One thing to start: we made it. After 203 editions, this is the final DD of 2020. For today’s DD, we’ve curated some of our best corporate finance stories to help you recap the year. If you missed our best of edition on private equity and hedge funds from Thursday, catch-up here.
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1. The extraordinary resilience of SoftBank’s Masayoshi Son
This year marked the second time in his career that Japan’s Masayoshi Son was pushed to the brink.
The billionaire, risk-addicted dealmaker behind investment conglomerate SoftBank, famously became the richest man in the world for a few days in 2000 before the bursting of the dotcom bubble wiped out almost all his wealth.
The mid-March rout of 2020 wasn’t as extreme, but for a few days it appeared that the market was going to take SoftBank and Son down with it, following an activist campaign against the company by hedge fund Elliott, reports on vicious internal back-stabbing and postmortems on its disastrous bet on WeWork.
To turn it round, Son did something he had never been known to do before: sell huge parts of his portfolio. But not before he gave a peculiar presentation on the “Valley of the Coronavirus” and compared himself to Jesus Christ.
About $90bn was raised from disposing of UK chip designer Arm Holdings, some of its Alibaba position, much of its T-Mobile US holding, and a portion of its Japanese telecoms business. With SoftBank’s coffers flush with cash, Son couldn’t help but revert to his old tricks.
The FT revealed that SoftBank was the ‘Nasdaq whale’, stoking the stock market with aggressive options bets on US technology stocks. Other SoftBank financial shenanigans we covered this year ranged from its secret circular financing to the mechanics of its controversial Wirecard trade.
SoftBank shares are up 73 per cent this year. It feels like Son is itching for his next big bet. The fundamental question remains, though, what is SoftBank?
2. Spacs: the blank-cheque blitz of 2020
No one had a glow-up in 2020 quite like the special purpose acquisition company, or Spac. Launching a blank-cheque company has this year almost become a rite of passage on Wall Street.
Spac-mania hit fever pitch in the summer, when hedge fund billionaire Bill Ackman raised a record-breaking $4bn for his Pershing Square Tontine Holdings, and has shown little sign of slowing down.
We saw the biggest Spac deal on record, the most complex Spac deal to date and a wave of launches from some unexpected figures — shout-out to basketball legend Shaquille O’Neal and baseball legend Billy Beane.
The sudden rush to set up blank-cheque vehicles prompted team DD to do some data work on how much money some of the most prolific Spac sponsors, like former Facebook executive Chamath Palihapitiya and ex-Citigroup executive Michael Klein, were sitting on for their dealmaking skills. As it happens, quite a lot.
It wasn’t all rainbows and roses in Spac land, however. Nikola’s debut on the stock market via a Spac deal raised questions around due diligence when short seller Hindenburg Research accused the company of “intricate fraud”.
The Spac boom gave us our favourite quotes of the year. “I just don’t understand why all of a sudden it’s OK for banks to make money, but it’s not OK for other people to make money,” Palihapitiya told team DD. It also led to one of our favourite finance memes.
We’ll be watching closely to see whether this generation of Spacs does better than its predecessors.
3. Wirecard’s stunning collapse
Earlier in the year, it wasn’t clear that any of the FT’s dogged reporting on Wirecard, the high-flying German payments company, would ever stick.
Every time the market got shaky, somehow Wirecard investors piled right back in. In June, that all changed.
The fintech group acknowledged the potential scale of a multiyear accounting scandal, warning that €1.9bn of cash on its balance sheet probably did “not exist”. No kidding.
Within days, the company was all but gone and collapsing under the weight of a massive fraud — its former chief executive Markus Braun was arrested and its former chief operating officer Jan Marsalek remains on the run. The company’s auditor, EY, faces serious questions.
And our FT colleagues — Dan McCrum, Paul Murphy, Olaf Storbeck and Stefania Palma — would finally see their five-year investigation take a turn after dodging constant surveillance and intimidation.
We couldn’t possibly chart the full extent of the Wirecard rabbithole in this space. Go deeper with the FT’s Inside Wirecard section, this episode of the FT’s Behind the Money podcast, or this replay of DD’s Wirecard forum, where you can hear from the journalists who exposed it all first-hand.
4. LVMH and Tiffany’s salacious soap opera
The global pandemic brought the dealmaking industry to a halt in March. And it also created a scenario where many companies who had agreed to transactions before the market mayhem looked to walk away from those deals, or at least get better terms.
No battle captured that dynamic better than when LVMH boss Bernard Arnault tried to scare US jeweller Tiffany into cutting the price of his planned $16.6bn takeover.
But Arnault, dubbed “the wolf in cashmere” for his silky smooth M&A tactics, ran into an obstacle that he had never encountered before in a takeover fight: US commercial law.
In the end, though, the extent to which mergers would crumble beneath the weight of the pandemic didn’t reach the scale feared in March.
Even LVMH and Tiffany managed to patch things up, although not before Arnault roped in the French government to do his bidding for him.
5. Investors gobbled up Silicon Valley’s hottest start-ups
The IPO floodgates for Silicon Valley’s long list of privately owned unicorns opened up in 2020. With market frothiness still a feature, we are gearing up for another year of big public debuts.
Listings by DoorDash, the US meal delivery platform backed by SoftBank, and Airbnb, ignited a feeding frenzy among investors.
The market reception left questions over whether the listing process will need further disruption or if bankers were helpless in the face of frantic retail demand. Controversial surveillance software maker Palantir opted for a direct listing, for instance.
You know who didn’t mind either way? Venture capitalists. The biggest winner of which was undoubtedly Sequoia Capital, with the group scoring big wins on the listings of Airbnb, DoorDash, Snowflake and Unity.
Further east, the good times on the Chinese market faced an unexpected hurdle. The decision by Beijing regulators to freeze Ant Group’s would-be $37bn record-breaking listing put a damper on all the excitement.
Draft regulations by the Communist party would dramatically alter Ant’s business model as a high-tech matchmaker between banks and borrowers, and if the IPO plan returns, it won’t be as colossal.
Heading into the new year, a number of European start-ups from Deliveroo to TransferWise are preparing to tap the stock market. With the US and Chinese market still roaring, will Europe’s sluggish start-up scene finally show up in the public market big leagues?
6. TikTok ban: threat or politics?
Donald Trump’s trade war with China was a defining theme of his four years in power. But the battle between the White House and Beijing reached new heights when the US president decided to go after the popular Chinese-owned video app TikTok.
The FT was the first to reveal in July that the Trump administration was getting ready to blacklist the social media app’s parent company ByteDance over concerns that the Chinese group might inappropriately mine the data of its US users.
That kicked off a race between some of America’s largest companies and tech investors to buy the video app and save it from being banned altogether.
Microsoft was leading the mad dash, before, as the FT revealed, Oracle, the software company, emerged as a leading contender. A deal had to be done fast — Trump issued a series of executive orders that required a sale to be completed before year-end.
Amid all the chaos, TikTok chief executive Kevin Mayer quit just months after joining from Disney. As a person close to Mayer put it to DD: “He didn’t sign up for this.”
Oracle ultimately won Trump’s “blessing” for a preliminary deal with ByteDance, perhaps thanks to the Trump-supporting credentials of its executives led by co-founder Larry Ellison.
Despite that, it’s still not entirely clear what is going to happen with TikTok and whether the deal will go through. And was this all just Trumpian politics or did TikTok actually threaten US security?
7. Untangling Brookfield’s complex web
For a man responsible for billions of dollars of investments in real estate, Brookfield boss Bruce Flatt was relentlessly cheery this year, touting the benefits of ultra-low interest rates and hiring former central banker Mark Carney to lead the $575bn group’s new impact fund.
But Brookfield faces challenges ranging from looming debt maturities at its Covid-hit shopping mall unit and a Congressional probe into a 2018 Manhattan skyscraper deal with the family of Jared Kushner.
That’s even after overhauling an unusual ownership set-up that was the subject of an FT investigation in February — a report that caught the attention of US lawmakers, and is the clearest look yet at one of the hardest-to-understand financial structures in the world.
8. Mind the gap: US and European banks drift further apart
The fallout from the pandemic meant that the biggest crisis facing the world since the 2008 financial crisis didn’t share a common villain: bankers.
Instead, banks raced to meet demands from corporations to keep funding lines open. In the process, debt issuance boomed and bolstered gains flooding in from new equity offerings. Fees came pouring in.
The M&A environment recovered by June and big deals were back on the ticket. And that activity wasn’t limited to clients. Morgan Stanley boss James Gorman struck a $7bn deal to buy asset manager Eaton Vance just days after closing a $13bn takeover of ETrade, highlighting a meaningful shift at the US bank.
We revealed recently that Gorman beat JPMorgan Chase to the Eaton Vance deal.
Power moves were also made by Jane Fraser, who is taking over as Citigroup’s chief executive and PNC’s Bill Demchak, a JPMorgan alum who has led the Pittsburgh bank’s ascent to the top of the regional bank charts.
It wasn’t all daisies. Former and current executives at Goldman Sachs agreed to return millions in pay to the bank to acknowledge the institutional failures leading to the 1MDB corruption scandal.
By market capitalisation, Goldman is now $35bn smaller than its arch-nemesis Morgan Stanley. Chief executive and part-time DJ David Solomon will need to find some new tracks to spin for investors if he wants to hang on to his job in the long-term.
Over in Europe, banks managed to hold their own, even stepping in when US banks bailed on local clients. France’s BNP Paribas made aggressive moves to try to establish itself as Europe’s premier bank.
Credit Suisse reeled in the wake of a scandal that saw its chief executive ousted. UBS, its crosstown rival in Zurich, also turned to new management. The moves kicked off a shake-up of the industry’s top ranks. Fast forward to the end of 2020 and members of European banking’s exclusive club were still busy playing musical chairs.
With hopes for greater in-market consolidation among local rivals, bankers are expecting more dealmaking to come. Will someone pull the trigger on a transformative deal?
9. Saudi Arabia’s shopping spree
When the world got scared in March, the globe’s most aggressive sovereign wealth fund went shopping.
Saudi Arabia’s Public Investment Fund decided that the market mayhem marked a good moment to flood into public equities in a big way. It came just as Crown Prince Mohammed bin Salman was in the middle of an oil price war that was collapsing the value of the country’s most important resource.
Whether it was luck or madness, the PIF thesis proved to be largely successful. Strategic bets on recoveries in the share prices of companies such as concert purveyor Live Nation and cruise operator Carnival paid off handsomely.
But Prince Mohammed couldn’t get his hands on everything he wanted. The PIF’s months-long crusade to complete a £300m purchase of English football club Newcastle United from billionaire British tycoon Mike Ashley ended in disaster. The saga proved a rare counterpoint to the general truth that anything in Britain is for sale for the right price.
10. Dealmaker of the year: Mukesh Ambani
When global markets were gripped with panic and dealmakers were predicting a huge slowdown in activity, the Indian market proved to be the unlikely destination for the hottest corporate auction in the world.
In doing so, it put the global spotlight on Mukesh Ambani’s empire. With the rare opportunity to buy into Jio, a telecoms and digital services business, the world’s most powerful companies and investors lined up to buy stakes from India’s richest man.
By the end, 13 global investors from Facebook to Google and KKR to Mubadala poured $20bn into the company. “It became a FOMO-kind of situation,” one person involved told the FT.
That wasn’t the end of the dealmaking for Ambani or the conglomerate behind Jio, Reliance Industries, which also raised $7bn from a rights issue in June.
Once the Jio auction process was completed, attention shifted to selling stakes in Reliance Retail, another unit of his conglomerate. Again, global investors raced to buy up shares.
It wasn’t all smooth sailing. Ambani was forced to concede that full payment from a hastily arranged $15bn deal with Saudi Aramco last year was going to be delayed.
But the huge sums raised from the frenetic dealmaking allowed the tycoon to pay down Reliance’s debts and position himself as the most influential businessman in India.
And last but not least, a few of our favourite videos and events from the year:
DD’s Ortenca Aliaj breaks down the blank-cheque blitz of 2020 in this helpful explainer video. For more on Spac mania, don’t miss her digital event on the subject featuring Nikola board member Steve Girsky and CC Capital’s Chinh Chu.
Our resident capital markets expert Rob Smith’s memorable interview with short-seller Carson Block — watch it back here.
DD’s James Fontanella-Khan takes us through how a mega-deal at Occidental Petroleum took a turn for the worse in this M&A tale.