Most bankers say they’re continuing to operate under the assumption that outside of the big four — Amazon.com Inc., Apple Inc., Alphabet Inc. and Facebook Inc. — tech companies can proceed with large deals.
One factor that would likely affect dealmaking is any change to the tax code under Biden. Tina Longfield, managing director and co-head of software at Truist, said some executives could try to push through deals ahead of that.
“There are some CEOs and founders with whom we are engaging who are thinking about capital gains taxes, and as such, have expressed a desire to get liquidity this year with the expectation they will save on tax rate as compared to next year,” Longfield said.
Even if trade tensions with China ease under Biden, the increasingly active role of the Committee on Foreign Investment in the United States in its reviews of deals won’t change, according to M&A lawyer Kenton King, a Skadden Arps Slate Meagher & Flom LLP partner.
That means cross-border deals with China will still suffer.
“I don’t see the CFIUS regime in the Biden administration pulling the brakes back on what we saw from the Trump administration,” King said. “That is here to stay for the foreseeable future.”
Mega Chips
Some of the biggest-ever semiconductor and hardware deals were struck last year. They include: Nvidia Corp.’s $40 billion purchase of Arm Ltd.; Advanced Micro Devices Inc.’s $35 billion acquisition of Xilinx Inc.; and Analog Devices Inc.’s $21 billion deal for Maxim Integrated Products Inc.
All three are still under review. China’s antitrust regulator presents a real risk to getting further deals done, advisers to chip companies said.
Any M&A involving hardware companies in the supply chain usually means there is product and revenue in China. That triggers a regulatory review at China’s State Administration for Market Regulation (SAMR).
Companies could avoid deals even if the industrial logic makes sense to avoid two years of regulatory limbo, King said.
So far this year, one company has used the lengthy China review process to its advantage. With its sale to Cisco Systems Inc. mired in the SAMR review, Acacia Communications Inc. had grown weary of waiting and pulled out of the deal this month.
The result: Cisco added a 64% premium on top of its original July 2019 offer — and saved the deal.
This article was provided by Bloomberg News.