In today’s edition, we look at how dealmaking is dead, despite rosy forecasts from bankers whose bon͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
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September 14, 2023


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Liz Hoffman
Liz Hoffman

Welcome back to Semafor Business.

One of my favorite genres of stories is “dealmakers expect more deals.” Wall Street has a tendency to try to will itself out of deep freezes, and we’re in a real corker of a freeze right now.

It will thaw eventually — it always does — but it’s worth asking whether it matters to anyone but the dealmakers themselves. I dug in below.

Plus, I texted with the writer-producers of Dumb Money and went deeper than is advisable on the seating chart from yesterday’s AI summit.


➚ BUY: Sports. Online bets for the NFL’s opening week were 56% higher than last year, according to GeoComply, which verifies gamblers’ locations to ensure it’s legal in their state.

➘ SELL: Slots. Hackers hit MGM just weeks after exacting a cyber-ransom from Caesars. MGM shares are down 5% since acknowledging the breach.

Reuters/Bridget Bennett
Semafor Stat

Share of U.S. homeowners with a mortgage under 4%, according to Black Knight. These “golden handcuff” loans are partly why nobody is selling their house.

WSJ has a delightful story on a VC-backed startup trying to fix that by attaching the loan to the house instead of to the borrower, meaning it could be passed on to a new buyer. Reinventing mortgages is fintech’s white whale. It never works.

Liz Hoffman

Wall Street has nothing to do


Just how dead is the deal market?

You can see it in the numbers. M&A is down 32% globally from 2022, trailing even the pandemic year; new listings are essentially nonexistent; and syndicated loans are on pace for their slowest quarter since the spring of 2020.

You can see it in the breathless hopes pinned on Arm’s debut today and the IPO of a valuation-leaking Instacart next week. Both are going public with the safety net of big anchor investors — Pepsi is buying $175 million worth of Instacart, and 15% of Arm’s shares were spoken for by Apple, Samsung and other customersCK — that can put a floor under the stock and attract retail interest.

You can see it in the advisory practices sprouting up on Wall Street peddling not big-money deal advice but the kind that pays a few thousand dollars a month. “Barbarians at the gate this is not,” the Financial Times said of a new “sustainability advisory” offering from one bank.

You can see it in a steady drumbeat of Wall Street layoffs and dour bonus predictions. Headcount at the biggest U.S. banks dropped by more than 20,000 in the first half of the year and more cuts are coming at Goldman Sachs, Barclays, and Citigroup. Alan Johnson, a compensation consultant to big banks whose annual forecasts are closely watched by those anticipating year-end bonuses, expects a 20-25% drop for M&A bankers this year.

You can see it in the press. Deal reporters are profiling bankers, writing up M&A glimmers-in-the-eye, and peppering stories with scenes of bankers staring morosely into berry parfaits.


The reasons are mostly technical. Debt is more expensive. CEOs are dour. The surprisingly strong profits that underpinned the stock-market rally approaching its first birthday look shaky after companies from Target to American Airlines to Thermo Fisher lowered their earnings forecasts.

“That’s the sound of air coming out of the balloon,” said Rich Farley, a lawyer at Kramer Levin who represents banks in capital-markets deals.

But they’re emotional, too. CEOs are pack animals, and nothing good happens to one who strays from the herd.

This may be bad news for bankers and reporters, but dealmaking isn’t an unalloyed good. It tends to reflect a good economy, or at least a feel-good economy, but doesn’t predict one. Studies (most of them years old, though) consistently show that most M&A deals actually destroy value. And there are job losses, of course, by one estimate as high as 30% when two rivals merge.

The bigger they are, the worse they do: Kraft/Heinz. AT&T/DirecTV, and AT&T/Time Warner were colossal failures, and GE’s purchase of Alstom in some ways sparked the unraveling of an American titan. Though smaller in scale, Google’s purchase of Nest was a dud. Even Warren Buffett gets it wrong.

And that’s just M&A. The IPO frenzy of 2021, driven largely by SPACs, did no discernible good for anybody except the sponsors and the bankers who took them public. U.S. companies are carrying twice as much debt as they were in 2012, while earnings before interest and taxes have increased by only a third.

It’s helpful sometimes to think of deals not so much as something companies do, but as products they buy. When stock prices are high or interest rates are low — which conveniently tend to happen together — they buy a lot of money, from shareholders and creditors. When shareholders reward them for it, as they unusually did during much of the last decade, they buy a lot of companies.

Those trends are reversing, so interest is down. Caution now isn’t the worst thing.

One financial product that’s doing very well: fixing troubled companies. Paul Taubman, CEO of boutique PJT, cited “extraordinary performance in our restructuring business” for record revenue last quarter.

For the View from Jamie Dimon and the rest of the story, read here.


As Matt Levine says often an accurately, everything is seating charts. Take a look at yesterday’s AI summit in Washington.

Senate organizers seemed aware of Elon Musk’s history with many of his peers. Mark Zuckerberg was placed about as far away as possible, and OpenAI’s Sam Altman — my colleague Reed Albergotti had the scoop on that beef — was farther still. Here’s a brief rundown of slights, barbs, and cage-match-challenges at the hearing table:

  • Musk called Bill Gates an “asshole” for shorting Tesla stock. (Gates’ own standing in the tech community has fallen after a series of damaging personal revelations and who was relegated to the far end of the table.)
  • Satya Nadella said Musk is “factually not correct” in claiming that the software giant essentially controls OpenAI.
  • Zuckerberg: cage match.
  • Eric Schmidt has said Musk is “exactly wrong” about his AI warnings and that Musk’s call for a pause in AI developments would only benefit China.
  • Altman called Musk “a jerk.” The two were once partners at OpenAI but Musk left after a failed coup and reneged on a huge planned donation, Semafor has reported.
  • Musk fired Rumman Chowdhury after he took over Twitter. She now runs Humane Intelligence, a nonprofit focused on AI safety and ethics.
What We’re Tracking

Reuters/Mike Blake

Citigroup is embarking on a major restructuring that will result in unspecified job cuts. CEO Jane Fraser has been whacking away at bloated footprints and byzantine reporting lines built up over decades of acquisitions and global expansion.

Some employees “might not enjoy it so much,” Fraser said, but simplifying the bank should appease shareholders and regulators, who have penalized Citi after a series of blunders.

One Good Text

Rebecca Angelo and Lauren Blum are former Wall Street Journal reporters who wrote the screenplay and served as executive producers for Dumb Money, the withering, winking story of the meme-stock frenzy that premieres in limited theaters Friday.

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