The megarich are dominating U.S. megadeals.
Seven of the 15 U.S. takeover bids worth more than $10 billion since January 2013 were initiated by firms founded and controlled by one of the 200 wealthiest men in the world, according to data compiled by Bloomberg. Last month Facebook Inc.’s Mark Zuckerberg, who has a net worth of $27.1 billion, made a $19 billion offer for messaging service WhatsApp Inc., and this week agreed to buy virtual reality firm Oculus VR Inc. for at least $2 billion.
Controlling shareholders aren’t subject to the same pressures that in recent years have inhibited corporate boards from pulling the trigger on major transactions, said Frank Aquila, a partner at New York-based law firm Sullivan & Cromwell LLP. U.S. companies have done 48 percent fewer large deals compared with 2007, according to data compiled by Bloomberg.
“Even as the economy has strengthened, boards and management have been risk averse,” Aquila said. “The companies that have been willing to take greater risks are those that have a controlling or significant shareholder.”
In some cases stockholders don’t look kindly on those risks. SoftBank Corp.’s stock tumbled 17 percent on Oct. 12, 2012 after the company, controlled by billionaire Masayoshi Son, confirmed that it was in talks with Sprint Corp.
Controlling CEOs tend to ignore such short-term moves, in part because they are less worried about losing their jobs, said Paul Parker, Barclays Plc global head of mergers and acquisitions. The freedom allows them to look for opportunities that may take years to produce results, unlike companies controlled by a diversified base of shareholders, he said.
Dell Strategy
When Michael Dell, worth about $15.4 billion according to the Bloomberg Billionaires Index, took his computer-maker company private last year with Silver Lake Management LLC, he said the strategic changes he wanted would take too long to sit well with public shareholders. Dell owned about 16 percent of the stock.
“Large individual shareholders typically take a meaningfully longer-term perspective, especially if they can buy against a market that is moving in the opposite direction,” Parker said in an interview.
They’re also more willing to take bigger bets because their nest eggs are so large.