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The Future of M&A:How will deals change as COVID continues?

September 24, 2020

Speakers:

Joe Mantone, News Desk ManagerNathan Stovall, Principal Analyst, Financial Institutions ResearchScott Denne, Senior Analyst, 451 Research

Lawrence Choy, Director, Corporates Product Management

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Today’s Speakers

Joe MantoneNews Desk ManagerS&P Global Market Intelligence

Nathan StovallPrincipal Analyst, FinancialInstitutions ResearchS&P Global Market Intelligence

Scott DenneSenior Analyst, 451 ResearchS&P Global Market Intelligence

Lawrence ChoyDirector, Corporates Product ManagementS&P Global Market Intelligence



Agenda

• M&A data insights from our deep transactions coverage

• Views from the challenged Banking sector

• Areas of opportunities in the Technology space

• Perspectives on the changing M&A landscape

5Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence.


POLLING QUESTIONOn a year-over-year basis, is the total announced value of third-quarter U.S. M&A deals: a) Upb) Down c) Relatively Flat


The 2020 M&A Landscape

Joe MantoneNews Desk ManagerS&P Global Market Intelligence


M&A volumes pick up in Q3

Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. 8


Good quarter for big M&A deals


Pending, completed transactions announced with a value of at least $10B for U.S. targets

Data compiled Sept. 18, 2020. Excludes terminated dealsSource: S&P Global Market Intelligence


Healthcare, TMT seeing the biggest deals



TMT’s deal value blip



Healthcare total value rebounding better than number of deals



Stimulus slows deal terminations



POLLING QUESTIONWhich U.S. financial institutions subsector has produced the great decline in M&A activity in 2020?

a) Banking b) Insurancec) Financial Services d) Fintech


Challenging Times: M&A in the Banking SectorNathan StovallPrincipal Analyst, Financial Institutions ResearchS&P Global Market Intelligence


US M&A deals since Q3'18 – Financials

16

Data compiled Sept. 4, 2020.Analysis includes U.S. financials sector M&A deals publicly announced between July 1, 2018, and Sept. 3, 2020. Excludes terminated deals.Transaction value is as of announcement date. Deal value used when transaction value is not available.Transaction value = deal value paid for equity, plus the value of any assumed long-term debts.Source: S&P Global Market Intelligence© 2020. S&P Global Market Intelligence. All rights reserved.


40.2

23.3

149.

9

42.7

22.2

56.5

44.9

6.8

27.3

482531

492455 474

432 418

301269

0

100

200

300

400

500

600

0

25

50

75

100

125

150

175

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2018 2019 2020

Num

ber o

f tra

nsac

tions

Aggr

egat

e tra

nsac

tion

valu

e

Aggregate transaction value ($B) Number of transactions


Valuations have diverged across the financial institutions sector

17

Source: S&P Global Market Intelligence© 2020. S&P Global Market Intelligence. All rights reserved.



US M&A deals since Q3'18 – Financials by subsectors

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Analysis includes U.S. banking, insurance, financial services and fintech sector M&A deals publicly announced between Jan. 1, 2020, and Sept. 3, 2020. Excludes terminated deals.Transaction value is as of announcement date. Deal value used when transaction value is not available. Transaction value = deal value paid for equity, plus the value of any assumed long-term debts.Source: S&P Global Market Intelligence© 2020. S&P Global Market Intelligence. All rights reserved.


6.5

2.8

24.8

21.6

0.1

1.5

1.2

3.5

0.9

4.4

0.7

21.0

43

168

62

37

10

108

76

33

18

92 94

27

0

20

40

60

80

100

120

140

160

180

0

25

Bank Insurance FinancialServices

Fintech Bank Insurance FinancialServices

Fintech Bank Insurance FinancialServices

Fintech

Q1'20 Q2'20 Q3'20

Num

ber o

f tra

nsac

tions

Aggr

egat

e tra

nsac

tion

valu

e ($

B)

Aggregate transaction value ($B) Number of transactions


Just nine bank deals announced in Q2’20 amid economic uncertainty

19

Data compiled Sept. 4, 2020. Includes U.S.-based whole company and minority stake bank and thrift deals that were announced between July 1, 2016 and Aug. 31, 2020. Analysis includes thrift merger conversions, but excludes branch, government-assisted and terminated deals. * Quarter-to-date through Aug. 31, 2020.Deal values are as of the deal announcement date. Source: S&P Global Market Intelligence Data Journalism Team.


0

10

20

30

40

50

60

70

80

90

0

5

10

15

20

25

30

35

40

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3*

2016 2017 2018 2019 2020

Num

ber o

f dea

ls

Tota

l dea

l val

ue

Total deal value ($B) Number of deals


Loan deferrals have declined notably in recent months

7.21

9.68

5.12

48.73

58.91

35.16

Early June2020

Q2'20

Late summer2020

Modified Texas ratio Deferrals/loans, excluding PPP

Permission to reprint or distribute any content from this presentation requires the prior written approval of S&P Global Market Intelligence. Copyright © 2020 by S&P Global Market Intelligence. All rights reserved

Modified Texas ratio, COVID-19 deferrals across the banking industry (%)

Data compiled Sept. 23, 2020. PPP = Paycheck Protection ProgramModified Texas ratio = Loans deferrals plus nonperforming assets plus loans 90 days or more past due/ tangible common equity plus loan loss reserves. Loans, including PPP loans, nonperforming assets, loans 90 days or more past due, tangible common equity and loan loss reserves based on the most recent quarter's data.Balance sheet metrics used for the analysis in early June were based on first-quarter data, which did not include PPP loans. Balance sheet metrics used in the analysis for Q2'20 and late summer 2020 are based on second-quarter data. Analysis based on disclosures of publicly-traded banks compiled from sell-side research reports and public filings. The median disclosure date for the 80 banks driving the late summer 2020 analysis was Aug. 31, 2020. The analysis for Q2'20 was based on disclosures from 387 publicly traded banks. The analysis for early June 2020 was based on disclosures from 150 publicly traded banks as of June 8.Sources: S&P Global Market Intelligence; Raymond James; Piper Sandler; Stephens; Janney Montgomery Scott; Hovde; Compass Point Research & Trading; Keefe Bruyette & Woods; proprietary estimates


Stimulus, forbearance soften the economic blow but cloud the outlook

• Congress passes $3 trillion stimulus package, supporting unemployment insurance, small business lending.

• Fed has nearly doubled its balance sheet, launching virtually every program from 2007-2009 and many new lending facilities.

• Unprecedented forbearance, Paycheck Protection Program, stimulus have propped up consumers, businesses but support is waning.

• As relief ends, economies continue to open, companies will gain greater comfort over asset values, prospects for future growth, helping restart M&A activity.

21

Data compiled Sept. 15, 2020. Source: S&P Global Market Intelligence,

.



POLLING QUESTIONHow do you think overall tech M&A spending in 2020 will compare to 2019?

a) Down more than 25%b) Down 1-25%c) Flatd) Up 1-25%e) Up more than 25%


Areas of Opportunity: M&A in the Tech SpaceScott DenneSenior Analyst, 451 ResearchS&P Global Market Intelligence

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Tech M&A

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Source: 451 Research’s M&A KnowledgeBaseRetrieved on 9/1/20

$180 $234 $193 $248 $393 $578 $469 $348 $589 $475 $362

3300

3812 36823326

4014

44714088

3592 3751 3716 3584

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

$

$100

$200

$300

$400

$500

$600

$700

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(projected)

Annual worldwide tech deal flow

Total deal value ($bn) Total volume



Tech M&A

25


$

$10

$20

$30

$40

$50

$60

$70

$80

$90

Jan-1

8

Feb-1

8

Mar-18

Apr-18

May-18

Jun-1

8Ju

l-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-1

9

Feb-1

9

Mar-19

Apr-19

May-19

Jun-1

9Ju

l-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-2

0

Feb-2

0

Mar-20

Apr-20

May-20

Jun-2

0Ju

l-20

Aug-20

Monthly worldwide tech deal flow

Total deal value ($bn)



Rising valuations in tech M&A market

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3.4 3.1 3.7 2.7 3.6 3.2 3.4 3.7 4.0 4.5 5.4 4.1 9.6

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (YTD) 2020 (Jan.-Mar.)

2020 (Apr.-Aug.)

Median valuation for tech acquisitions worth $1bn or more

enterprise value/ TTM revenue



Notable tech deals since April

Source: 451 Research’s M&A KnowledgeBase and S&P Global Market Intelligence’s Capital IQRetrieved on 9/9/20* EV/ LQA revenue; all others EV/ TTM revenue

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Acquirer Target Deal value% paid in

stock price/rev.

Teladoc Livingo $18.5bn 90% 88x

Just Eat Takeaway Grubhub $7.1bn 100% 5x

Uber Technologies Postmates $2.6bn 100% 6x*

Zynga Peak Games $1.8bn 50% 3x*

Fastly Signal Sciences $775m 74% 31x

dMY Technology Group Rush Street Gaming $1.5bn 100% 24x

FinTech Acquisition Corp. III Paya $1.3bn 46% 6x



COVID-19’s impact on technology spending

Source: 451 Research’s Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey, June 2020Retrieved on 9/8/20

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4%

3%

6%

4%

6%

7%

11%

16%

20%

21%

24%

28%

29%

30%

45%

50%

42%

48%

41%

49%

38%

46%

11%

4%

16%

9%

9%

16%

11%

7%

8%

52%

42%

21%

30%

21%

16%

13%

20%

12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

IoT projects

Adopting open source software

Data analytics projects

Adopting cloud native software development practices

Migration of workloads to cloud

Overall digital transformation initiatives

Automation of business processes

Shift to digital delivery of customer experience

New information security tools/practices

Newly introduced Accelerated Continuing on original timeline Delayed Canceled Not in plan

Q. For each of the following types of technology initiatives, please indicate how they were affected at your organization by coronavirus, if at all.


Q&A

Please take the post-event survey!

29


Lawrence ChoyDirector, Corporates Product [email protected]

Joe MantoneNews Desk [email protected]

Nathan StovallPrincipal Analyst, Financial Institutions [email protected]

Scott DenneSenior Analyst, 451 [email protected]

Thank you for joining us.Contact our team 24x7x365 with [email protected]

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+852 2533 3565(Asia-Pacific)

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