Bourse traders pour champagne after the last trading day at Frankfurt’s stock exchangeThomson Reuters
The merger madness continues.
For a second consecutive week, a string of big deals were announced Monday, with GE agreeing to a deal to merge its oil and gas business with Baker Hughes, and CenturyLink announcing a $34 billion deal to buy Level 3 Communications.
US mergers and acquisitions activity in October was already at a record high before these deals were announced, led by AT&T’s giant deal for Time Warner.
In both of the deals announced Monday, it appears that cost cutting will be the order of the day. In the case of GE/Baker Hughes, the deal is expected to generate $1.6 billion in runrate synergies of $1.6 billion by 2020, with GE assigning those savings a net present value of $14 billion.
The CenturyLink deal is expected to generate $975 million in annual run-rate cash synergies.
“Everybody is talking about synergies,” Wall Street CEO Ken Moelis told Business Insider earlier this month. “You’ve got to take out every cost you possibly can. You have to position yourself as your services change.”
The deals represent more good news for Wall Street dealmakers, with seven banks and six law firms winning a role on one of the two deals. Only Morgan Stanley worked across both deals.
On the GE deal, super boutique Centerview Partners is acting as financial adviser to GE, with Morgan Stanley also acting as financial advisor. Shearman & Sterling is GE’s legal adviser. Goldman Sachs is working on the other side of the transaction, with Davis Polk acting as legal advisor to Baker Hughes.
On the CenturyLink deal, Bank of America Merrill Lynch and Morgan Stanley are CenturyLink’s advisors, while Evercore provided a fairness opinion. Watchtell, Lipton, Rosen & Katz, and Jones Walker are the legal advisers. On the other side, Citigroup is financial advisor, and Willkie Farr & Gallagher is legal adviser. Credit Suisse advised ST Telemedia, a shareholder in Level 3, with Latham & Watkins acting as legal adviser.
There could be more dealmaking on the way. Citi’s global head of corporate and investment banking, Ray McGuire, sent a memo to staff saying last week the bank’s M&A pipeline was at an all time high.
“There are a number of significant landmark transactions still in the works, some of which could sign in the next few weeks,” the memo said.
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