M&A Deals of the Year
How do you judge a year? Terrific, terrible, somewhere in the middle? The worst place to judge a year is standing right next door, in January, say, of the year following. Like right where we're standing now. Sometimes, big events transpire, and occasionally, like Sept. 11 or the fall of Lehman Brothers, you sort of know these events will define the year. But usually we have no idea how to judge events -- and we won't for some time. We live life forward; we judge in retrospect. M&A deals are like that too. Deals get negotiated, announced and closed, but the most accurate rendering of a deal's value exists somewhere in that unfathomable future, when we'll discover if that acquisition made sense or not, if the price was cockeyed or spot on, if those synergies really existed or were products of overheated ambitions, imaginations or expectations.
Last year was a particularly volatile and difficult year to get a bead on, living it or looking back on it. It existed, like a basketball game, in two halves: The first was robust and hopeful, with lively debt markets and enough vitality in the initial public offering markets to stir talk of a tech bubble; the second, laboring under the shadow of deepening euro-zone woes and August's gridlock in Washington (producing debt ceiling Russian roulette and the Treasuries downgrade), was a period that saw markets shut down, M&A fade, and fear and anxiety spike. And yet the turn of the year offered signs of hope. The European situation has stabilized (for now) and a number of economic signs glow vaguely green. As for politics, well, it's an election year. So who knows what strange events will occur?
All this serves as background to our annual M&A Deals of the Year package. Regular readers can wander off at this point and check their BlackBerries: We offer this lesson in how we do M&A Deals of the Year annually. A-hem. First, we are not interested in simply listing the biggest deals, as many expect. Second, we are not fixated on what we, or analysts, bankers or investors, may think are the "best" or "worst" deals of the year (unless, and this is a big caveat, we can actually quantify that, say, in a private equity exit). Third, we are not really interested in talk of transformation, which should be avoided as a sign of overheating, or perhaps overeating. Fourth, what does engage us is how a deal got done, the degree of difficulty or complexity involved in pulling it off and whether it was notably tortuous, demanding, innovative or creative. We care, in short, about dealcraft, whether it involves a deft regulatory argument or a financing structure last seen in Legoland.
And that's what you'll find in this year's survey of last year's most notable deals. We have, for instance, two transactions that involve something relatively new, the recognition of intellectual property as a key aspect of M&A: the auction of bankrupt Nortel's patents, which, in turn, shaped Google's move to buy Motorola Mobility. We feature three big energy deals, each complex: Peabody Energy buying Macarthur Coal (U.S. company buys Asian assets), BHP Billiton acquiring Petrohawk Energy (Australia giant makes U.S. play) and Kohlberg Kravis Roberts & Co. and partners, including Japan's Itochu Corp., nabbing Samson Investment Co. (private equity buyer with global partners fends off rival bids for a hot property in a tough market). We had consolidations (Caterpillar scoops up Bucyrus), auctions, large and small (Warner Music Group, 99 Cents Only Stores), deals turning on regulatory issues (H&R Block and TaxAct, Comcast's purchase of NBC Universal), a giant PE exit (Apollo and Connections Education LLC), some bottom fishing (Blockbuster) and your basic bank breakup and bailout (Dexia) of which we are sadly too familiar.
And we have lots and lots of names. This year, whenever possible, meaning wherever we had space, we include our proprietary Deal Memos of the many legal and financial advisers who labored to bring these deals to life. Why? Because dealcraft suggests the presence of dealmakers. It's a little like giving credit to physicians and nurses after a child has been born. Did everyone emerge hale and hearty? Kudos. What that child becomes is a matter for another day.