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The bank has played a leading role in cementing some of the most significant cross-border mergers and acquisitions of the last year. Edward Russell-Walling reports.  

While last year set new records for merger and acquisition (M&A) activity in Europe and globally, it also witnessed a rally in cross-border deals. Jefferies, which celebrates its 60th anniversary this year, has persuasive form in advising on complex cross-border mergers, and hopes to maintain the tempo in 2022.

Dominic Lester, European head of investment banking at Jefferies, identifies several important trends that drove success in 2021 that he expects to continue — at least in part — in 2022. “One was the massive inflow of funds into public equities, fuelling the resurgence of initial public offerings (IPOs) and an enormous special purpose acquisition company industry,” Mr Lester notes.

Another, he says, was the record M&A valuations achieved by private companies, particularly in the highly sought-after technology, healthcare, consumer and infrastructure sectors.

“A third important influence was the acceleration of environmental, social and governance [criteria] as a meaningful driver of investment outcomes,” Mr Lester continues, adding that the ongoing shift to renewable energy is generating significant investment and deal activity in Europe.

Hot market 

Countries might have been closing their borders because of the Covid-19 pandemic last year, but the flow of cross-border capital accelerated at a record pace. “Our integrated global team was prepared, and we worked seamlessly to cement some of the most significant cross-border M&A transactions of the year,” Mr Lester maintains.

Our integrated global team was prepared, and we worked seamlessly to cement some of the most significant cross-border M&A transactions of the year

Dominic Lester

One of the more notable was the €2.6bn acquisition by CSC, a Delaware-based provider of corporate, legal and tax services, of Intertrust, a Dutch provider of trust and administration services. While the agreement is still conditional, the transaction is expected to close in the second half of this year. Jefferies was lead financial adviser to CSC.

CSC, a long-standing Jefferies client, was founded in 1899 and operates across the US, Canada, Europe and Asia-Pacific. Its customers, said to include 90% of all Fortune 500 companies, run to more than 180,000 corporates, 10,000 law firms and 3000 financial market firms. Its ears pricked up last November when it heard that Intertrust was in exclusive takeover talks with CVC Capital Partners, the British private equity house. CVC was offering €18 per share for the Amsterdam-listed business.

Intertrust then disclosed it had received multiple takeover offers at prices ranging up to €22 a share. CVC withdrew at the beginning of December and CSC’s successful €20/share bid was announced shortly afterwards. Intertrust said there had been a higher bidder who was unable to confirm financing for the deal.

“We have seen consolidation in this sector over the last 24 months,” says Daniel Frommelt, Jefferies’s European head of business services investment banking. “There has been increased strategic competition for larger platforms in the broader trust and corporate services industry, recently dominated by private equity (PE) investments.”

PE involvement

Jefferies was joint financial adviser and UK corporate broker to Sanne, a UK-listed global provider of fund and other services, in its recent £1.5bn acquisition by Bermuda-registered rival Apex. The deal was announced in August 2021.

PE was on both sides of the deal in the purchase — for more than $3.5bn, reportedly — of capital markets software specialist Calypso Technology by US private equity investor Thoma Bravo. The sellers were the UK’s Bridgepoint and the US’s Summit Partners. When they bought it in 2016, it was valued at around $800m.

Jefferies acted as joint financial adviser to Bridgepoint and Summit. “We ran a traditional auction, reaching out to a number of strategic and financial buyers, and received a wide range of bids from below $2bn to over $3bn,” Mr Lester says. “It was a hot market, with private equity stretching to buy the asset.”

Another all-PE transaction was the €1.6bn sale of Pharmathen to Swiss private markets investor Partners Group. The vendor was UK PE investor BC Partners, to whom Jefferies was sole financial adviser. “We had never worked with BC Partners on a major sell-side before,” Mr Lester says.

Pharmathen, founded in Greece and now headquartered in Amsterdam, develops complex drug-delivery technologies for pharma customers worldwide. It was acquired by BC Partners in 2015. Jefferies did significant preparatory work before the launch to present the company in the best light and introduced a pre-qualification round “to increase transaction tension”.

Partners Group used to invest as a limited partner in other funds but has increasingly chosen to invest directly and in competition with private equity. It made a pre-emptive bid early in the auction’s second phase. The price, which exceeded expectations, represents an industry-leading earnings before interest, taxes, depreciation and amortisation multiple within European business-to-business pharma, according to Jefferies. The deal was also Greece’s largest-ever leveraged buyout.

Gaming industry

Another cross-border deal with a twist was the sale of Codemasters, a UK-based video game developer, to the US’s Electronic Arts (EA) for £945m. Jefferies was exclusive financial adviser to Codemasters.

The bank has built a global team that specialises in gaming and interactive entertainment. “When we focus on a sector, we go deep and we go global — gaming is a good example of that,” says Gaurav Kittur, co-head of global internet investment banking at Jefferies. “More people are playing, of all ages, and games have a longer life because of in-game engagement. So our view was that this would accelerate M&A activity around the globe.”

Codemasters, founded in Warwickshire 1986, became a poster child of the games industry and was most famous for racing games Micro Machines and the Colin McRae franchise. Its founders sold a 50% stake to India’s Reliance Entertainment in 2010, later increased to 60%. Its fortunes declined, however, and in 2018, after a failed attempt at a trade sale, the business was listed in London, valued at £185m.

In 2019, Jefferies was mandated to work on the share price and ultimately flush out a bidder. The share price was £1.80. “We have a team in New York who only sell UK stocks to US investors,” says Paul Bundred, a Jefferies managing director in UK investment banking. “We understood the investment story and we understood the investor base, including all the strategic buyers.”

The shares traded up to £3.50 though, as Mr Bundred points out, that still did not reflect the value of the business to a strategic owner. In the US, Jefferies had a close relationship with Take-Two Interactive, publisher of the popular Grand Theft Auto franchise. In November 2020, Take-Two made an offer of £4.85 a share, valuing Codemasters at £739m.

In the two days following the offer, Jefferies says, it made over 50 calls to shareholders to discuss its merits and the prospects of a bidding war. Then EA announced an all-cash offer of £6.04 – a 25% premium to the Take-Two bid. The £945m offer was successful.

IG’s US acquisition

Jefferies was on the other side of the deal as lead financial adviser to IG Group when it went in search of a US acquisition. With a relatively new CEO, IG’s new strategy was to expand more aggressively in the US. “They asked us to find an interesting acquisition,” Mr Lester says.

Jefferies introduced IG to Chicago-based tastytrade, a derivatives brokerage, and then designed and led the negotiation of a cash and shares deal worth $1bn. The transaction brings international growth opportunities for tastytrade, while expanding IG’s product range into listed options and futures.

“Tastytrade had no adviser,” Mr Lester notes. “We delivered the right buyer for them where they felt comfortable selling their business in a bilateral transaction.”

Last year saw Jefferies become the world’s eighth largest investment bank by revenue and the sixth busiest in M&A. It was in the top four in IPO market share in the UK, Germany and the Nordics, and was the fourth-ranked public M&A adviser in the UK.

“Technical drivers will maintain a healthy M&A market this year, as long as debt funding remains available,” Mr Lester predicts.

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