Global M&A
Market Outlooks

J.P. Morgan M&A Mid-Year Outlook: Anu Aiyengar CNBC

Interviewer: Welcome back to Squawk Box this morning. Global M&A activity surging in the first half of the year, according to a new report from J.P. Morgan. Total deal volume topping $2 trillion, an increase of 27% from a year ago. Thanks to a rise in mega deals. Joining us right now is Anu Aiyengar, J.P. Morgan's global head of mergers and acquisitions. I got close, not—

Anu Aiyengar: It's pretty good.

Interviewer: --not perfect.

Anu Aiyengar: Pretty good.

Interviewer: Tell us what's happening. There had been a whole sort of sense that, given the tariffs and everything else, negotiations going on, that people weren't going to do deals, that people weren't going to make investments. And yet it appears that there's some deals happening here, maybe more than we expected.

Anu Aiyengar: Yeah. And my hope today is we can reconcile the sentiments and the headlines to reality and data, because the sentiment and a lot of the headlines has been the M&A market has been challenged. And yes, you've had a little bit of a roller coaster, but the second half of May and June and the pipeline that we see right now is really robust, and the megadeal trend is pretty unusual, 59% increase in 10 billion plus deal volume, 57% increase in the number of deals 10 billion plus.

Interviewer: How much of that is a function of what maybe a perception that the regulatory environment under this administration is going to be easier than the administration before?

Anu Aiyengar: There's a little bit of that in the conversations that are happening right now, but when you look at the type of deal activity, whether that's in the US or Asia, Asia has been a big, bright spot, take privates happening. Because at one level you look at it and say the S&P 500, all time high. You showed a couple of the earnings this morning. Really good. But yet there are opportunities of companies which are mispriced.

So at J.P. Morgan, we're very fortunate. We were in the middle of three of the largest take private transactions, whether that was ADNOC Santos in Australia or Sycamore Walgreens and 3D Skechers in the US. So there are still opportunities on both sides, right? You feel really good about where your stock prices. You have access to plenty of financing, and you feel like now is the time to make a bold bet on regulatory.

Interviewer: One of the big issues that has challenged the M&A market was that a huge component part of the merger world was private equity. And there have not been a lot of exits. Private equity has been unwilling to sell, in part because I think there's a sense that the prices are not where they want them to be. That's also created a lockup in terms of just capital across the entire world. How do you see that playing out now?

Anu Aiyengar: You're right. Like some of the things I mentioned have been a little bit of an exception in terms of private equity is willing to deploy, but it's now been 2 and 1/2 years where we are all waiting for the kind of unlock of private equity assets.

The way the unlock has been happening is in every flavor of minority deals. So whether you call them continuation funds, minority deals, partial exit, fund to fund transfer, every version of it, that has the same theme. You partially sell, partially continue to own. So I take a little bit of a mark, I satisfy my LPs, give some money, and leverage the phenomenal secondaries market. That—

Interviewer: So you actually like this secondary market? I mean, there's a whole view that this sort of-

Anu Aiyengar: --churn.

Interviewer: --churn is not actually good for the market, that it's sort of an artificial way to deal with this sort of hot potato problem of just moving things from one place to the other.

Anu Aiyengar: Yeah, it could be. It depends on the asset and depends on why you're doing it. So there are some assets where there is a reason to continue to own it, and you have conviction and belief in it. For those type of assets, this type of trade is not unusual. But if you're doing it because you don't have any other form of exit, and then it's just a matter of passing it on, the market is largely of the first type, but if there is too much of the second type that happens, then that would be a concern.

INTERVIEWER 2: Anu, one of the things we've been talking about this morning is the need for more energy to power the data centers that are out there. And I know that both AI and the data centers, all that energy demand, that's playing into what you're doing, too. What do you see on that front?

Anu Aiyengar: Yeah, that's been a big theme, right? Because it's gone from people saying, oh, I kind of need to understand it. And I need to at least say the word AI on my earnings call to be like a real thing, right? If you look at the amount of money that has gone to startups this year, 2/3 of that has gone to AI.

INTERVIEWER 2: Wow.

Anu Aiyengar: Almost every company has some form of CapEx investment going into AI. All of that requires, as you said, pretty big investment in data centers as well as energy transition. So both of those, we expect to be drivers. And then you've seen this trend of people saying, what am I acquiring when I acquire AI? Am acquiring AI capabilities, talent? What am I acquiring?

Interviewer: Which raises a whole other question. There is a phenomenon that we talk about now almost on the program every day of acqui-hires and what's described as reverse acqui-hires and what that means long term to the M&A market, which is-- one of the things that I've been thinking about is, in a world powered by AI, if I can turn you into a superwoman and me into a superman, that maybe-- unless a company has genuine physical assets, but in the services space, I don't know if you're going to need in the future to buy entire companies.

You may just decide, I'm going to pick off the top 10 people. I'm going to pay them extraordinary amounts of money to leave. I don't have to pay a premium to the shareholders, and I don't have to deal with the regulators.

Anu Aiyengar: Yeah. Life doesn't work that easily, usually, but there's need and search for talent, is something that has been on the rise across everywhere, whether that's the C-suite here in the US or you've seen in Europe, particularly in the UK market, because especially when you have so much data, imagine the amount of information that all of us have to cull through. Like, the minute you go off camera, you have to read a ton before you get back on camera, right?

Interviewer: Yes.

Anu Aiyengar: Figuring all that out and the judgment that you have to apply-- I don't care what AI tools you have-- there is still judgment that needs to go on top of it in the current foreseeable future. Who knows how it advances in-- but this need of getting talent is also not a new thing. I mean, we are in the investment banking business. We are all about getting talent.

Interviewer: Right.

Anu Aiyengar: And so we understand that. And I don't think it's also a way to circumvent, because that is the capability that you're buying. Oftentimes, when you're thinking about doing any merger deal, you think as much about, do I have the capability to run the business I'm buying? Do the people who run that business, will they stay with me and will they perform at the highest caliber that they're currently doing under my organizational culture? So figuring out talent and navigating it has always been an integral part of M&A.

Interviewer: Fascinating. Thank you, Anu. It's great to see you this morning.

Anu Aiyengar: Great to see you as well.

Interviewer: Appreciate it.

Anu Aiyengar: Thanks for having me. 

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