Dealmaking is showing signs of life, but it comes with some downsides
- This post originally appeared in the Insider Today newsletter.
Almost Friday! We're fully functional at Insider Today, unlike a popular AI chatbot that recently went off the rails. Consider that a win for the humans.
In today's big story, we're looking at why M&A could be staging a comeback and which bankers made the most of 2023.
What's on deck:
Markets: Nvidia's stock price skyrockets after a blowout earnings report shows a surge in demand for its AI chips.
Tech: Rivian workers have been waiting all night to find out whether they've been laid off.
Business: There's a way to fix dining out, but you're probably not going to like it.
But first, let's make a deal.
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The big story
Dealmaker's delight
Three monster deals announced in less than a week has Wall Street wondering: Is M&A back?
The deals market was one of the biggest casualties of the Federal Reserve raising interest rates in a bid to clamp down on inflation. (Real estate would also like a word.)
But after a dreadful 2022 and 2023, dealmaking is showing signs of life, Business Insider's Theron Mohamed writes. Capital One, Truist, and Walmart announced acquisitions totaling $53 billion this week, leaving bankers hopeful the good times (and fees) are back.
M&A's comeback isn't just a 2024 phenomenon. As bad as last year was — and it was bad, with global deal value dropping to a 10-year low — there were signs of hope.
The FTC's failure to stop Microsoft's $69 billion bid for Activision Blizzard proved that the Biden administration's pledge to crack down on corporate dealmaking was more bark than bite. A few months later, ExxonMobil and Cisco announced big-ticket deals of their own.
BI's Alex Morrell and Reed Alexander have a breakdown of the 20 bankers who topped the M&A charts last year amid a difficult market.
Dealmaking's return isn't just about lining bankers' pockets with advisory fees. Deals represent an exit opportunity for companies, giving their investors (some of whom are employees) a chance to cash out.
The M&A drought has delayed that process, forcing companies and their workers into a holding pattern as they wait for an escape plan to materialize. M&A ramping up means the wider landscape might shift.
But dealmaking's return isn't good news for everyone.
Show me a deal, and I'll show you the synergies (see: layoffs). Acquisitions tend to create redundancies, and companies are quick to address them. The ink was barely dry on Microsoft's takeover of Activision Blizzard before heads started to roll.
Unfortunately, it's an approach that's not going away anytime soon. As BI's Emily Stewart writes, Wall Street loves layoffs these days. Companies can't stop talking about their plans to reduce head counts, and investors are egging them on.
The latest layoff love affair isn't surprising when you consider how well it's working for those on top. Big Tech embraced job cuts last year as part of its push for efficiency, and it's paid off (at least for companies' bottom lines).
So yes, your employer might get acquired. But don't bank on getting acquired with it.
3 things in markets
Nvidia's latest problem is a good one to have. Demand for the semiconductor giant's AI chips is so high that CEO Jensen Huang has had to give assurance that it's allocating them "fairly". He made those comments on a call with analysts after Nvidia posted a blowout quarterly earnings report.
Signs of trouble in the bond market. ING Economics highlighted how correlated US Treasury yields and Bund yields in Europe are. When those two are in tandem, it's a sign the US could be headed towards a recession since European central bankers will look to cut interest rates quickly if the US tips into a downturn, ING said.
Here's what hedge funds are betting on. Amazon and Microsoft are two of the 10 most commonly held stocks by hedge funds, according to regulatory filings analyzed by Goldman Sachs. But funds might be falling out of love with the Magnificent 7, as data also shows them trimming their exposure to Big Tech.
3 things in tech
Rivian left its workers in limbo. The EV maker announced plans to lay off 10% of its salaried staff yesterday — but employees have had to wait until this morning to find out whether they're impacted, per a copy of an email obtained by BI. It's the third time Rivian has cut its head count in the past two years.
Music labels are still suing internet companies over illegal downloads, which is bad news for the AI industry. Lawsuits about digital piracy are playing out years after the debate hit its peak in the early 2000s. It's a reminder the current legal fights about intellectual property and generative AI could last a very, very long time.
Google employees are roasting the company's several AI models and names. Google has launched — or renamed — several different AI models, and even employees are getting confused. Googlers have begun posting internal memes poking fun at the company's iterations.
3 things in business
You might be killing your favorite restaurant. It's not just you: Dining out has been worse lately. Facing a labor shortage, restaurants can be slow and disorganized. In order to survive, these businesses need to evolve — but change-averse diners could make it even harder to do.
Amazon and Walmart's points-based attendance system is giving them legal headaches. In three recently filed lawsuits, fired workers accuse the companies of violating their employment rights by terminating them after they took legally protected time for sick, medical, or pregnancy-related leave.
Walgreens-backed VillageMD is shutting down all its clinics in Florida. The primary care company confirmed to BI on Wednesday that it's closing over 50 locations in the Sunshine State. Walgreens, which holds a majority stake in VillageMD, is trying to cut spending by at least $1 billion, as the pharmacy giant's healthcare business struggles to turn a profit to compete with CVS.
In other news
This chart shows why the new sports streamer is going to cost $50.
Parents who want to buy a house this year are pretty much screwed.
America isn't building enough homes. A new map may fix that.
Citigroup just boosted its CEO's pay to $26 million even as it plans to slash thousands of jobs.
What's happening today
Today's earnings: Intuit, Nestle, Square, and other companies are reporting.
The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Hallam Bullock, editor, in London. Jordan Parker Erb, editor, in New York. George Glover, reporter, in London.