The trillion-dollar deal boom

One thing to start: Josh Pack, the co-chief executive and managing partner of Fortress Investment Group, has died unexpectedly, aged 51. Fortress described Pack as “a gifted investor” and a “compassionate leader”. No cause of death was given.

And a scoop: BlackRock-owned Global Infrastructure Partners is nearing a $38bn deal to buy utility group AES in what would be one of the largest infrastructure takeovers of all time.

And another thing: Billionaire AlixPartners founder Jay Alix and private equity veteran David Tayeh are teaming up to launch a buyout firm focused on investing in family-owned, mid-sized professional and business services companies.

In today’s newsletter: 

• The Trump M&A boom is back

• The UK investor betting on the high street

• HSBC’s bungled succession

Wall Street’s hot deal summer tops $1tn

Earlier this year dealmakers popped up on the airwaves with predictions of an M&A boom, only to be left with their tails between their legs after Donald Trump’s tariff war.

But financial markets have shrugged off Trump’s destabilising “liberation day” and instead, the US president’s pro-deals agenda of corporate tax cuts, cutting regulation and falling interest rates has got dealmakers excited again. And the numbers support their optimism.

This week’s $55bn leveraged buyout of Electronic Arts was the icing on the cake, capping a third quarter in which M&A activity soared past the $1tn mark.

Other big buyouts this summer included Union Pacific’s $85bn takeover of Norfolk Southern, mining company Anglo American’s $50bn tie-up with Teck and cyber security group Palo Alto Networks’ $25bn acquisition of CyberArk.

In total over the first three quarters, 47 deals were valued at more than $10bn, the highest number since LSEG records began more than four decades ago.

Eric Tokat, co-president at Centerview Partners, was effusive: “The previously unimaginable now seems possible,” he told DD’s Oliver Barnes.

This year, global M&A activity has hit nearly $3.1tn, up 35 per cent on the same period last year. That puts this year on track to be the best 12 months for deals since 2021.

The big winners from the M&A resurgence are investment banks, which have pulled in near-record fees.

In the nine months to the end of September, $95.4bn of investment banking fees were generated, the second-highest year-to-date tally since LSEG records began.

Bank of America is set to earn a record advisory fee of $130mn from its work with Norfolk Southern on the railroad tie-up — provided the deal makes it through a two-year antitrust review.

Spirits are high and there’s a sense that deals beget more deals.

As Latham & Watkins’ Charles Ruck, who advised on the EA, Teck and CyberArk deals, put it: “M&A is infectious: the CEO of company A does a big deal and then the CEO of company B starts thinking maybe I need to do something.”

The distressed investor buying up UK high street stores

The UK’s high street retailers are going through a rough patch and there’s a new distressed investor in town snapping them up. Its methods are raising some eyebrows.

Modella Capital announced its arrival on the high street (or main street for US readers) with the purchase of Hobbycraft, the UK’s largest arts and crafts retailer.

Nine months later came a painful restructuring. There were 18 store closures, more than 100 job losses and the UK taxpayer was left to foot the bill for redundancy costs.

Modella is by no means the first opportunistic investor to pounce upon high street distress, but the pace of its acquisitions has drawn attention.

Just over a year ago, Modella was little more than an empty shell, but it now controls British retailers that together employ more than 10,000 staff and trade from almost 1,000 stores.

Behind the business is Jamie Constable, a distressed investing veteran described by an industry insider as “the money” backing Hay Wain Group, the company that owns Modella.

“Where there’s chaos, there’s opportunity,” Constable said in a recent interview.

By far Modella’s most eye-catching purchase to date is its acquisition of WHSmith’s high street branches earlier this year, after the UK retailer focused its attention on stores in airports, train stations and hospitals.

Modella plans to turn the business, which it has named TG Jones, into a “hub of the high street”, with books, toys, postal and banking services. It comes at a time when bricks and mortar banking services in the UK are in decline.

There’s plenty of scepticism out there about Modella’s intentions. But for one restructuring adviser familiar with the company, it’s the WHSmith deal that will reveal its true colours: is Modella really committed to the high street, or simply looking to “make a quick return and disappear”?

HSBC’s botched succession

Ask any senior banking executive what key objectives they need to achieve and one thing you will almost always hear is “a smooth succession”.

Clients, employees, shareholders and regulators aren’t fond of uncertainty and leaving an important post such as chair or chief executive empty for long can start to cause jitters — not least if you’re Europe’s largest lender.

Tuesday marked HSBC chair Mark Tucker’s last day at the helm of the bank, which is yet to find a permanent successor for the hard-charging executive who has had an unusually hands-on approach to the role.

Brendan Nelson, a former KPMG executive and HSBC board member, is stepping in as interim chair from today but the outcome is less than ideal for the bank. It appears the board has bungled the search for one of the most high-stakes roles in banking.

Part of the problem is that being HSBC chair requires, to quote Liam Neeson, a very particular set of skills.

You need to keep officials happy in China (HSBC makes most of its profits in Asia), the US (as a bank with a dollar-clearing license) and the UK (where the bank is headquartered). That’s no mean feat.

There’s also the issue that HSBC’s succession process has run backwards.

Noel Quinn’s shock retirement as chief executive in April last year meant Tucker oversaw the selection of his third CEO in less than a decade. In the normal course of things, Tucker would’ve been first to leave, allowing the bank to name a new chair who would then go on to find a CEO. Turning that on its head hasn’t worked out well. 

Distracted by settling in HSBC’s new CEO Georges Elhedery and overseeing his sweeping overhaul of the lender, the board has moved slowly on Tucker’s replacement to its detriment.

Job moves

• Spotify has appointed Alex Norström and Gustav Söderström as co-CEOs after co-founder Daniel Ek said he would step down after nearly two decades at the helm. Ek will become executive chair.

• The US Treasury department has named Michael Friedman as chief of staff. He joins from the White House, where he was special assistant to the president for presidential personnel.

• Stellantis has named Joao Laranjo as its new finance chief, replacing Doug Ostermann, who stepped down for “personal reasons” just a year into his role.

• Apollo Global Management has launched Apollo Sports Capital and named sports investor Al Tylis as CEO. Apollo partners Rob Givone and Lee Solomon will be co-portfolio managers and Sam Porter will serve as chief strategy officer.

• Mizuho Emea has appointed Matthew Ponsonby as head of the corporate and investment bank, Emea and president and CEO of Mizuho International. He succeeds Suneel Bakhshi, who will become deputy CEO of Mizuho Financial Group.

Smart reads

Nvidia’s globetrotter Jensen Huang has criss-crossed the world urging countries to build AI ecosystems before they’re left behind — using Nvidia’s chips, of course, the FT writes.

Crypto’s survivor Barry Silbert’s $33bn asset manager Grayscale is nearing an IPO, but first, he’ll need to shake off a string of legal woes, the FT reports.

Golfing drama At this year’s Ryder Cup, the American team captain performed a tribute dance to the president and US fans hurled insults at European players. DD’s Sujeet Indap was there to witness it all.

News round-up

Buffett’s Berkshire Hathaway nears $10bn deal for Occidental’s petrochemical unit (FT)

Elon Musk hit by exodus of senior staff over burnout and politics (FT)

China probes quant trader Tower Research over chip imports (FT)

SEC clears way for ETF share classes in challenge to US mutual funds (FT)

Ovo warns of ‘material uncertainty’ over its going concern status (FT) 

Brussels raids Sanofi in flu vaccine antitrust probe (FT)

Coty explores sale of Max Factor and Rimmel as $12.5bn beauty bet backfires (FT)

First Brands bankruptcy probe examines if invoices were pledged multiple times (FT)