Mark Kleinman: Trump tariffs spell doomsday for dealmakers
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly CityAM column
Trump tariffs spell doomsday for dealmakers
Shock and awful. The primary consequences of President Donald Trump’s global tariffs blitz are becoming clearer by the day: inflation, a looming recession and a sweeping international protectionism which could take years, if not decades, to unravel.
Jamie Dimon, the chairman and CEO of JP Morgan, and Larry Fink, his counterpart at BlackRock, were among those queuing up to denounce the policy (as opposed to its architect), with the former saying in his annual letter to shareholders: “Whatever you think of the legitimate reasons for the newly announced tariffs – and, of course, there are some – or the long-term effect, good or bad, there are likely to be important short-term effects.
“We are likely to see inflationary outcomes, not only on imported goods but on domestic prices, as input costs rise and demand increases on domestic products.”
“Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth,” he wrote.
Fink, meanwhile, suggested that many of the CEOs he spoke to believed the US was already in recession.
The second-order consequences of Trump’s decision to rip up the fabric which has held global trading relationships together for decades will in some cases be conspicuous by their absence.
Plunging stock prices, of course, equate to opportunistic takeover targets, and bankers are now scrambling to pick over the wreckage of a year which already looked anaemic in terms of deal volumes to salvage something from it. The London stock market will continue to look ripe for such raids.
Senior bankers I’ve spoken to this week suggested, though, that the corporate strategy implications of Trump’s move will pose a far darker outlook for dealmakers.
Companies which were looking to grow in the US through acquisitions are now pausing those plans, with many now instead looking at other geographies for expansion opportunities. Similarly, the bid-ask spread in many deal discussions has widened significantly again in the last week, according to people close to multiple sets of talks.
Bill Ackman, the prominent US investor, has warned of a “nuclear economic winter” caused by the tariff war. Bankers know they’ll be among the first to catch a chill.
Roadside Real Estate’s £250m takeover is left in the garage
Intriguing news reaches me about Roadside Real Estate, an AIM-listed group with a market capitalisation of just over £40m.
According to well-placed sources, the company, which has pivoted from the definitively in adjacent area of sleep-related technology, has been plotting the acquisition of SGN Retail, Britain’s fourth-largest independent petrol forecourt operator.
Trading from more than 100 sites under brands including BP, Shell and Texaco, the exact price Roadside Real Estate was in talks to pay for SGN was unclear, although insiders say it would have been “several hundred million pounds”.
One said Roadside was working with bankers on plans to raise up to £250m in equity, with the balance of the purchase price to be funded by debt and stock issued to SGN’s existing shareholders.
As part of the deal, Roadside planned to switch its listing from AIM to the main market of the London Stock Exchange.
Insiders say an announcement was scheduled to take place by the end of March, with the publication of a prospectus in May and the admission to trading of the new shares later next month, but that talks with the seller broke down during price negotiations.
With the much larger EG Group sizing up a prospective US initial public offering, persistent rumours around the future of some oil majors’ downstream operations, and Motor Fuel Group’s owners weighing the sale of a minority stake, the sector is awash with corporate activity. Whether a New York flotation will fly in the next 12 months given the market turmoil triggered by Donald Trump’s tariffmania is, of course, highly debatable. Nevertheless, don’t be surprised if Roadside returns to the pump for another tilt at SGN.
Glut of accountancy sector deals is rare bright spot for City bankers
Whisper it quietly, but the seemingly mundane world of professional services has suddenly become the hottest target for private capital – in Britain and elsewhere. With Interpath readying itself for a sale, MHA about to make its debut on the London stock market (if its fundraising target is met) and Teneo also holding exploratory talks with new investors, the wave of activity has become a deluge.
Grant Thornton has been the most prominent UK target so far, with Cinven buying a majority stake in its UK firm several months ago. Sources say the private equity firm is now working hard to trim Grant Thornton UK’s cost base.
AlixPartners’ name also features on the list of prospective professional services deals. Its founder, Jay Alix, is said to be seeking a valuation of at least $5bn in a transaction which will see its existing minority investors swapped out for new backers. The current external shareholders – Canadian pension funds CDPQ and PSP Investments, and private equity firm Investcorp – have been investors since 2016, when they replaced CVC Capital Partners in a deal valuing the firm at $2.5bn.
The reported $5bn value target feels punchy, though, implying a forward earnings multiple of close to 20 times. Recent deals in professional services have invariably been priced below that level, and in an era of uncertainty like the one gripping public and private markets now, paying a premium seems unlikely.