The latest obstacle to private equity dealmaking

One thing to start: The blank-cheque company seeking to take Donald Trump’s media business public said it has agreed to pay $18mn to settle a regulatory probe over certain disclosures surrounding its initial public offering and proposed merger with the former US president’s company.

In today’s newsletter:

• Trustbusters’ new check on dealmaking

• Private equity bids on Worldpay

• Greenhill boss Scott Bok’s $78mn payday

Antitrust regulators throw new obstacles at private equity

As US trustbusters fight a signature legal battle in court — challenging Microsoft’s $75bn takeover of Activision — they’re opening a new front in their efforts to curb dealmaking.

Last week, the Federal Trade Commission and Department of Justice unveiled a new set of regulatory proposals that threaten to slow down the dealmaking process, and which antitrust lawyers think could lead to more deals being blocked.

While the rules are aimed at any acquiring entity, dealmaking experts think the FTC and DoJ had a specific type of buyer in mind when they came up with the proposal: private equity.

It’s no secret that US antitrust regulators have become increasingly concerned about private equity’s grip on the economy, as DD has written about extensively.

Changes to the Hart-Scott-Rodino (HSR) form, which companies fill out to notify regulators about deals exceeding a certain size, would force buyout firms to disclose significantly more information in the early stages of a transaction.

They include details about their investors, documents pertaining to cost and labour cuts, companies’ past consolidation efforts and other closely guarded strategies.

The proposed rules are viewed by top dealmakers as a surgical threat to private equity activity, currently a lifeblood of the moribund M&A market.

“This is breathtaking and astonishing in its reach and potential impact to deals,” said James Langston, a partner at Cleary Gottlieb in New York. “There’s nothing about the existing process that was broken.”

Regulators predict that the new form will add an extra 100 hours to the time companies need to prepare, though dealmakers say it could be significantly longer (we can see why they would say that).

Cracking down on roll-ups — a private equity strategy that consolidates niche sectors — has been a central priority for FTC chair Lina Khan and DoJ watchdog Jonathan Kanter. (Take, for example, the private equity march into hospital emergency rooms.)

Last year, the FTC ordered JAB to divest from a number of veterinarian clinics to avoid overconcentration, and similar rulings are to be expected.

Meanwhile, lawyers say that a DoJ probe into private equity firm Thoma Bravo’s proposed $2.3bn take-private of cyber security company ForgeRock could lead to a rare antitrust challenge involving a big private equity deal.

There are some winners to the HSR revamp, though, depending on how you look at it.

The rule would likely be “great for my pocket but terrible for my private life”, said one antitrust lawyer, as long as deal volume remained steady.

It may be wishful thinking. Soaring interest rates already have created a freeze in dealmaking activity that has caused law firms and investment banks to cut headcount that swelled during the pandemic-era M&A boom.

Private equity eyes a payments mega-deal

Fintech giant Fidelity National Information Services is working on plans to sell a majority stake in its Worldpay merchant payments unit to private equity buyers in a major twist that could signal more mega-deals ahead — a welcome relief to M&A advisers.

On Friday, the FT reported that private equity buyers are in talks to buy Worldpay from FIS at a valuation of more than $15bn — one of the largest corporate carve-outs on record, citing sources close to the deal. 

US buyouts firms GTCR and Advent International are studying bids, sources told DD. GTCR is the frontrunner, they said. If FIS were to accept private equity cash, it would mark a shift from its plans to spin off Worldpay into a separate publicly traded business.

Banks are working on debt packages to finance the carve-out — a sign of confidence from lenders that have demurred from financing large buyouts after several hung deals where they struggled to offload the debt to third-party investors.

Many cash-flush private equity buyers have earmarked carve-outs as a way to pay below market prices for large businesses and earn a good return off their own investment specialisation.

In 2019, FIS acquired Worldpay for more than $30bn in a deal aimed at blending its payment processing strengths with Worldpay’s speciality in handling merchant payments.

But the dealmakers’ logic never panned out and FIS took an almost $18bn writedown before drawing up its spin-off plans.

Private equity has already made a fortune on Worldpay. Advent and Bain Capital carved the business out of Royal Bank of Scotland in 2010 at a $3bn valuation. After taking the business public, it was sold to Vantiv — another Advent-backed payments carve out — for more than $10bn in 2017. The combined company was then sold to FIS two years later.

GTCR recently sold a large business to Canadian payments company Nuvei, which itself made a fortune for private equity firm Novacap.

FIS shares rose 6 per cent on Monday, signalling that shareholders approved of the change in course.

The carve-out would accelerate FIS’s clean-up and avoid the uncertainty of a spin-off, analysts at Mizuho said on Monday as Worldpay manages its own growth challenges. Activists including DE Shaw and Jana Partners have already taken stakes in FIS, further underscoring the benefit of a quick solution.

If a mega-deal with bank financing materialises, the next question on dealmakers’ minds won’t be whether other carve-outs are in store — just whether they’ll be even bigger.

How Greenhill’s Scott Bok scored a $78mn payday 

Know when to hold ‘em, know when to fold ‘em, sang the crooner Kenny Rogers. 

Scott Bok knows this rule of thumb well. The Greenhill & Co boss is set to receive $78mn in various payouts from Mizuho Financial Group’s $550mn acquisition of the boutique investment bank, as DD’s Sujeet Indap discovered in the fine print.

That includes his existing stock, restricted stock and guaranteed bonuses as part of a three-year agreement to chair Mizhuho’s advisory business, which will be branded Greenhill after the boutique founded by Wall Street legend Robert Greenhill in 1996.

Even more interesting was the “background to the merger” section of the file.

It goes like this: Bok and the Greenhill board rebuffed Mizuho when it first came calling in July 2022. By this past January, however, the world had changed. Greenhill was staring at a deal slump as well as a near-$300mn debt maturity coming in 2024. 

Bok met with Mizuho’s US head of securities Jerry Rizzieri in early April, and by May the pair quietly negotiated a deal in which Mizuho would pay a more than 100 per cent premium to acquire the lender.

Mizuho hopes to be holding the ultimate winning hand, but Bok and Greenhill shareholders are pleased to be taking money off the table for now.

Job moves

• HSBC is in advanced talks to poach a team of senior Middle East wealth managers from Credit Suisse, including Qatar chief executive Aladdin Hangari, according to two people with knowledge of the moves.

• Tesco has recruited City heavyweight Gerry Murphy as its next chair to replace John Allan, who stepped down this year amid misconduct allegations. Murphy, who chairs Burberry and Tate & Lyle, will step down from the latter in September.

• Lazard has fired a top dealmaker following allegations of inappropriate behaviour during a weekend party, Bloomberg reports.

• Volkswagen is replacing Audi head Markus Duesmann with Gernot Döllner, who is currently VW’s head of strategy.

• Heathrow airport has appointed Copenhagen airport boss Thomas Woldbye as its new chief. He will replace John Holland-Kaye later this year.

• White & Case has hired Ignacio Paz and Pablo Garcia-Nieto as mergers and acquisitions partners in Madrid. They join from Herbert Smith Freehills.

Smart reads

Once upon a time in Bollywood India’s richest man Mukesh Ambani has turbocharged his streaming platform to rival Disney and sparked a price war that will transform the market in the process, the FT reports.

Breaking (holy) ground The Mormon Church is on a temple-building spree underscoring the might of its opaque $100bn investment portfolio, The Wall Street Journal reports.

Faulty plumbing The Thames Water fiasco shows that private equity-backed utilities are less equipped to deal with setbacks than their publicly listed peers, writes the FT’s Helen Thomas.

News round-up

Former Carillion finance chief barred from UK boards for 11 years (FT)

Barclays seeks to end relationship as Odey Asset Management’s corporate bank (FT)

Japan arms itself for global chip wars with $6.4bn state-backed deal (FT)

City AM put up for sale after 17 years (FT)

India’s IDFC to merge with IDFC First Bank in latest consolidation (Reuters) 

Eurovita/Cinven: flop raises concerns on buyout push into insurance (Lex)