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Capital Markets

The Art Of The (No) Deal: Identifying The Drivers Of Canceled M&A Deals

5-Year Virtual Multichannel Revenue Forecast Underscores Segment's Opportunities

Wake Up Savers, Watch Out Banks - CDs Back In Vogue - Episode 25

Financial Consumer Watchdog's Powerful Investigative Tool Faces Overhaul - Episode 26

SNL Banker


The Art Of The (No) Deal: Identifying The Drivers Of Canceled M&A Deals

Globally, almost 54,000 merger and acquisition (“M&A”) deals with a total value of $4.1 trillion were announced in 2017. While investors generally expect announced deals to close, not all do. Terminated deals impact capital market participants in various ways. Predicting deals that are likely to be canceled is of interest to both M&A advisers and equity investors. Certain drivers influence whether a deal is likely to be canceled:

  • Size: The larger the size of the target (acquirer), the more difficult (easier) it is for the acquirer to finance the deal.
  • Deal Proportionality (deal size to acquirer’s market cap): Deals with large proportionality ratios (“mergers of equals”), can be difficult to manage (who leads the combined entity, board membership constitution, etc.), leading to a higher cancelation risk for these type of transactions.
  • Perceived Price Discount: Shareholders of targets with stock prices well off their 52-week highs often believe their positions are worth more than the offer price, and existing management usually encourage this point of view.
  • CEO Age: Deals where the acquirer CEO is a young male have a higher risk of being terminated than deals involving older CEOs, as younger male CEOs can be less diplomatic, more combative, and less willing to concede in negotiations.
  • Regulatory Risk: Deals where both the target and acquirer account for a large share of total industry assets have a higher risk of being terminated (antitrust concerns) than deals where this is not the case.
  • A model comprised of four drivers forecasts the rate of M&A cancelations at twice the level (26%) of the M&A universe (13%).

The Art Of The (No) Deal: Identifying The Drivers Of Canceled M&A Deals

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5-Year Virtual Multichannel Revenue Forecast Underscores Segment's Opportunities

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Jul. 18 2018 — Driven by subscriber gains from AT&T Inc.'s DIRECTV NOW and DISH Network Corp.'s Sling TV and assisted by a batch of new arrivals in 2017 that includes Hulu LLC's Hulu with Live TV and Alphabet Inc.'s YouTube TV, Kagan estimates virtual multichannel services will reach nearly $2.82 billion in overall revenue in 2018, rising to more than $7.77 billion by 2022.

The large gains we project reflect the relative fledgling status of a market that is positioned to take advantage of widespread internet access by presenting new, alternative choices to traditional multichannel operators.

While the growth of virtual services is expected to dampen the projected decline in customers with some form of live linear channel package, we project the shift to have significant revenue implications for the market due to markedly lower average revenue per user rates associated with the new services.

Future developments could impair the segment over the five-year outlook. For instance, legacy distributors could revisit skinny bundles at competitive price points and leverage their existing customer relationships to undercut virtual providers.

Of note, traditional multichannel operators also providing wireline broadband have additional leverage with broadband bundles. For this category of ISPs, broadband could also be leveraged through the creation of prioritization lanes given the FCC's net neutrality reversal.

Recent M&A activity also clouds the future, led by the pursuit of key 21st Century Fox Inc. assets by Walt Disney Co. and Comcast Corp.

Disney has been quite transparent about the rationale behind the move. The media juggernaut plans to launch direct-to-consumer services leveraging its vast content libraries, including some of the world's most valuable franchises such as Marvel and Star Wars.

Although Comcast is playing its strategy cards closer to the vest, its pursuit of Sky PLC and 21st Century Fox, combined with the company's foray into wireless telecommunications, intimate wide-scale video-streaming plans.

FOX Could Reap Substantial Rewards For 2026 World Cup

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WatchTV's $15 Price Tag Outpaces Programming Costs Per Subscriber

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Listen: Wake Up Savers, Watch Out Banks - CDs Back In Vogue - Episode 25

Jul. 17 2018 — CD specials are back. More banks are offering the promotional rates on CDs, or certificates of deposits, to attract new customers. While that is good news for savers, it means funding costs likely will rise even more for banks. The episode shines a light on recent CD rates offered by banks and features commentary on smart deposit strategies from Bruce Hinkle of StoneCastle Cash Management and KeyCorp CFO Donald Kimble.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).


Listen: Financial Consumer Watchdog's Powerful Investigative Tool Faces Overhaul - Episode 26

Jul. 17 2018 — Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, has changed the way the agency operates and reduced enforcement actions against banks. Now, Mulvaney is turning his attention to a powerful tool used by the agency called the civil investigative demand. S&P Global Market Intelligence colleague Brian Cheung discusses how the CFPB uses the tool and what changes could mean for banks and consumers.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).


Watch: SNL Banker

Jul. 10 2018 — Transform internal data into vital insight with SNL Banker from S&P Global Market Intelligence. Our solution integrates seamlessly with internal systems to give U.S. community banks and credit unions greater visibility into finances and operations