British tech giant Arm Holdings yesterday agreed to a £24.3bn takeover by telecoms group Softbank, in a move that would go down as the second largest outbound Japanese deal on record.
Softbank has pounced for the Cambridge-based chip-maker following a sharp drop in the value of the pound, largely prompted by last month’s vote to leave the European Union.
Some commentators said that the deal is also a show of confidence in post-referendum UK, although much of Arm’s business is conducted abroad and its revenues are largely earned in dollars.
As the third largest global merger or acquisition (M&A) announced so far this year, the mega-deal will provide a windfall for some leading City businesses including Goldman Sachs, Lazard, UBS, Barclays, and boutique outfit Robey Warshaw.
The banks are set for a $120m bumper payday according to estimates calculated by Thomson Reuters and Freeman Consulting yesterday.
Market data experts at Dealogic said that the capture of Arm would be the biggest UK technology deal of all time.
“Softbank is paying over 25 per cent less in yen terms compared to over a year ago to acquire this crown jewel of the UK, and indeed global, intellectual property,” said John Haynes of Investec Wealth & Investment.
“The devaluation of sterling will continue to provide interesting investment opportunities for overseas investors to buy UK assets, including central London property, at a discount.”
City bankers and analysts are expecting an M&A boost from sterling’s drop.
“There’s a spectrum of M&A that’s on the table at any one point in time,” said Richard Windsor of Edison Investment Research. “And the price of a transaction is a big cut-off point. If you move the price of that transaction 10 per cent to the left, then obviously more deals become viable.”
Top Bank of America Merrill Lynch exec Simon Mackenzie-Smith concurred: “This is likely to produce more M&A interest from buyers who have a positive, long-term approach that looks beyond the current political situation in the UK. We’re cautiously optimistic that there will be more activity over the next quarter as a result of this currency shift than there otherwise would have been post the referendum vote.”
BEHIND THE DEAL
Representatives from the boutique investment bank, founded by Simon Robey and Simon Warshaw, have become a common fixture at the top table of some of the world’s biggest mergers and acquisitions.
Robey’s football team, Arsenal, may be struggling to land big-money deals during the transfer window, but the former Morgan Stanley banker is having no such problem, teaming up with Softbank as it bids to capture Arm Holdings for £24bn.
Robey Warshaw is also working on the proposed merger between the London Stock Exchange and Deutsche Boerse. In recent times the bank has also worked on Shell’s £36bn takeover of BG, the “mega-brew” tie-up between SABMiller and AB InBev, and Aviva’s deal with Friends Life.
The British side of the deal is represented by bigger financial beasts, with Goldman Sachs and Lazard the lead advisers to Arm. Top Goldman banker Anthony Gutman, who recently gave evidence to MPs over the controversial sale of retail giant BHS, is heading up his team, while UBS is financial adviser and joint corporate broker with Barclays. Law firms on the deal include Freshfields Bruckhaus Deringer and Slaughter and May.