Peter Tague, former head of one of the largest M&A advisory groups on Wall Street, shares his global outlook with Brunswick
Peter Tague, who’s been working on deals for more than three decades, is especially focused on the geopolitics of cross-border deals these days. “It matters in M&A in a way that it hasn’t historically,” he says. Tague was Co-Head of Citigroup’s Global Mergers & Acquisitions group from 2012 to 2018. During that time, Citi advised on more than 1,100 deals with a combined value in excess of $2.7 trillion, according to data from Acuris (formerly Mergermarket) and Thomson Reuters.
In late 2017, when megadeals such as Broadcom-Qualcomm, Disney-21st Century Fox, and CVS-Aetna Health were closing out another strong year for M&A, Brunswick met Tague in Citi’s office in west Manhattan. The room boasted a clear view of the glimmering Hudson. Off in the distance, small but unmistakable, stood the Statue of Liberty.
We spoke about the global M&A landscape, though our conversation often returned to geopolitics. “Today, it’s increasingly common for us to have at least one government entity with a seat at the table; and, often, more than one playing an integral role in a transaction,” says Tague. “But, as someone who worked on the Dubai Ports World transaction in 2006, it’s clear this sense of nationalism and protectionism in a deal context isn’t entirely new, either.” Tague is a voracious reader, withthe voluminous knowledge you expect from a leader of one of Wall Street’s largest cross-border advisory businesses. His daily online intake includes The Wall Street Journal and Stratfor, a geopolitical news platform, and has recently expanded: “I’m spending a lot more time reading blogs and newsletters around the hedge fund activist activity,” he says. Still, he manages to sneak in non-M&A themed material as well. When we spoke, he had just finished Yuval Noah Harari’s acclaimed non-fiction work, Sapiens: A Brief History of Humankind.
But he stresses that the strength of his team at Citi means he doesn’t need to know all the answers himself. “I’m very fortunate that I have 25 Managing Directors sitting next to my office and when I ask any one of them a specific question,” Tague says, “they’ll probably be smarter and better-read and more thoughtful about it than I was.”
Though we spoke at length about the myriad challenges facing dealmakers today, Tague remains fundamentally optimistic about the future of M&A. Yes, there are new obstacles to be overcome today, but he says that every era has had its own set of challenges.
“What our industry has demonstrated time and time again,” he says, “is that, wherever the lines get drawn, however the rules get written, we will work within the constraints that we’re given, and we will provide creative, value-adding solutions within those constraints.”
What advice do you lead with when talking to boards and CEOs?
If boards stay focused on strategy and their shareholders, they’re going to end up in the right spot. You won’t necessarily always get a deal done, but you’ll end up in the right spot. So we always start with a defensible strategic rationale for the transaction itself. If the deal can’t pass muster on its own merit, then let’s all set down our pencils and get on with something else. If that strategic merit is based on dominating a particular sector, well, we can put the brakes on because every nation has some version of antitrust regulations.
But the subtler issues of national security or currency controls, the nuanced questions of market definition around antitrust – those take real work to understand. It probably doesn’t take me very long to identify a North Korean buyer of US nuclear power assets as being a non-starter. But there are a host of transactions that I see every day that are far more debatable and far less black and white than that.
How often do these debates result in deals not going forward?
It happened this morning, actually. I have a foreign client looking at an asset in the US.
I shared that there are challenges around that asset’s ownership that make getting a deal done less likely. And the asset quality itself would require an enormous investment to bring it to the same standard as my client’s existing operations. So, I basically said, “I’m in the deal-doing business.
If you tell me that you really want to give this a go, we’ll think hard about it. But my advice to you is: let’s look for the next opportunity.” And they agreed.
There are very few right and wrong answers to the questions we get asked. We occasionally get asked a simple question like, “How did you calculate the weighted-average cost of capital in this discounted cash flow?” That’s pretty rare. Not a lot of boards are really spending their time asking that question. Nor should they be. More often, we get complicated questions with no right or wrong answer, where it’s a question of judgment. And 30 years of experience gives me the basis for some level of judgment. But it also has taught me that I’m as fallible as the next guy.
2017 was a strong year for M&A. How much of that was driven by cross-border transactions?
It was a strong year, both in terms of volume and number of transactions. But cross-border deals are down. If we stripped out Broadcom, which had a massively distorting effect by the sheer size of it – and there are some complexities depending on how you define Broadcom’s domicile – then in terms of volume, cross-border activity was down in every single market other than transatlantic.
One of the biggest reasons is that cross-border activity tends to revolve around larger transactions that bump up against regulatory issues that in-market, domestic deals sometimes don’t. And those issues can run the gamut from antitrust to national security concerns to questions of taxation or employment. It can get complicated pretty quickly. Investment Canada, for instance, considers different things than CFIUS [the Committee on Foreign Investment in the United States] does.
The challenges involved in cross-border deal-making have always been present, to some extent, but it’s certainly been building.