Getting deals done takes much longer. The focus is purely on high-quality assets, especially in resilient industries such as infrastructure," he said.

Wall Street banks had to stomach a loss of roughly $700 million linked to the underwriting of the $16.5 billion leveraged buyout of Citrix.

As the environment for dealmaking has deteriorated this year, a number of corporate buyers have chosen to walk away from earlier handshake agreements while others have postponed large buyouts altogether.

"I don't think we've hit the bottom yet. Today's market is just all over the place and people are still a little bit spooked," said Melissa Sawyer, global head of the M&A group at Sullivan & Cromwell LLP.

Still, some large deals were signed during the quarter.

Notable transactions included Adobe Inc's $20 billion acquisition of design software company Figma and Oak Street's $14 billion take-private deal for real estate investment trust Store Capital Corp.

In Britain - where on Sept. 26 the pound plunged to an all-time low against the dollar - Schneider Electric's 9.5 billion-pound proposed takeover of British software firm Aveva was a rare attempt to revamp activity in Europe's biggest M&A market.

For an interactive graphic, click here:

CURRENCY DISLOCATION

While valuations are sinking, U.S. buyers have so far taken a cautious stance on doing deals overseas and making currency-driven bets amid concerns over the war in Ukraine and Europe's energy crisis.

"Currency dislocation can create opportunism. But if you're a U.S. buyer you also need to look at the long-term value creation thesis and right now you won't get any upside from your target's sterling earnings which have been weakened by the latest currency fluctuations," said Dwayne Lysaght, co-head of EMEA M&A at JPMorgan.

Corporate confidence in markets being supportive of dealmaking - widely seen as the leading indicator for M&A activity - has plummeted as a long-lasting recession is looming.

"You have a whole generation of people who haven't seen interest rates rise this precipitously and no one really knows where it will stop. That could have a huge impact, not just on valuations, but also on the underlying economy," said Matthew Abbott, global co-chair of the M&A group at Paul, Weiss, Rifkind, Wharton & Garrison LLP.

Going forward dealmakers expect more domestic tie-ups, mostly funded by stock, to help companies withstand the storm.

"As a reaction to macroeconomic pressures, some large all-stock mergers will be certainly under consideration as a way to gain efficiencies and tackle sluggish top-line growth and inflation in the cost base. The rationale for dealmaking will rely on the ability to take out costs and address operational overlap," said Derek Shakespeare, chairman of EMEA M&A at Deutsche Bank.

Meanwhile, some companies could pursue hostile deals if boardrooms are not willing to play ball.

"On the public M&A side, (proactive outreaches) may lead to some more aggressive or hostile activity where buyers don't take no for an answer and decide to go directly to the shareholders," said Marc-Anthony Hourihan, global M&A co-head at UBS.

Yet deals have to go through a longer gestation period due to increased antitrust scrutiny, especially in sectors such as Big Tech.

Lengthy regulatory reviews have pressured buyers to offer so-called reverse break-up fees they would need to pay if they were unable to consummate the deal.

"Reverse break-up fees are a contractual technique that we're using to help people overcome their fear of wacky and unpredictable outcomes from the regulators," said Sawyer of Sullivan & Cromwell.

($1 = 0.9033 pound)

(Reporting by Anirban Sen and Abigail Summerville in New York and Pamela Barbaglia in London; Editing by Matthew Lewis)

By Anirban Sen, Pamela Barbaglia and Abigail Summerville


ę Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
ADOBE INC. -1.59% 328.97 Delayed Quote.-41.05%
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) 0.37% 0.55806 Delayed Quote.3.78%
AVEVA GROUP PLC -0.50% 3175 Delayed Quote.-6.73%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.39% 1.791 Delayed Quote.-3.63%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) -0.03% 1.61287 Delayed Quote.-5.46%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.32% 166.421 Delayed Quote.7.87%
BRITISH POUND / NEW ZEALAND DOLLAR (GBP/NZD) -0.31% 1.93361 Delayed Quote.-1.97%
BRITISH POUND / SWISS FRANC (GBP/CHF) 0.19% 1.13718 Delayed Quote.-7.51%
BRITISH POUND / US DOLLAR (GBP/USD) 0.38% 1.20046 Delayed Quote.-10.90%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) 0.03% 0.620005 Delayed Quote.5.77%
CARY GROUP HOLDING AB (PUBL) 5.63% 76.05 End-of-day quote.-29.06%
CITIGROUP INC. -2.20% 47.23 Delayed Quote.-21.79%
DEUTSCHE BANK AG -1.77% 10.206 Delayed Quote.-7.37%
EURO / BRITISH POUND (EUR/GBP) -0.03% 0.8645 Delayed Quote.2.34%
INDIAN RUPEE / BRITISH POUND (INR/GBP) -0.33% 0.010209 Delayed Quote.2.01%
SCHNEIDER ELECTRIC SE -0.87% 141.08 Real-time Quote.-18.20%
STORE CAPITAL CORPORATION -0.35% 31.77 Delayed Quote.-7.33%
UBS GROUP AG -1.06% 17.295 Delayed Quote.6.46%
US DOLLAR / BRITISH POUND (USD/GBP) -0.36% 0.833056 Delayed Quote.12.26%
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Financials (USD)
Sales 2022 17 612 M - -
Net income 2022 4 731 M - -
Net cash 2022 2 483 M - -
P/E ratio 2022 32,7x
Yield 2022 -
Capitalization 153 B 153 B -
EV / Sales 2022 8,54x
EV / Sales 2023 7,71x
Nbr of Employees 25 988
Free-Float 77,4%
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Technical analysis trends ADOBE INC.
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Mean consensus OUTPERFORM
Number of Analysts 32
Last Close Price 328,97 $
Average target price 371,18 $
Spread / Average Target 12,8%
EPS Revisions
Managers and Directors
Shantanu Narayen Chairman, President & Chief Executive Officer
Daniel J. Durn CFO, EVP-Finance, Technology Services & Operations
Cynthia A. Stoddard Chief Information Officer & Senior Vice President
Mark S. Garfield Chief Accounting Officer, Controller & SVP
John E. Warnock Chief Executive Officer
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