Stripe and private equity firm Advent secured $50 billion in committed bank financing for their joint bid for PayPal.
Growing bank balance sheets
This points to a strengthening bank market – with banks willing to underwrite very large acquisition debt again. Strong results and a growing set of bank deregulation measures (including lower capital requirements) are likely supportive.
Private equity managers partnering with trade buyers
The deal points to a possible future direction for private equity firms as their traditional deals get more difficult to do. In this case they partner with a trade buyer – and bring their capital and financial engineering expertise.
M&A-friendly administration – many more jumbo M&A deals likely
We are in a positive trade M&A environment – with a broadly supportive US government meaning that there are fewer antitrust barriers than in the recent past. This both creates the opportunity for more very large deals – with the carrot of greater scale and profitability. It also creates the stick – that a future administration might revert to a more conservative position and make these deals more difficult in the future – making this a potentially short window to get deals done.
The jumbo-M&A financing and fees opportunity for banks and private credit firms
We are likely to see increasing numbers of jumbo M&A deals. These deals will need financing.
Building the capabilities to finance these deals and to provide all parts of the investment banking service around them – including M&A advisory, acquisition financing take-out arranging/distribution, etc. – allows you to capture the full set of fees that can come with the financing. For private credit firms that are not set up to do all the investment banking work involved, it might be possible to set up partnerships for this. Ultimately this is a multi-step production line – and the firms that can execute (and earn fees) at each stage of the line are likely to be able to out-price and out-earn firms that can only do some of the stages for this type of deal.
