Rainmakers are regaining their swagger. After two punishing years, when the financial crisis and global recession caused mergers and acquisitions activity to drop by half, deal making is on the rise again. Announced global M&A volume for 2010 totaled $2.49 trillion at the start of December, up 21 percent from a year earlier. Revenues also rose a healthy 21 percent over the same period, according to Dealogic.
Perhaps just as important, life has gotten more difficult for the securities trader, the rainmaker’s perennial rival for power and influence on Wall Street. The Dodd-Frank Wall Street Reform and Consumer Protection Act appears destined to curb the decadelong dominance of traders and push old-fashioned relationship banking to the forefront. In a world where short-term trading faces restraints through higher capital charges and the so-called Volcker rule on proprietary trading, veteran deal makers — who often spend years getting to know their corporate clients — should deliver a bigger share of investment banking profits.
Institutional Investor’s Rainmakers of the Year certainly delivered in 2010. The top ten deals by fees, as estimated by investment consulting firm Freeman & Co., brought in a cool $839 million, with PepsiCo’s acquisition of two bottling units and Kraft Foods’ purchase of Cadbury accounting for a quarter of that total. Four of the ten deals were in technology, a sector that generated revenues of $1.3 billion — more than any other sector — in the first eleven months of 2010. Private equity players, which generated huge fees during the boom years only to swoon during the bust, made a comeback. TPG Capital’s $5.2 billion buyout of IMS Health with the Canada Pension Plan Investment Board ranks No. 6 on our list. Only three of the top ten transactions involved a company outside the U.S., but cross-border deals are growing in overall importance.
With economic recovery continuing, albeit at a modest pace in places, and with companies having amassed great financial firepower, most bankers are anticipating a strong rise in M&A activity in the coming 12 months. “Twenty-eleven is going to be an action-packed year,” says Paul Parker, global head of M&A at Barclays Capital. “Our anticipation is for deal volume to grow up to 15 percent, to reach a total of $3 trillion or more.” Stefan Selig, executive vice chairman of global corporate and investment banking at Bank of America Merrill Lynch, concurs: “With record levels of cash on corporations’ balance sheets and historically attractive debt markets with record-low interest rates, all of the catalysts to do deals are in place for a strengthening M&A market.”
Cross-border deals and transactions involving emerging markets will remain engines of growth. By the start of December, announced cross-border deal volume was $902 billion, up 66 percent from the same period a year earlier, and emerging-markets volume had grown 63 percent, to $808 billion. With the U.S. dollar expected by many to stay weak and developing economies hungry for resources and other assets, bankers say they will boost their presence in Asia, Latin America, the Middle East and Africa.
Private equity deals are also expected to continue to grow, although at a more sober pace. Although there are likely to be transactions as big as $10 billion, medium-size deals should predominate. “Seventy percent of private equity deals are in the middle-market space that we define as companies with ebitda of $50 million or less,” says Everett Schenk, CEO of BNP Paribas North America, referring to earnings before interest, taxes, depreciation and amortization. “We have never had a stronger deal flow at the bank, and we expect it to get stronger in 2011.”
1. Blair Effron and Team / Centerview Partners
It can take years of patient work to build a relationship and win the confidence of a corporate client. Veteran deal maker Blair Effron did just that with PepsiCo before winning his payoff last year. The Purchase, New York–based soft-drink giant tapped Effron and his team at investment banking boutique Centerview Partners, along with Bank of America Merrill Lynch, as its main advisers on the $15.5 billion buyback of two bottling units.
Unlike Steven Baronoff, the BofA Merrill chairman of global M&A who also worked on the deal, Effron wasn’t involved when PepsiCo spun off the bottling units, PepsiAmericas (PAS) and Pepsi Bottling Group (PBG), in 1999. Nor was he in on Pepsi’s last major deal, the acquisition of Quaker Oats Co. for $13.4 billion in 2000. But Effron had toiled diligently behind the scenes for Pepsi on various strategic issues over the years, and he brought a wealth of knowledge to the complex transaction after two decades spent advising on high-profile consumer deals. Effron, 48, worked on Gillette’s $57 billion sale to Procter & Gamble Co. in 2005 and on InBev’s $52 billion acquisition of Anheuser-Busch Cos. in 2008, and his strategic thinking is top-notch.
Pepsi debated whether to try to restructure the relationship with its bottlers, combine PAS and PBG, or buy back part or all of them. “We concluded the last option would bring the most significant financial impact in terms of cost and revenue synergies,” Effron says. “It’s also the best path in which Pepsi can maximize its expertise in marketing, innovation, branding and bringing products to market.” The deal is expected to create annual pretax synergies of $300 million by 2012.
Brisk and quick-witted, Effron says acquiring two companies at once presented unique and daunting challenges. “It affects how you make each move,” he notes. “You have to think, ‘If I do something here, it will have a knock-on effect over there, and how should I think through that?’” For example, Pepsi’s early proposals to PBG and PAS emphasized that each transaction would depend on the other one closing. After rejections from the bottlers, Pepsi removed that clause with the larger company, PBG, prompting PAS to push for the same treatment. But negotiations had reached the last stage, and four weeks later Pepsi closed the two mergers simultaneously.
The big buyback was a boon to the banks involved, which collected an estimated $113 million in fees. PBG’s sole adviser, Morgan Stanley, with a team led by vice chairman and global head of M&A Robert Kindler, earned a whopping $43 million. Goldman, Sachs & Co., led by Adam Taetle (who joined Barclays Capital in December 2009 to become co-head of its global consumer group), advised PAS and received $20 million. Fees for Pepsi’s advisers — Effron’s team, Baronoff and his colleagues at BofA Merrill, and Citigroup — were not disclosed, but Freeman & Co. estimates their total at close to $50 million.
2. Antonio Weiss and Team / Lazard
Improvisation in the midst of a fast-changing takeover battle can be critical to the art of deal making. But rarely has a bank had to respond quickly in a crisis the way Lazard did while advising Kraft Foods on its hostile bid for British confectioner Cadbury. Lazard’s legendary leader, Bruce Wasserstein, had overshadowed dozens of other bankers involved in the heated contest. He played a pivotal role in devising takeover strategy and pricing with Kraft CEO Irene Rosenfeld, notably insisting that the company hold off on increasing its offer for as long as possible. Tragically, however, Wasserstein died suddenly at the height of the negotiations after being hospitalized with an irregular heartbeat.
Lazard’s deep bench of seasoned bankers on both sides of the Atlantic stepped in to fill the void. The team included New York–based head of investment banking Antonio Weiss; Lazard’s London CEO, William Rucker; and London-based managing director Peter Kiernan. The trio smoothly navigated the deal’s late stages and ensured that Lazard remained the sole lead financial adviser to Northfield, Illinois–based Kraft.
For the 44-year-old Weiss, whose specialty is cross-border deals, the takeover was unrivaled in its complexity. “It was unprecedented to use that much stock in a cross-border transaction of this sort,” he says. “Stock was 60 percent in the initial approach.” (It subsequently fell to 40 percent.)
Differing regulatory frameworks also made things tricky. Two weeks before Wasserstein’s death on October 14, 2009, Britain’s Panel on Takeovers and Mergers set a November 9 deadline for Kraft’s formal bid. In contrast to the U.S., U.K. takeover rules don’t typically allow any financing contingency. In addition, a buyer cannot retract a formal offer, and British boards are forbidden to deploy so-called poison pills (whereby the target company issues more shares) or sue to stop a takeover. Racing against time, Weiss and his team also had to deal with an unhappy public and sensitive politics.
The results showed the brilliance of their strategy and its flawless execution. On January 19, after almost five months of resistance, Cadbury’s board recommended that shareholders accept Kraft’s final offer. The deal valued Cadbury shares at 840 pence ($13.20), up from the initial offer of 755 pence. That price was 12.9 times 2009 ebitda, less than the 13.6 multiple Kraft paid for Groupe Danone’s biscuit business in 2007 and far below Mars’s 19.3 multiple for its 2008 acquisition of Wm. Wrigley Jr. Co. “The tactics were specifically designed to acquire the company at the lowest possible price,” says Weiss, referring to the deal’s unsolicited nature. “Kraft succeeded by sticking to its initial path.”
3. James Lee Jr. and Team / JPMorgan Chase
The $6.5 billion merger of UAL Corp.’s United Air Lines and Continental Airlines involved some of the biggest names in corporate deal making, but one stood out: James (Jimmy) Lee Jr.
Lee, a vice chairman and veteran financier and merger adviser at JPMorgan Chase & Co., knew the deal inside out — and rightly so, given that he had negotiated an almost identical transaction for UAL chief executive Glenn Tilton in 2008.
Tilton, a fan of consolidation, had started conversations with a handful of fellow airline CEOs back in 2006. Continental looked like the ideal merger partner, and Lee and Tilton negotiated a deal only to have Continental CEO Lawrence Kellner and his board pull out on the eve of the announcement.
In 2009, when Kellner’s successor, Jeffery Smisek, got wind that Tilton — again advised by Lee — was talking to US Airways Group, he called the UAL boss and suggested that the two of them sit down together. Lee says the deal they hammered out is virtually the same as the proposed transaction of 2008.
Lee, 57, ran a heavyweight JPMorgan team that included Thomas Miles, a managing director who left to join Morgan Stanley in July; Christopher Ventresca, co-head of North American M&A; and David Fox, head of Midwestern investment banking. He struck a good deal for Tilton: The owners of United parent UAL would hold 55 percent of the combined company, with Continental shareholders taking the rest. The latter got 1.05 UAL shares in exchange for each one of theirs. The combined entity formed the world’s largest carrier by revenues, leapfrogging Delta Air Lines.
Tilton also took counsel from Goldman Sachs’s Michael Carr, a senior member of the firm’s merger leadership group. Both banks were on par in terms of advice, but JPMorgan enjoyed a deeper relationship because it has long been a lender to UAL. Morgan Stanley M&A chief Robert Kindler worked with Continental alongside Lazard managing director Harry Pinson.
4. Ben Druskin and Team / CitiGroup
For Ben Druskin, Citigroup’s co-head of global technology, media and telecommunications banking, having Dad on the board of a key client company might suggest the possibility of favoritism. But when Druskin and his team brought home $32.5 million in fees from the sale of Affiliated Computer Services (ACS) in February, the gigantic paycheck was solely the result of their tenacity through a tortuous six-year journey to the deal.
The effort that led to ACS’s $8.4 billion takeover by Norwalk, Connecticut–based printer-and-copier giant Xerox Corp. began in 2004 — four years before Druskin’s father, former Citi COO Robert Druskin, joined the ACS board. The relationship between Ben Druskin and business-process outsourcing provider ACS dated to 1997, when the New Jersey native started giving strategic advice to then-CEO Jeffrey Rich. Over the years, Druskin, 42, worked on many deals with Rich and two subsequent ACS chief executives, Mark King and Lynn Blodgett.
Dallas-based ACS’s quest for a buyer started on the wrong foot. The company’s founder, Texas billionaire Darwin Deason, first aimed for a leveraged buyout of the company he launched in 1988, but a potential deal with Blackstone Group and TPG Capital collapsed in 2005 over price differences. Then negotiations with Cerberus Capital Management broke off in late 2007 as markets grew rocky. Later, talks with Kohlberg Kravis Roberts & Co. folded in the catastrophic fall of 2008. Druskin, along with Citi managing directors Eric Levengood and Edward Wehle, served as sole adviser to ACS during these negotiations.
Meanwhile, Xerox had its eye on ACS. Last spring, Xerox asked its long-standing adviser Blackstone to consider possible approaches. In a reflection of today’s complex deal-making landscape, John Studzinski and Christopher Pasko of the private equity firm’s advisory division teamed up with Paul (Chip) Schorr of its buyout unit (who had led the 2005 bid to acquire ACS). They contacted ACS’s Deason about a sale to Xerox; they first proposed that Blackstone co-invest, but an outright acquisition quickly followed.
Druskin represented ACS on price and deal structure, working closely with Blackstone and Douglas Braunstein, then head of investment banking and now CFO at JPMorgan. Those two firms claimed $20 million apiece, according to securities filings. For advising ACS’s special committee, Evercore Partners received $16 million.
5. James Elliott and Team / JPMorgan Chase
When Irving, Texas–based oil supermajor Exxon Mobil Corp. began mulling the purchase of independent gas producer XTO Energy, it turned to one of the energy industry’s most legendary advisers: JPMorgan. The bank’s team, led by global head of M&A James (Jimmy) Elliott, has advised on many energy deals, including Phillips Petroleum Co.’s $25 billion merger with Conoco in 2002 and Burlington Resources’ $37 billion sale to ConocoPhillips Co. in 2006. It also presided over the $86 billion merger of Exxon Corp. and Mobil Corp. that created ExxonMobil in 1999.
Elliott, 58, and team members Douglas Petno, Laurence Whittemore and Jeremy Wilson, were called in to help after XTO approached ExxonMobil in the summer of 2009. The Fort Worth, Texas–based company had been battered by declining natural-gas prices and surging supplies. Recognizing that XTO needed to merge with a big player so it could compete in an increasingly capital-intensive industry, chairman Bob Simpson and board member Jack Randall proposed an acquisition to ExxonMobil.
For Elliott, who cut his teeth doing energy deals in the 1970s at First Boston Corp., the XTO takeover made strong strategic sense. Demand for natural gas is expected to grow 1.8 percent annually through 2030, compared with 0.8 percent for oil. Also, natural-gas prices are at a cyclical low since hitting their peak in 2008. Buying XTO added 45 trillion cubic feet of gas resource base to ExxonMobil’s portfolio, more than half of it in the high-growth shale-gas category.
Elliott and his team helped ExxonMobil smoothly execute the $35.5 billion deal in less than four months. “Jimmy is highly regarded in the energy sector for his superb industry expertise,” attests Stephen Arcano, a partner at law firm Skadden, Arps, Slate, Meagher & Flom who advised XTO. The deal was finalized ten days before Christmas 2009 and completed in June 2010, bringing JPMorgan an estimated $33 million in fees. Securities filings show that XTO’s advisers, Jefferies & Co. and Barclays Capital, each earned $24 million.
6. Ravi Sachdev and Team / Deutsche Bank
When Deutsche Bank signed on as adviser to IMS Health four years ago, the buyout market was red-hot. Through the lean times that followed, Deutsche stuck with IMS, deploying some 20 bankers to the account without a payday. Its reward was a $24 million fee for the first big leveraged buyout after the financial crisis: IMS’s $5.2 billion sale to TPG Capital and the Canada Pension Plan Investment Board.
IMS was one of the accounts brought to Deutsche by Ravi Sachdev when he joined the bank in 2006 from Peter J. Solomon Co., a New York investment banking boutique specializing in mergers and acquisitions in the health care sector. David Carlucci, chairman and recently retired CEO of IMS, had built the company into a market leader and was looking for the next growth opportunity. So in 2007 he hired Deutsche, which for the next two years advised the board on strategic alternatives, including a possible sale or recapitalization.
“In 2007 the credit markets were good and IMS was a natural LBO candidate,” says Sachdev, the lead banker to IMS. “It had strong market share, stability and free cash flow generation, but the credit markets had started to deteriorate, making an LBO challenging.”
Sachdev and his team, which came to include Bruce Evans, head of Americas M&A for Deutsche, met regularly with IMS’s board and management. “IMS deserves a lot of credit because it had a continuous process in place to look at ways of maximizing shareholder value,” says Sachdev, 34. “The secret of the success of the deal was that we, in conjunction with IMS, had already looked at so many alternatives, we were able to quickly take advantage of a change in the credit markets. This company did not suddenly have to determine if a sale transaction was the right alternative.”
Long an admirer of IMS, TPG had garnered sector experience through several deals, including the 2003 acquisition with Bain Capital of Quintiles Transnational Corp., a biotechnology and health care services company. “TPG differentiated themselves from the start with their knowledge of the sector, the speed in which they moved and their comfort in terms of offering the board strong deal protection,” Evans says.
TPG showed its commitment with a $2 billion equity check, and it also brought in GS Mezzanine Partners, which was prepared to underwrite $1 billion of the debt. “A lot of our discussions revolved around the terms of the reverse break fee,” Evans notes.
Reverse break fees, virtually unheard-of before the crisis, are now commonplace, but this was the first time they figured in a big deal. TPG agreed to pay $275 million, almost 10 percent of its total equity commitment, if it failed to follow through on the transaction.
Deutsche’s fee was based entirely on a successful deal and marked the bank’s first payday since it began working with IMS in 2007. “A lot of time and effort went into the relationship,” says Sachdev, who recently moved to JPMorgan. “But it was worth it because the TPG deal was the best possible outcome for shareholders.”
Other banks in on the action included Foros Securities, the boutique launched by Jean Manas, former M&A boss for Deutsche Bank Americas. Manas worked on the IMS account with Sachdev but quit the bank before the deal.
7. Eduardo Mestre, Michael Price and Team / Evercore Partners
When Frontier Communications Corp. asked Evercore Partners to advise it on acquiring some 4.8 million access lines from Verizon Communications, Evercore’s senior team resolved that the $8.6 billion all-stock transaction would not echo previous deal failures in the telecom sector.
Earlier consolidation plays had been beset with integration problems, and the acquiring company had too often been left weakened. Evercore’s Michael Price — a senior managing director and head of the firm’s technology and telecom group — and vice chairman Eduardo Mestre understood the company and the sector well. Mestre, 61, had known Frontier CFO Donald Shassian for more than a decade, having worked with him on the sale of Southern New England Telecommunications Corp. to SBC Communications in 1998.
Stamford, Connecticut–based Frontier was being tracked by an undisclosed third party while it sought a deal with Verizon, so Evercore and co-adviser Citigroup felt extra pressure to maximize value for shareholders. Their strategy called for Verizon to create a separate entity, SpinCo, which held the assets in the 14 states that were subject to the takeover. After clearing SpinCo’s $3 billion of debt, New York–based Verizon spun the entity off to shareholders, and SpinCo immediately merged into Frontier. “One of the hardest aspects of this transaction was to analyze what the combined company would look like when the business we were buying did not exist as a separate entity,” Price says.
Achieving the right capital structure was key to guaranteeing a successful transaction and avoiding the pitfalls of previous deals. Price, 53, says the advisers did this by ensuring that the combined company’s balance sheet would approach investment-grade and that the systems conversions were well understood. To get things right, they reserved the option to delay closing.
“We had the comfort that Frontier was a large company with an experienced management team that had been through acquisitions before,” Price recalls. “The improvement in the dividend payout ratio contributed to the improved financial condition of the enlarged Frontier.”
Evercore kept the senior team of Mestre, Price and managing director Daniel Mendelow on the account; Mestre describes this as a hallmark of his firm. “Overall, this transaction typified the Evercore approach in that we assigned three senior people to the client and they worked through the problem from inception to completion,” he says.
Evercore and Citi each received $18 million, according to Freeman & Co. Freeman estimates that JPMorgan and Barclays Capital, which acted as joint advisers to Verizon, earned a combined $36.8 million.
8. Pawan Tewari and Team / Goldman Sachs
Pawan Tewari is not known as “Bid-’em-up Pawan,” but that’s what he did in advising 3Com Corp. on its $3.2 billion acquisition by Hewlett-Packard Co. The Goldman Sachs technology banker, with George Lee, Ryan Limaye and Colin Ryan, helped push HP to boost its offer three times in less than three months. The final bid of $7.90 per share was 53 percent more than the upper estimate of HP’s initial $5.15 offer. For that, Tewari and his team won $41 million in fees, according to securities filings.
Tewari’s group achieved such stellar value creation for 3Com as a result of its deep understanding of the Marlborough, Massachusetts–based networking provider’s businesses. Based in San Francisco, Tewari has been a key adviser to 3Com for more than a decade. His team counseled the company on its acquisition of U.S. Robotics Corp. in 1996 and its spin-off of Palm in 1999.
Most important, Tewari grasps 3Com’s relationship with Chinese networking giant Huawei Technologies Co. — a key aspect of the HP takeover — better than anybody else. He was lead adviser on all 3Com transactions with Huawei, including a joint venture in 2003, 3Com’s subsequent buyout of Huawei’s stake in 2006 and a failed attempt to take 3Com private by Bain Capital and Huawei in 2008.
With help from Goldman’s Hong Kong team, Tewari stressed 3Com’s strength in China during the negotiations with HP. A tour of 3Com’s R&D facilities in Beijing and its Chinese headquarters in Hangzhou helped persuade the computer maker to boost its offer to $6.75 per share. After further talking up China, where it has a hefty share of the enterprise networking market, and the synergy potential for HP — and after two more price hikes — 3Com agreed to a deal. The final number was almost double 3Com’s share price before HP’s initial offer. Morgan Stanley managing directors Kamal Ahmed and Michael Wyatt advised HP, earning $32.5 million in fees, according to Freeman & Co.
9. Joseph Modisett and Team / Morgan Stanley
Two years ago, Morgan Stanley got its hands dirty defending Mississauga, Ontario–based Biovail Corp. in a proxy fight with its controversial founder. The successful outcome against Eugene Melnyk ensured that the bank would be the pharmaceuticals company’s go-to adviser for its merger with bigger rival Valeant Pharmaceuticals International.
“We were advising Biovail in 2009 when the company started talking to Valeant about possible commercial agreements on certain products,” says Joseph Modisett, 34, a managing director in health care banking at Morgan Stanley. “Those discussions then evolved as the benefits of a merger became clear.”
Morgan Stanley had a strong historical relationship with Biovail chief executive William Wells, who retained the firm shortly after taking charge in 2008. Wells knew he would need a bank with a thorough understanding of the company’s structure if Biovail was to cut a deal with Valeant.
Although Canadian, Biovail was registered in Barbados and enjoyed a corporate tax rate of less than 10 percent, which gave it a competitive edge despite its size. With a market capitalization of $2.3 billion, it was dwarfed by $3.9 billion, Aliso Viejo, California–based Valeant. Biovail had to find a way to structure the deal as a merger of equals, or it would lose its tax status.
Morgan Stanley’s team drew on its years of experience to come up with a plan. Mergers of equals are usually all-stock deals, says Michael Boublik, the bank’s chairman of M&A for the Americas. “But given the disparity in size, we needed to find a way of bringing the two companies together while maintaining a majority ownership position for Biovail shareholders,” he notes.
The solution was to pay those shareholders an appropriate premium and give Valeant shareholders a predeal equalization dividend of $1.3 billion to bridge the market-value gap. This would reduce Valeant’s size and bring Biovail up to the 50 percent threshold needed for a merger.
To avoid any risk of leaks, Boublik and Modisett brought Whitner Marshall, head of North American leveraged finance, onto the deal. Morgan Stanley provided almost half of the required $3 billion in the form of senior secured credit facilities, with the rest coming from Goldman Sachs. The facilities also had to fund repayment of existing Valeant debt.
“The share prices of both companies rose when the deal was announced, which is highly unusual in a merger of equals and demonstrates that shareholders understood the value that was being created,” Boublik says. “The combined company achieved greater scale, diversity, significant synergies and an efficient corporate tax structure.”
The involvement of Morgan Stanley’s leveraged finance arm ensured that the firm earned advisory and financing fees. Its total fee was $21.7 million, according to Freeman & Co. Goldman Sachs, co-adviser to Valeant, earned an estimated $24.5 million for investing as a principal, while Jefferies & Co., another Valeant adviser, scooped up an estimated $15 million.
10. Steve Miller and Team / Bank of America Merrill Lynch
BofA Merrill Lynch’s involvement in the $7.1 billion sale of Sybase to SAP this past May is a lucrative example of how consistency of coverage and personnel pays off in banking.
Steve Miller, co-head of enterprise and communications technology at BofA Merrill Lynch, and Jack MacDonald, who was recently promoted to co-head of Americas M&A, joined Merrill Lynch as part of the same recruitment intake in 1995. Both became members of the technology investment banking group, which built a reputation for persistence, good strategic advice and team stability.
Miller, 41, won the Sybase account nine years ago by cold-calling the Dublin, California–based technology giant. He gained Sybase’s trust through convertible bond deals and his advisory role in the 2006 acquisition of Mobile 365, a mobile messaging provider. In 2005, Merrill signed a formal engagement letter that made it the enterprise and mobile software developer’s adviser of choice. The team and the relationship survived Merrill’s acquisition by BofA in September 2008. “There are seven senior partners in our technology team who have been together for a decade, and that is something that is appreciated by clients,” Miller says.
Sybase and German business software provider SAP were also on familiar terms in the run-up to the transaction. John Chen, CEO of Sybase, and William McDermott, co-CEO of SAP, had a long working relationship before striking a commercial partnership two years ago to extend SAP’s applications to wireless by leveraging Sybase’s mobile platform.
During the first quarter of 2010, the pair discussed a deal. Then in April, McDermott called Chen to tell him that SAP was ready to make a formal offer. Miller and MacDonald, who were lead advisers to Chen along with Harry McMahon, an executive vice chairman of BofA Merrill, formed part of a six-member team that also comprised Michael Altmin, a vice president; David King, a managing director in investment banking; and Xuxia Kuang, an associate.
Sybase rebuffed SAP’s initial offer of $61 a share, as well as an improved $64 offer, forcing SAP to make a third and final bid of $65. “Once we got to $65, the board’s view was to continue along the road with SAP with a view to being able to make a decision as quickly as possible,” Miller says.
Before negotiations entered the home stretch, in the wake of the European sovereign debt crisis, SAP adviser Deutsche Bank came back in May and tried to recut the deal at about $63. “It was a difficult time in the markets,” MacDonald recalls. “The euro was falling off a cliff, so we had to work pretty much round the clock for two weeks to finalize the transaction at $65 a share.” SAP’s attempt to lower the price made sense to Sybase and did not threaten the deal. Financing was in the bag, and Chen and McDermott saw a deal at $65 as the most logical option.
Miller has since stayed on good terms with SAP. After it wrapped the deal, BofA Merrill advised the company on a private placement of $500 million, and the bank still covers SAP on both sides of the Atlantic.
