Axios Pro: Climate Deals

November 16, 2022

Axios Pro Exclusive Content

🐪 Happy Wednesday!

🌎 Crunch time at COP27: Major fault lines remain as negotiations hit the middle of their second week. Axios' Andrew Freedman has the latest.

  • Meanwhile, at the G20, countries pledged today to maintain the ambitious but long-shot Paris Agreement goal of holding temperature rise to 1.5°C. Axios' Ben Geman looks at what, if anything, that means.

1 big thing: Deal advisers forecast cloudy skies

Speaking at the Berkeley Forum are (from left) Rachel Proffitt, Steve Lipin, Ed Batts and Brittany Skoda. Photo: Michael Flaherty/Axios

Getting a corporate deal done in the current climate isn't impossible. But it will require patience, creativity and some banking jiu-jitsu, a panel of advisers said last week at the Berkeley Forum on Corporate Governance, Axios' Michael Flaherty writes.

Why it matters: Deal volumes dropped 55% in Q3, meaning options for some struggling companies to survive are dwindling.

Yes, but: Opportunistic buyers are dusting off target sheets and preparing to scope out cash-heavy, lending-light candidates.

  • For now, uncertainty is keeping them at bay, said the panelists, who gathered in San Francisco with a roomful of mostly deal lawyers.
  • "Investors keep waiting for another shoe to drop," said panelist Brittany Skoda, Morgan Stanley's global head of software banking. She said they're asking if there's something missing, and if it's going to get worse. "It feels increasingly that the answer to that question is yes."
  • She added that the big question for the software industry is where IT budgets are being set for 2023.

Of note: Steve Lipin, CEO of Gladstone Place Partners, said well-capitalized buyers are getting ready to make a move. But he echoed the view that volatility continues to keep CEOs from pouncing, as budgets and belt-tightening are their main focus.

  • "Fast firing has replaced quiet quitting," he said.

Zoom in: SPACs that went public with a flare, and quickly saw their value fizzle, offer buying opportunities.

  • "There's a large number of de-SPAC companies that their viability as standalone entities are questionable. And they’re very cheap," said deal lawyer Ed Batts, a Gibson Dunn partner.
  • "The interesting thing about de-SPACs is that, unlike prior cycles, it's very easy to understand where they're at. They all started at $10. If they're at 78 cents, you know there's been a significant depreciation," Batts added.

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