The bank’s strategy of offering bespoke advice for premium-value deals has seen its European mergers and acquisitions market share continue to grow. 

Team teaser 0121

Philipp Beck and Nestor Paz-Galindo

In investment banking, UBS no longer seeks to be all things to everyone, choosing instead to concentrate on parts of the market where it can outperform. One of these areas is European mergers and acquisitions (M&As) where, by end-November, it was among 2020’s top five advisers and number one among Europe-based banks.

“We have been gaining market share for the past three years,” says Nestor Paz-Galindo, UBS global co-head of M&A, noting that the bank’s strategy in this area has been paying off.

That strategy flows from the fact that the M&A team is about one-third the size of those being fielded by its biggest US competitors. So UBS has focused on quality rather than quantity, with hands-on senior involvement and a bespoke approach to each deal — no generic off-the-shelf advice.

By specialising in certain types of premium-value deal, it can also maximise fee income for its relatively small team.

“We have an institutional heritage of advising large public companies in transformational transactions,” Mr Paz-Galindo maintains, adding that these are often cross-border, exploiting the bank’s presence in Asia and the US. UBS was involved in three of the 10 largest deals in 2020.

It advised Siemens Healthineers on the year’s largest cross-border deal and largest medical acquisition, its $16.4bn purchase of Varian Medical Systems, announced in August 2020. It also acted as underwriter for the associated $15.2bn bridge facility for Siemens AG, to be refinanced with Healthineers equity and Siemens bonds. The deal is expected to close in the first half of 2021.

The bank is also “deeply embedded” with financial investors, according to Mr Paz-Galindo, advising financial sponsors, infrastructure funds and family offices on complex buy- and sell-side opportunities.

UBS advised a consortium led by Advent, Cinven and RAG on the €17.2bn acquisition of thyssenkrupp Elevator Technology. That followed a process which had also considered an initial public offering and the sale of a minority stake. The deal was Germany’s largest-ever leveraged buyout (LBO) and the largest private equity buyout in Europe since 2006.

Strong start to 2020

The bank has a dedicated sell-side franchise, Mr Paz-Galindo says, with expertise in designing and executing bespoke sell-side processes. That includes minority sales and investments in high-growth companies.

The bank advised on 20 sell-side transactions announced in 2020. These include advising investor Antin Infrastructure Partners on the sale of a minority stake in Eurofiber (a digital infrastructure provider) to Dutch pension fund manager PGGM. Though the details have not been disclosed, UBS says that this was the largest-ever business-to-business fibre optic transaction in Europe.

This year, we expect to see more portfolio transactions and the sales of more mid-sized public companies.

Philipp Beck, UBS

Yet another speciality is in activism and defence. A distinctive differentiator here is UBS-Guard, an analytics tool that combines in-house knowledge of activist investors with artificial intelligence-based diagnostics to predict the probability of an attack. UBS-Guard was part of a product suite that won The Banker’s Best Technology Innovation in Investment Banking award for 2020.

The bank began 2020 with a “great” pipeline of transactions, a large number of which were announced in the month and a half before the market shut down and deal volumes fell drastically. “We stuck with our clients and had a lot of dialogue with them,” Mr Paz-Galindo says. “We also focused on those sectors that could be resilient in the face of Covid-19, like infrastructure.”

The idea was to be in a position to capitalise on any recovery in dealmaking once the lockdown was over and the market came back. Meanwhile, some transactions continued to be put to bed. The thyssenkrupp Elevator Technology transaction, for example, dated back to at least August 2019, when thyssenkrupp first invited bids. The transaction finally closed in July 2020.

In March, the UK’s Pennon Group said it would sell Viridor, a recycling and waste business, to Kohlberg Kravis Roberts’s (KKR’s) infrastructure fund for a debt-free enterprise value of £4.2bn ($5.6bn). With UBS as financial adviser to KKR, the deal closed in July.

The market duly returned, and UBS advised on 15 transactions between August and September, according to UBS’s Europe, the Middle East and Africa head of M&A, Philipp Beck. “A lot of execution was done during lockdown and after the summer we had a run rate of two announcements a week,” Mr Beck says.

One of those was the Eurofiber/PGGM transaction. Another was a £3bn hostile offer by Canada’s GardaWorld security business, with UBS as joint lead financial adviser for its UK rival, G4S. After GardaWorld raised its offer to £3.7bn in early December, the G4S board recommended a competing £3.8bn bid by Allied Universal Security Services of the US.

After the summer, the bank was also exclusive financial adviser to Finnish paper-maker Ahlstrom-Munksjö on a €3.2bn recommended cash tender offer by a consortium including Bain Capital. This was the year’s largest Nordic LBO.

The year also saw the closing of some large transactions that were first announced in 2019. One was the €10.4bn merger of Vodafone Italy Towers with Inwit, a subsidiary of Telecom Italia (TIM). It was first announced in July 2019, with UBS as sole financial adviser to Vodafone. Vodafone and TIM each ended up with a 37.5% stake in the combined entity, which is now Italy’s biggest mobile towers company. The deal closed in March 2020.

Another was the $14bn all-share merger between online food delivery platforms Just Eat (UK-based) and Takeaway (Netherlands-based), announced in August 2019. UBS was joint lead adviser and corporate broker to Just Eat.

Consumer internet giant Prosus gate-crashed the party in October 2019 with a hostile cash bid for Just Eat, but shareholders were not convinced and the deal closed in March 2020. The merged entity will be listed in London, but domiciled in the Netherlands.

In October 2019, Austrian sensor firm AMS relaunched an all-cash bid for Munich-based lighting business Osram. UBS was lead adviser to AMS. What began as a public bear hug evolved into a recommended €4.6bn deal and transformed the German takeover code along the way. It closed in July 2020.

Second lockdown

During the second wave of 2020 lockdowns, UBS again stayed close to its clients, although the fear of action which had characterised the first lockdown was less in evidence.

“We had lots of calls with requests for proposals from the sell-side,” Mr Paz-Galindo says. “Companies were now ready to transact even during Covid-19.”

However, the Covid-19 crisis was able — if only temporarily — to dampen the enthusiasm of shareholder activists. “In 2020 we did not see as much public activism as the year before,” Mr Beck notes. That was not a surprise, he adds, since valuations were all over the place, which is not conducive to change.

“Behind closed doors, however, activists have been laying the foundations for public campaigns in 2021,” he continues. “This year, we expect to see more portfolio transactions and the sales of more mid-sized public companies.”

Covid-19 has forced management to think hard about corporate portfolios, and this will be one of the drivers of M&A activity in the new year. Companies are reflecting on the need for scale, for example, and the fitness of their supply chains.

“When we had discussions with clients last March, it was about how to protect their employees, preserve liquidity and ensure that the business kept operating,” Mr Beck says. “They have overcome that and now want to discuss more strategic topics.”

The recovery in valuations has helped, Mr Paz-Galindo observes. “We are confident about 2021,” he says. “We are as busy as ever, and the team is stretched, but we continue to get calls and have real dialogue with clients.”

There may be one other factor contributing to the year’s M&A activity. Mr Beck expects to see more controlling shareholders capitalising on the uncertainties of the times to take companies private or otherwise buy out minorities. “It could be families with big stakes who have a differentiated view of their business’s potential,” he states.


All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker

For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Top 1000 2023

Request a demonstration to The Banker Database

Join our community

The Banker on Twitter