Is M&A back?

Rob Armstrong (0:08)

Pushkin, it's a new dawn for Wall Street. There's a new presidential administration, and with it comes a new regime of regulators. And mergers are back, or possibly not. This is Unhedged, the markets and finance podcast from the Financial Times in Pushkin. I am Rob Armstrong, coming to you from Unhedged World Headquarters in beautiful and chilly New York City. And I am joined by James Fontanella-Khan, the FT's US. Deals editor.

James Fontanella-Khan (0:48)

Hi, Rob.

Rob Armstrong (0:49)

Man, it's been a long time since we had anything resembling a merger Monday. You're a Deals reporter. Have you just been like sitting at your desk waiting for the phone to ring for two years?

James Fontanella-Khan (0:59)

No, that's obviously not true. We're a small team, so there's always plenty to do for us. But it has been a wild week. There's been a lot of Deals going on, that's for sure. And a lot of people have exactly the same question that you have. Are we going to see a wave of deal making? Are animal spirits back? Is this kind of Reagan era madness?

Rob Armstrong (1:24)

Let's start by talking about the individual Deals we have seen. And then we can go into the question of what is driving this apparent inflection point for deal activity. Omnicom Interpublic, like the two biggest ad firms...

James Fontanella-Khan (1:41)

In America.

Rob Armstrong (1:41)

In America coming together. What do you make of that?

James Fontanella-Khan (1:45)

So that's a great example. A deal which probably should have happened a while ago. These guys are dealing essentially with the rise of AI and how a lot of their clients are now using AI to do their own marketing campaigns. So they come together, they can essentially cut a ton of costs.

Rob Armstrong (2:04)

But it's not just AI, is it? It's the competition from tech that's been happening for years now that the ad market is increasingly...

James Fontanella-Khan (2:13)

So that was the first wave. All that advertising has been concentrated on essentially two platforms or three. And so they've lost an app, but AI has made it even harder because the actual clients they run the campaigns for don't really need them because they can go online.

Rob Armstrong (2:29)

Wip up something. Yeah, really quick. It's interesting. I remember, this was probably 15 years ago, I was talking to the CFO at one of these huge global advertising firms and I said, what's your basic strategy? And he said, we get a big client and we just buy every other ad firm that serves that client. So you get a Coca-Cola or a Ford account or whoever, and you just make sure that whoever is making ads for them, you buy that company. So you basically surround the client, so you become impossible to fire.

James Fontanella-Khan (2:59)

You see why we've had a very progressive antitrust environment of late? Because that is precisely the kind of stuff that is wrong.

Rob Armstrong (3:05)

Yeah, exactly.

James Fontanella-Khan (3:07)

I'd call that anti-competitive.

Rob Armstrong (3:08)

Yeah. Now, I will emphasize that this was many, at least 15 years ago that I had this conversation, it was probably off the record and if I've released anything secret, I apologize deeply to the advertising industry. So anyway, they're doing it.

James Fontanella-Khan (3:21)

Yeah. It's a $13 billion deal. It's an old stock deal, which is interesting because it reduces the risk.

Rob Armstrong (3:27)

Right.

James Fontanella-Khan (3:27)

And it'll be interesting to see actually if it does get approved by the regulators.

Rob Armstrong (3:32)

We'll move to the regulatory environment in a second. Now, we've also had a deal in paper. We have. I don't know if it's exactly paper, packaging. Okay. Another industry that's under pressure, I mean, that industry is always, and it's just a hard industry. It's a commodity industry, and it's difficult. So that's a big deal.

James Fontanella-Khan (3:49)

What else have we seen? That was a $7 billion deal, and then we had a private equity firm selling a insurance brokerage business for another 13, 14 billion. Let me check my data here. Yeah, 13 and a half. Again, that's kind of, in one day we had $35 billion worth of deals. There were other smaller ones. And yeah, there's a sign that kind of people are keen to do stuff.

Rob Armstrong (4:15)

Yes. Well, there is one deal announced this week that is kind of ironic in this environment, which is the possibility of Walgreen. It wasn't announced, it hasn't happened yet, but there's a possibility that Walgreen is...

James Fontanella-Khan (4:25)

They're in advance talks.

Rob Armstrong (4:27)