TheChek News Flow

While deals globally are drying up, one sector went ahead — and even paid full prices

Fear is powerful motivator. Lately, anxiety over tariffs and general global disarray has discouraged would-be buyers of companies from taking the plunge. But for some, the fear of not doing a deal can be worse.

Amid President Trump’s capricious trade policy, the number of deals signed globally in April fell to the lowest in at least 20 years, according to Dealogic data. Bankers the world over are bemoaning the withering of their carefully-tended M&A pipelines. 

Yet one group ploughed ahead: private equity. In the US, leveraged buyouts led by these well-upholstered firms totalled $46bn last month. That’s a 25 per cent increase compared with April last year and almost twice the three-year monthly average.

It is helpful that the sectors private equity likes, such as tech and healthcare, are relatively shielded from trade tensions. Some of April’s largest transactions were in this space, from Thoma Bravo’s $10.5bn acquisition of Boeing’s software business to Silver Lake’s purchase of a majority stake in Intel’s Altera for $4.5bn.

The other reason for private equity’s undiminished appetite is that it is sitting on a lot of cash. Globally, dry powder — capital which has been raised to fund deals but has not yet found a home — was $1.2tn at the end of 2024, according to Bain & Co. Of this, almost a quarter has been sitting around for at least four years. Given the average lifespan of a private equity fund is about a decade, and investments are typically held for five to seven years, use-it-or-lose-it time is rapidly approaching. 

With a lot of cash to throw around, private equity buyers not only went ahead with planned deals. They paid full prices, too. At Boeing, proceeds from the software disposal were well ahead of the $6-$7bn that Barclays analysts were expecting. The majority stake in Altera went for 5.7 times trailing revenue — about 2.5 times what Intel itself trades on. 

Of course, wanting to do deals during market ructions and pulling them off are two quite different things. And it does seem that some financing sources — such as the high-yield bond market — were temporarily frozen amid the uncertainty.

But banks didn’t completely shut up shop. And private credit funds marched on unfazed. Apollo and Blackstone led Thoma Bravo’s $4bn financing. In Europe, in an admittedly thin market, private credit provided financing to twice as many LBOs as the broadly syndicated market did in April, according to PitchBook LCD data.

There is one itch this does not scratch. Private equity firms also seek a way out of the assets they already own. And it doesn’t add up to anything like the deal flow that investment bankers were hoping for. But it does suggest that in the perpetual tug of war between greed and fear, the fear of losing out may prevail.

Altice creditors brace for next showdown with Patrick Drahi

Analysts and investors believe restructuring of international business could be more aggressive than French unit

Altice bondholders have formed an alliance to bolster their position ahead of the next round of restructuring of Patrick Drahi’s heavily indebted telecoms empire, just two months after the billionaire struck a €24bn deal with creditors of his French business.

Investment firms holding about 85 per cent of the €8.2bn of top-ranking debt at Altice International have signed a co-operation agreement to prevent creditors from being picked off through side deals, even though the company has said no talks are imminent.

Drahi, a Franco-Israeli telecoms mogul whose sprawling group borrowed more than $60bn of debt in an era of cheap money that now needs to be renegotiated, in late February struck a deal for Altice France that involved handing over a 45 per cent stake in the company to creditors in exchange for a substantial debt writedown. 

While Altice France’s management angered bondholders a year ago by raising the prospect of aggressively shifting assets away from them, the restructuring negotiations concluded amicably, with creditors set to profit if Drahi is able to sell off assets in line with expected valuations.

However, some analysts and investors believe there is a greater risk of asset stripping for bondholders at Altice International than at Altice France, because specific quirks of French law prevented Drahi from taking the most aggressive course of action.

Altice International houses the group’s assets outside of France and the US, with operations in Portugal, Israel and the Dominican Republic.

Some large investment firms that played a significant role in the Altice France restructuring — such as Pimco and Elliott Management, the two largest bondholders in the French process — have shied away from getting involved in Altice International.

London-based credit fund Sona Asset Management is the largest creditor at Altice International, according to people familiar with the matter, followed by PGIM, the asset management arm of the American life insurance firm Prudential Financial. 

The creditor group, which is advised by US law firm Gibson Dunn, also includes large asset managers such as Invesco and BlackRock, alongside hedge funds such as King Street Capital Management and Arini Capital Management.

One large holder of Altice International’s debt said that while the bondholder group was wary of manoeuvres aimed at shifting assets away from them, it appeared that Drahi was again looking to strike a consensual deal with creditors if possible. 

Separately, US hedge fund GoldenTree Asset Management is one of the largest holders of Altice International’s €675mn of unsecured bonds, the people added. These lower-ranking bonds are trading at just 35 cents on the euro, suggesting bondholders are braced for heavy losses.

Altice said that restructuring talks at its international business were not on the “2025 agenda”, with “absolutely no urgency at all” on the maturities of its debt.

Substantial loans that Altice International made to related parties could draw scrutiny from bondholders as restructuring negotiations kick off, with more than €4.5bn of loans outstanding to its parent company Altice Luxembourg at the end of 2024.

Altice International also previously lent about €600mn to an investment vehicle Drahi used to build a 24.5 per cent stake in BT. This loan was not repaid when Drahi sold his stake in the London-listed telecoms company last year, however, and was instead shuffled so the money is now owed from another Altice entity.

Bankers, bondholders and rival executives believe that Drahi is potentially looking to exit his home market of France entirely, with mobile operator SFR an attractive target if competition regulators allow consolidation to take place. Bouygues, Xavier Niel’s Iliad and Orange are the other major operators in the French market.

SFR would probably have to be broken up to appease competition regulators, which may still veto any deal that raises prices for French consumers or risks job losses.

Altice said it “declined to comment on French rumours” and that it was focused on “implementing the debt agreement, considering the sale of non-core assets, and continuing SFR’s commercial revival and improving service quality”.

Away from France, Drahi has previously examined sales of the major units comprising Altice International and could restart these processes. Most notably, Saudi Telecom reportedly offered €8bn for its Portuguese business, although talks collapsed last year without a deal. 

“Everything is for sale,” said an executive at another telecoms company.

Swatch investor takes aim at family behind Omega and Longines

Steven Wood accuses the Hayek family of sidelining minority shareholders in Swatch Group as he campaigns for board seat

Swatch Group investor Steven Wood has said the struggling Swiss watchmaker is “only being run for one shareholder”, as he steps up his campaign to be elected to the board of the family-controlled company.

Wood, founder and chief investment officer of New York-based GreenWood Investors, said in an interview with the Financial Times that the group behind Omega, Harry Winston and Breguet is mired in “a situation where minority shareholders’ rights are being ignored”.

The comments are a thinly veiled criticism of the Hayek family, which own 25 per cent of Swatch’s shares but control 44 per cent of the voting rights. Nick Hayek Jr, son of Swatch founder Nicolas Hayek, has served as chief executive since 2003. His sister Nayla has chaired the board since 2010.

GreenWood, which owns a 0.5 per cent stake in the company worth about Swf37mn, has tabled a resolution for Wood to be elected to Swatch’s board at the company’s annual general meeting on May 21.

The Hayek family are coming under pressure after years of underperformance that has prompted Nick Hayek, the chief executive, to repeatedly raise the prospect of taking the company private. Swatch reported a 75 per cent fall in net profit to Swf219mn last year.

“The undervaluation is eye-opening. Swatch trades at about half its book value,” said Wood, who added he had been engaging with the board since June. “This is a once in a lifetime opportunity in the luxury space,” he said.

Wood’s campaign is a rare example of shareholder activism in Switzerland, where many companies are controlled by powerful families.

Swatch has a dual class share structure. The Hayek family own mostly registered shares, which carry greater voting rights than bearer shares, many of which are held by institutional investors. Wood wants to serve as a representative for holders of bearer shares, which represent 55 per cent of Swatch’s share capital.

Wood describes himself as a “constructivist” rather than an activist. He wants Swatch to communicate more openly with investors, an approach he has also pursued at Italian-listed aerospace and defence group Leonardo, where he has served on the board since 2023.

Many of Wood’s ideas are aligned with analysts and shareholders, according to Jean-Philippe Bertschy, head of Swiss equity research at Vontobel.

“All investors agree with what he says. It is a good thing to have some healthy pressure on the Hayek family,” he said.

Swatch’s board has recommended shareholders vote against Wood’s resolution for several reasons, including that he is not Swiss and does not live in the country. The company said Jean-Pierre Roth, a former president of the Swiss National Bank who has served on Swatch’s board since 2010, is the designated representative of Swatch’s bearer shareholders.

Swiss proxy group Ethos Foundation, which represents Swiss pension funds and has previously expressed concern over Swatch’s corporate governance, has recommended voting in favour of Wood’s election.

However, another proxy agency, ISS, advised shareholders to vote against Wood’s election because he had not laid out a sufficiently compelling case. ISS also advised investors to vote against the re-election of most Swatch board directors on the basis that the company has failed to establish a sufficiently independent board.

Swatch has not given its bearer shareholders the opportunity to elect their board representative, without the input of registered shareholders. This is a violation of their rights under Swiss law, according to Wood.

Swatch said it would ensure the proposal is dealt with in a “legally correct manner” at the AGM and it has acted in full compliance with all national laws and regulations.

Wood said that Orbis Investment Management, which owns a 1 per cent stake in Swatch, had given him its backing.

But if the Hayek family succeed in blocking Wood’s appointment to the board this month, he will consider seeking the required backing of five per cent of shareholders to be able to call an extraordinary general meeting.

He would use that to request a separate vote, among Swatch’s bearer shareholders alone, to be elected as their board representative.

“There are many different paths this could take,” he said. “May 21st is not the end of the story.”

Country’s small and medium-sized businesses are pivoting to defence amid European rearmament

Within days of Russia’s invasion of Ukraine, as Germany’s industrial heartlands shuddered and recession loomed, the boss of 161-year-old engine maker Deutz came up with a plan to turn adversity into opportunity.

“I said ‘what about defence?’,” Sebastian Schulte recalled asking colleagues, thinking that the Cologne-based company’s engines for tractors, diggers and other heavy machinery were a perfect fit for tanks.

“Our engines run 3,000 metres above sea level, in a mine, at 40 degrees celsius or minus 20 — that’s exactly the kind of reliability militaries need,” he added.

Three years on, the manufacturer expects to make about 2 per cent of more than €2bn in annual revenue from defence contracts, from close to nothing previously. That is a proportion that is only likely to grow as Deutz begins to roll out products specifically targeted at military customers, such as hybrid engines that can help tanks approach enemies more quietly.

Deutz is one of a number of companies in Germany’s Mittelstand — the network of small and medium-sized enterprises that form the backbone of Europe’s largest economy — that have jumped at the opportunity to tap into the country’s soaring arms expenditure, amid a deepening industrial malaise.

Germany’s defence reboot — fuelled by the loosening of its strict borrowing rules and the threat of waning US support — has overturned a widespread taboo among German businesses surrounding arms manufacturing, quietly redrawing the moral and commercial boundaries of its industrial core.

Family-owned laser specialist Trumpf is considering walking back a pledge to abstain from arms production. Meanwhile, automotive supplier Schaeffler — which has announced thousands of job cuts, as German car production slows — has said it could in the future supply bearings to tank manufacturers.

Economists expect many Mittelstand companies, squeezed by a punishing industrial slowdown, to jump on the opportunity presented by rising European defence spending.

Corporate distress in Germany has been nearing levels last seen during the pandemic, as soaring energy costs — driven by the collapse of Russian gas supplies — and a bleak industrial outlook have intensified warnings of looming deindustrialisation. The country’s economy is suffering the most protracted slump in its postwar history, shrinking in both 2023 and 2024.

“You can be sure that every company able to provide services and products needed by the German Armed Forces, will definitely try to get contracts,” said Hans-Jürgen Völz, the chief economist of BVMW, a Mittelstand lobby group. “Almost all sectors of the economy can benefit from [Germany’s rearmament],” he added.

One group repositioning itself to serve the defence industry is Bavarian chemical producer Alzchem.

Until 2022, one of Alzchem’s core businesses focused on supplying the agricultural sector with nitroguanidine — a building block for many herbicides used to improve crop yield, which also happens to be highly explosive, and can be used to propel long-range shells.

“Everybody talked about cyber wars in the future, nobody had in mind that [Nato-standard] 155mm munitions would come back as the most needed ammunition,” said Alzchem’s chief executive Andreas Niedermaier.

But when the sheer demand for artillery shells became apparent — Rheinmetall has in the past three years expanded its production of 155mm munition tenfold — Alzchem pivoted from fertiliser to firepower, setting aside its agricultural clients to supply the defence industry instead.

“We let that market go to the Chinese,” Niedermaier said of Alzchem’s former herbicide business. Instead, it is rapidly expanding its capacity to supply arms makers.

Alzchem has since received a €34mn EU grant for ammunition production to support a €140mn plan to double nitroguanidine production at its Trostberg headquarters.The US government has also awarded the company $150mn to build a plant stateside — a project for which Alzchem is scouting locations.

Niedermaier said he expected defence to account for more than 10 per cent of Alzchem’s sales in the near future, depending on how its other major growth bet — creatine, a muscle-building amino acid popular among fitness influencers — performs.

But the transition under way at several of Germany’s famed Mittelstand companies has not been without friction. Arms manufacturing has long been taboo in postwar Germany because of the legacy of industrial co-operation with the Nazi regime.

Germany’s deliberate under-investment in the military allowed the country to channel resources into its welfare state and export-oriented industrial base — but the political consensus surrounding that approach is now visibly fraying.

Deutz’s Schulte, previously managing director of submarine manufacturer and defence contractor Thyssenkrupp Marine Systems, said his plan to broaden the engine maker’s client base to arms contractors was initially met with resistance from colleagues.

“I got a lot of pushback internally,” he said, adding that it took a while until Deutz’s new strategy became “I wouldn’t say broadly, but fairly accepted”.

Traditionally, many Mittelstand companies steered clear of the defence sector, wary of the reputational risks and cultural sensitivities tied to Germany’s postwar pacifism.

If deals happened at all — both Deutz and Alzchem have in the past had small contracts with defence companies — they were quietly tolerated rather than actively pursued.

“Like many German Mittelstand companies, [at Deutz] defence was not only not a focus — it was actively avoided for [environmental, social and governance] reasons,” Schulte said.

But Germany’s long-held resistance to arms production is now fading, as the country faces a historic geopolitical shift. “We need to see challenges as opportunities — not by benefiting from the war, but asking: how can you contribute best to solve the challenge?”

World’s biggest carmaker forecast includes $1.25bn impact from trade levies in April and May

Toyota has warned operating profits will fall 21 per cent this fiscal year due to the fallout from Donald Trump’s trade war, increasing the pressure on Japan to reach a deal on tariffs with the US. 

For its year ending in March 2026, Toyota said it expected an operating profit of ¥3.8tn ($26bn) compared with ¥4.8tn in the year just ended. The forecast includes a US tariff impact of ¥180bn for the months of April and May. 

The US president has recently offered relief to carmakers to soften the impact of his 25 per cent tariffs on imports of foreign-made cars and parts. Toyota and other Japanese manufacturers export some of the vehicles they sell in the US from Japan.

The evolving nature of Trump’s tariffs has thrown the global car industry into turmoil, with Mercedes-Benz, Volvo Cars and Ford pulling their guidance for this year, while General Motors has warned of an up to $5bn hit from the levies.

In its fourth quarter, Toyota’s operating profit was almost flat year-on-year at ¥1.2tn while revenue increased 12 per cent to ¥12.3tn. 

While Toyota grapples with tariff effects, Japan’s biggest company is also considering a $42bn move to take a key subsidiary private.

Akio Toyoda, grandson of Toyota’s founder, is considering investing his personal money to lead a buyout of Toyota Industries, which makes industrial equipment and vehicles, according to people close to the discussions.

Toyota Motors, which has a complex series of cross-shareholdings with its subsidiaries, is also considering investing, say the same people, in what would be one of the world’s largest buyouts.

The move, which came to light last month, has sparked speculation that other big industrial groups would accelerate discussions over potential acquisitions or buyouts of listed subsidiaries. 

Toyota Industries shares rose sharply on the news and remain up 36.5 per cent this year. Toyota Motors is down slightly over the same period.