Is an M&A revival wishful thinking?

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

In today’s newsletter:

Dealmakers search for light at the end of the tunnel

It has been another down year for the dealmakers. But there are a few signs that the action is picking up.

Higher interest rates are taking their toll on private equity transactions while a more hostile antitrust environment is dissuading companies from pursuing consolidation, sinking global dealmaking to a 10-year low.

But corporates and investors are adjusting to the new normal.

A handful of large post-summer deals has left some sensing a shift, including Cisco’s $28bn acquisition of US software maker Splunk and a $20bn tie-up between US packaging group WestRock and its Irish rival Smurfit Kappa.

“In the last two weeks I’ve received calls from big [strategic bidders] looking at multibillion transactions in their sectors, and those are phone calls I didn’t get six to 12 months ago,” said Bill Curtin, global head of M&A for the law firm Hogan Lovells.

But the consensus on Wall Street seems to be that it’s still too early to call a comeback.

Dwayne Lysaght, JPMorgan Chase’s co-head of M&A for Europe, the Middle East and Africa, said: “It’s hard to see any one big driver for a slew of upcoming M&A. While momentum is building, deals in the $1bn-$5bn territory are going to be the mainstay of the bigger end of the market.”

Big private equity deals also remain scarce. Norwegian classifieds business Adevinta confirmed last week it had received a non-binding approach from private equity firms Permira and Blackstone, pushing its enterprise value up to about $14bn including debt.

Yet broadly, industry activity is in retreat. Private equity transactions totalled $393bn this year, a 41 per cent decrease year on year.

Big deals have become particularly scarce as M&A worth $10bn or more has fallen 42 per cent over the first nine months of the year compared with the same period last year.

And advisory fees have fallen 12 per cent from this time last year to $76bn, with fees for the third quarter at their lowest quarterly level since the start of 2016.

Dealmakers have found various coping strategies in the meantime.

With lending opportunities expected to be on the rise, private equity’s steady march into lower risk, though less glamorous private credit investments has kicked into overdrive.

Lending money at current rates recently caused Blackstone’s Stephen Schwarzman to gush about 12 per cent and 13 per cent returns, but buyout firms themselves are struggling to make the math work on new takeovers because of the higher cost of money.

There is one area where firms have been clamouring for cash — even if it’s costly. They have begun to borrow against their own funds to prop up debt-strapped portfolio companies and return money to limited partners amid a dearth of initial public offerings.

Is this Patrick Drahi’s last rodeo?

Patrick Drahi, the Franco-Israeli billionaire behind Altice, isn’t a man who usually troubles himself with the mundane task of talking to debt fund managers.

But ever since the telecoms magnate’s longtime right-hand man Armando Pereira was placed under house arrest as part of corruption investigation in July, Drahi has been working hard to keep the lenders behind his sprawling empire’s $60bn debt pile on side.

In August, he fronted Altice’s quarterly results for the first time in years, describing the alleged fraud as “a shock and as a huge disappointment” and stating that “if the allegations are true, I feel betrayed and deceived by a small group of individuals, including one of our oldest colleagues”.

(For a primer on the allegations against Pereira — who detailed his journey from abject poverty in Portugal to immense riches in his autobiography The Barefoot Billionaire — check out the FT’s deep dive from July.)

Then earlier this month, Drahi spoke to a packed room full of credit fund managers at Goldman Sachs’ office in what was billed as a “fireside chat” with Altice’s founder.

Drahi will be hoping all that face time will have paid off, as Altice International looks to borrow €500mn, the group’s first attempt at tapping the debt markets since the scandal broke.

The billionaire has long modelled himself on John Malone, the legendary “cable cowboy” whose judicious use of leverage made him a billionaire many times over.

Drahi’s ability to keep lenders from panicking may determine whether this is his last rodeo.

Job moves

• Uber has hired Prashanth Mahendra-Rajah as chief financial officer, effective November 13. He’s currently the CFO of US semiconductor group Analog Devices.

• Wm Morrisons chief executive David Potts is standing down after nine years at the helm of one of the UK’s largest supermarket chains. He will be replaced next month by former Carrefour France CEO Rami Baitiéh.

• Deutsche Bank has hired 10 Credit Suisse bankers for its Middle East business, per Bloomberg, including Saad Osseiran who will lead its wealth unit in the region.

• Qatalyst Group, the boutique investment bank founded by Silicon Valley banking veteran Frank Quattrone, has hired Rob Chisholm as a partner in its software advisory practice. He joins in San Francisco from Goldman Sachs.

Smart reads

The toughest job in tech The FT’s Hannah Murphy sought to understand why Linda Yaccarino took on the challenge of running X and whether she can salvage it under Elon Musk’s chaotic rule.

A simple favour Not long before its collapse, the CEO of a tiny bank in Kansas asked to borrow $12mn from a wealthy local farmer. Bloomberg chronicles the crypto scam behind its demise.

Taking the loss JPMorgan’s recent legal settlements over Jeffrey Epstein were inevitable regardless of its arguments, the FT’s Brooke Masters writes. The longer the lawsuits dragged on, the more it weighed on the bank’s reputation.

News round-up

UBS seeks last-ditch settlement in Mozambique ‘tuna bonds’ case (FT)

Jailed oligarch accuses TPG of colluding with Kremlin to seize $14bn assets (FT)

Donald Trump committed ‘repeated’ fraud by inflating real estate value, judge rules (FT)

CVC-backed DKV Mobility eyes next week launch for IPO (Reuters)

Citadel is ready to fight with SEC over WhatsApp probe (Bloomberg)

US car dealer AutoNation sets up bidding war for Pendragon (FT)

PwC Australia’s culture attacked in tax leak scandal report (FT)