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Anu Aiyengar, global head of M&A at JPMorgan share's her views on the outlook for M&A activity in the year ahead. Aiyengar said that health care and industrial deals have picked up. She talks with Mary Ellen Egan, Senior Editor, Women's Programs.
Transcript
Mary Ellen Egan:
I am Mary Ellen Egan. I'm the Senior Editor Women Program at American Banker. I'm here today with Anu Aiyengar, who is the global head of M&A at JPMorgan. Thank you for joining us today. And I'd also like to thank Women In Financial Markets for hosting us today at their inaugural conference. So correct me if I'm wrong, but you are the only female global head of M&A for a large US bank. Is that correct?
Anu Aiyengar:
That's true, yeah, unfortunately as of now,
Mary Ellen Egan:
Hopefully that will change in the future. So, tell me a little bit about your path to this amazing job.
Anu Aiyengar:
I've been at JPMorgan for a long time now, and I started in M&A actually in New York. Just kind of went through the ranks and first started, I'd say a big turning point was becoming a manager, which I did about nine years ago, running the Americas. And the switch from being kind of the individual producer to being a manager and learning how to run a group of M&A bankers was interesting. And I also realized that I enjoy it. I enjoy management. You don't know till you actually start doing it. Do you like it or do you not like it? And actually like that. I like seeing people hit their strides and almost become the best version of themselves and that's really nice.
Mary Ellen Egan:
So what have you found out about leading a team? Because I've done the same thing. I started as a reporter and then went to an editor and then ran a team. And it's a very different skillset. I mean, you still have to have the same base of knowledge, but now it's just not your career path you're concerned about, it's also the team around you and their productivity. So how did you adjust to that?
Anu Aiyengar:
So the different elements of that, there's one which is the strategic element. Where is the market going? How are we positioned? What is our resource allocation, what should we be chasing? Where is the puck going and how do we get that? So there's that element of it. And then the people element of it, which you talked about is how do you organize your team? Is everyone set up to succeed and are they in the right place? So there's a lot of people, they may be in one sector or something or working with one team and maybe they were okay but muddling along, and then you move them to another spot and then they flourish. So, I particularly like to figure out what is it about this person? Why are they successful or why are they not successful? And if we try them somewhere else, can they be successful? Because sometimes as I was growing up, saw that it was okay, you're working in this particular position and if it's not out, then people sometimes gave up on them. There's a lot where you just move the person and then they become successful. I think positioning people for success and understanding the said and the unsaid about each person's own career aspirations. I like that.
Aiyengar manages a team of over 250 M&A bankers in 17 countries across the globe. She has been with JPMorgan since 1999.
September 27
How large is the team that you manage?
Anu Aiyengar:
It's 250 people globally.
Mary Ellen Egan:
And how do you deal with the different time changes, the remoteness? I assume you travel a lot to see your teams.
Anu Aiyengar:
I do. I travel a lot to see clients as well as teams. And so we work with the global team. So a lot of times, even if you're physically not seeing them, you're always on the phone with other team members, working with clients everywhere. Once one week a month or so, on average, I spend in Europe, then Asia a couple of times a year. And so, thanks to technology, even though you physically don't see people, distances appear to be a bit smaller. And the fact that we have a global client base kind of necessitates it. So it's not that you have to go separately just to connect with the team. You do that a bit more seamlessly as a part of your client work and you see the teams also.
Mary Ellen Egan:
So we've seen M &A slow down quite a bit the past couple of years, for obvious reasons, like it's tougher to raise capital. There's the global sociopolitical uncertainty with Ukraine and Israel and everything else. I've heard that there is starting to be more activity. Are you seeing that? And if so, where? And are there certain sectors?
Anu Aiyengar:
Yeah, no, you're right. In 2021, you saw remarkable levels of deal activity. So before that you would've said average annual activities about 4 trillion. In '21 it was 6 trillion and last year was significantly lower. And part of you could say is there was a little bit of pull forward that happened to '21. And then, as you say, beyond in the middle of two land wars, the inflation concerns haven't fully gone away. It is better. So that's why the mood today feels better because it feels like there is a path to inflation being under control and hence a path to rate cuts. The equity markets are a lot better and that has a psychological impact on people. CEO confidence and board confidence I'd say is higher today than it was even three months ago. Even though a lot of the challenges remain because we're still in the middle of the war, rate cuts haven't fully happened and more than 50% of the GDP is going up for elections.
And so that's always an uncertainty. Uncertainty is not good for M&A, but when people feel like I have a little bit of a handle in terms of what is going to happen, even if it's not perfect, you feel a little bit better. And where is it that we are seeing activity? Last year, we saw a lot of activity in industrials and energy already that is trend continuing globally. The U.S. market is more resilient because U.S. companies a bit faster to react to things, to take action and come out of it. In Europe, the wars are a little bit closer to home and the European market is always a little bit slower because companies don't usually react that fast. It's a bit more deliberate. So the European market I'd say probably still has a little bit of a ways to come back to normal, but the U.S. market feels a lot better now.
And health care is the other sector where you've seen a lot of activity. It started in December, it's continuing the financial sponsors a little bit of activity you see, but still not anywhere back to their normal levels, even though there is a lot of capital to deploy and there is a lot of assets sitting with private equity firms which are ready for monetization. So a little bit is coming out. I think people will wait and see how that fares either in terms of getting sales done and deals done or in going public. And if there are success stories, then more will come. And so it's better, better today than three months ago. so we'll see.
Mary Ellen Egan:
Why do you think health care is starting to see more activity? Is there a certain thing about just the demand or technologies?
Anu Aiyengar:
A little bit of, I think for a while the entire health care industry and sector is focused on COVID and every aspect of it. So testing, vaccination solutions, and many of the normal healthcare decisions even that people were making was getting deferred because that was kind of the thing. And now we are a little bit out of that. And so companies are kind of looking at regular ways business and saying, okay, where should we be going? How's your R&D pipeline looking? Are there other companies which are having good test data that you should go after? How should you think about the very complex healthcare IT space, which is a very interesting intersection of technology and healthcare, intersection of healthcare and services, and how you think about the element of how do you actually provide services to people? Is that only through the hospital system? Is that through retail networks? How do you do that urgent care? So there is several elements of the health care sector which are evolving. And because it's evolving, the larger companies are taking notice of that. So I'd say a combination of trends that you see happening that is driving activity in that sector.
Mary Ellen Egan:
And it's been a hard time for banking mergers obviously. I mean, first Horizon, TD Bank tried to put that merger together. I think is it partly because we're in such a highly regulated space now, and I think Congress, which doesn't move the fastest, is giving mergers additional scrutiny. Do we think their bank merger activity might pick up?
Anu Aiyengar:
This year? So, in general, the regulatory environment has been challenging. So it's no longer a straight line between announcing a deal and getting it closed. The time between announcement and closing increases the certainty of the deals. Closing is also not as certain as it was though. I must say that what generally you see across all industries is that companies are willing to litigate to get their deals closed. So if the government puts an injunction or something like that, it's no longer game over. Companies are willing--and even at the time of entering into deals--thinking about litigation as an antitrust strategy almost as opposed to an insurance policy. That's what it used to be. Earlier it was, okay, what other things can I do when litigation would be your last option? Whereas now, it's a very active part of company's strategy in terms of thinking, how do I get my deals closed? Bank mergers have incremental complexity even beyond that in terms of the performance size of the company, what does that mean for your capital requirements? The changing framework for capital requirements? How do you do mark on the company when there's so much uncertainty in the world? So that has even incremental hills to climb beyond the regular regulatory challenges that the rest of the industry
Mary Ellen Egan:
So your CEO, Jamie Dimon has been really all in and really pro AI on how it's going to change the banking industry and other industries quite frankly. So are you seeing any of that in your day-to-day?
Anu Aiyengar:
Absolutely. I mean, ignore it at your peril, right? Because it is interesting technology, it has a lot of possibilities, like anything it has risks too, but the benefits that you can have to every walk of life and humanity if you use it appropriately. It's a powerful tool that I think we would all be doing a disservice if we don't pay attention to it. So I'd say almost every client that we work with thinks about both aspects. How will AI affect the industry? And hence my business, how can I use AI to improve my business? And probably a third is what are the risks I have in my business because of AI, whether that is cyber or other things. So it is a fascinating part of, I think what we will see happen over the next several years. But absolutely, not only are we internally spending a lot of time on it because we have so much data. And so if you can mine insights out of that data using AI while protecting data integrity and all of that, I think that would be fabulous.
Mary Ellen Egan:
So are there any trends you see on the horizon or any concerns? I mean obviously you touched upon how the global elections, it's not just the U.S. election, which has a big impact, not just here but overseas as well, but in the other countries. I mean, I know it's like you're not a political prognosticator, but what do you think?
Anu Aiyengar:
Look, I think the elections, obviously people watch that. Now historically, if you look at it, election years haven't had that much of an impact on M&A activity actually, right? So people talk about it a lot, but historical data would suggest that election years you don't see any particular increase or decrease. But having said that, it does affect, like I said, certainty and certainty affects M&A, but outside of that, we haven't really seen any other big impact itself in the past the wars. I think having resolution on that would be a big kind of oxygen boost. But in general, it's good for humanity. But I think it'll also be good for the markets. And I'd say that, but in bridging the seller buyer valuation mismatch, because sellers need some time to adjust to the new valuation. And so I always say sellers should be more realistic and buyers should be less greedy.
Mary Ellen Egan:
It's kind of like selling a house the same thing, I want the maximum amount of dollars. And they're like, ah, no, you're not going to get quite that much.
Anu Aiyengar:
But we use a lot of structure to bridge the valuation gap, right? Whether that is earnouts or contingent value rights or seller paper or other ways of bridging the gap between a seller and buyer's view on valuation. And because of that, you also see a lot of unsolicited deals, not hostile, but unsolicited, where a company may not proactively put themselves up for sale, but somebody will come knocking on the door saying,' I don't want to be opportunistic, but I really think it makes sense for us to put it together', because supply chain challenges still exist. You do need to invest in technology synergies and this can help a lot with that, and the market seems to value consistent, profitable growth at scale. And so if you want to deliver all of that growth, profitability, consistency and scale, M&A is a good route to do that.
Mary Ellen Egan:
Well, thank you so much, Anu. Thank you for speaking with us today. And thank you again, Women In Financial Markets, for hosting us. Thank you.