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Q2 League Tables: M&A, PE Plunge as Deal Litigation Booms

By David Marcus | Published on June 30, 2020

M&A and PE transactions plummet in response to the coronavirus pandemic while deal litigation proliferates.

U.S. M&A activity plummeted in the second quarter, with the number of deals of $100 million or more announced between April 1 and June 23 declining by 43% from the first quarter and the dollar volume of those transactions dropping by 49% thanks to the economic effects of the pandemic and the uncertainty created by it, according to data from Dealogic.

In the largest deal for a U.S. target signed up in Q2, JustEat Takeaway.com NV (GRUB) agreed to buy GrubHub Inc. for $7.3 billion in stock. The European buyer outmaneuvered Uber Technologies Inc. (UBER) for the U.S. online food delivery service. That deal was one of only 16 worth $1 billion or more signed in the period; in more normal times, there might that many deals of $1 billion or more announced in a single month. Private equity has also seen a major decline; the largest U.S. PE deal of the quarter is KKR & Co. Inc.’s (KKR) agreement to pay $3 billion for a 60% stake in Coty Inc.’s (COTY) Wella retail hair business.

PE firms have put money to work by buying preferred stock in a number of companies. In the largest such deal announced in the second quarter, Apollo Global Management Inc. (APO) invested $1.75 billion in supermarket operator Albertsons Cos. Inc., which went public on June 25.  And there was a feeding frenzy for stakes in Jio Platforms Ltd., which hauled in $14.3 billion led by a $5.7 billion investment from Facebook Inc. (FB) for a 9.99% stake in April. At least nine other investors have put money into the Indian digital services company.

Deal lawyers have kept busy advising clients about deals signed before the pandemic, many of which look far less attractive now. A number of buyers are seeking to walk, including Simon Property Group Inc. (SPG), which is trying to escape from its $3.6 billion agreement to buy Taubman Centers Inc. (TCO), and Advent International, which has sued in the Delaware Court of Chancery to abandon its $1.9 billion agreement to buy Forescout Technologies Inc. (FSCT)

The situation could be a lot worse; the Taubman deal is the only one of the 20 largest U.S. deals signed in the first quarter from which the buyer is trying to walk, and only two others have been affected thus far. Woodward Inc. (WWD) and Hexcel Corp. (HXL) called off their merger, and BorgWarner Inc. (BWA) and Delphi Technologies plc (DLPH) recut their deal to reduce the BorgWarner stock Delphi shareholders will receive by 5%.

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