Bankers get creative to sign M&A deals in Trump's trade war

By Milana Vinn, Amy-Jo Crowley and Abigail Summerville

(Reuters) - After U.S. President Donald Trump's tariffs sent global markets sideways, Silicon Valley private equity firm Silver Lake Partners added some new terms to a deal it had spent months negotiating with chipmaker Intel.

“The volatility of the market, and the risk of a recession, and the tariff impact on semiconductors has made investing a lot more difficult,” Silver Lake Chairman and Managing Partner Ken Hao told Reuters in an interview. They delayed the signing for about a week and inserted a new clause into the final agreement that deferred close to a third of the $4.46 billion it was paying for a majority stake in Intel's programmable chip business Altera.

Amid the market slump and unpredictable tariff fight, bankers and investors are finding creative ways to get some multibillion-dollar deals done, albeit delayed, from Silver Lake's purchase of Altera to Prada's acquisition of Versace, both announced in the last two weeks.

Some investors are adding clauses that protect them if the markets do not rebound while others have had to sweeten terms to get deals signed, interviews with more than a half dozen investors, bankers and corporate executives say.

M&A ACTIVITY FALLS

While global dealmaking rose 12.6% in the first quarter to $984.38 billion from the year-ago period, it has since fallen off a cliff, according to data compiled by Dealogic for Reuters. M&A volume during the first half of April slid 29% from the same time last year to just $98 billion, the worst kickoff to the second quarter since 2020, the data shows.

“We live in turbulent times,” Hans De Cuyper, CEO of multinational insurance company Ageas, told Reuters in an interview. He said his team gamed out several different economic scenarios before deciding to buy home insurer esure from Bain Capital for 1.3 billion pounds ($1.7 billion), announced last week.  

Dealmakers say some companies are modifying terms with lenders or floating creative financing structures to bridge gaps in valuations that have tumbled in recent weeks.  

"People are rethinking deals, maybe cutting them a little bit. We saw this in 2008-2009 where deals had contingent value rights and earnouts because valuations were depressed. That might come back,” Alex Hecker, vice chairman of global M&A at Deutsche Bank, said in an interview. 

RECALCULATING NUMBERS    

Global Payments was close to closing an already complex, three-way, $24.3 billion deal to buy one of its rivals on April 2 when Trump announced sweeping tariffs on his self-proclaimed Liberation Day that sent the company's shares plunging by nearly 15% over the next two days.

Days before executives hoped to finalize the agreement to buy Worldpay, they had to quickly recalculate their numbers, according to a person familiar with the matter. To seal the deal, part of which was being financed with stock, Global Payments executives decided to honor the company’s pre-Liberation Day share price of $97, despite the fact it was trading in the low $80s, according to this person.  

For Silver Lake, Altera was also still worth the price, but Hao said he wanted to mitigate some of the new risk that came with the tariffs. 

“We were open with the changing dynamics all the way through, and we made no secret that the tariff environment made the short term a lot more unpredictable – and not in a positive way for the business," he said.

Instead of lowering its bid, Silver Lake decided to defer $1 billion of the purchase, $500 million to be paid at the end of next year and the last payment at the end of 2027. While it does not save money, it increases Silver Lake's internal rate of return, a key metric for PE firms that measures an investment’s profitability, Hao said.  

ENHANCED STRUCTURE

If the market rebounds to pre-Liberation Day levels in the next few months, as measured by the Philadelphia Semiconductor Index, the first $500 million payment will be paid when the transaction closes later this year, he said.

"It's not full protection, but it’s certainly an enhanced structure for us that contemplates volatility over the next year or two,” he said.  

Other deals getting done in this turbulent market have been in the works for months and make a lot of strategic sense, like Prada’s $1.38 billion April 10 agreement to buy rival Versace from Capri Holdings, dealmakers said. The two Milan fashion houses started talking in November after U.S. regulators blocked Capri’s merger with U.S. retailer Tapestry, which owns the brands Kate Spade and Coach.  

"If a deal makes a lot of sense and it's good in any scenario – a strategic deal, easy to fund – then you keep moving along and do it,” Hecker said. 

(Reporting by Milana Vinn, Abigail Summerville, Isla Binnie and Echo Wang in New York and Amy-Jo Crowley, Charlie Conchie and Andres Gonzales in London; Editing by Dawn Kopecki, Anousha Sakoui and Chris Reese)