$800 MILLION FEEDING FRENZY: Wall Street banks stand to make a fortune from a tech deal spree

  • Broadcom’s record-breaking $US130 billion bid for rival chipmaker Qualcomm could earn banks as much as $US280 million in advisory fees.
  • Qualcomm is set to reject the unsolicited offer, according to several reports.
  • Wall Street bankers have been on a feeding frenzy orchestrating transactions for a handful of tech chipmaking firms.
  • If pending deals gain approval, bankers will have earned a payday of as much as $US790 million in advisory and debt financing fees from four takeover transactions since 2015.
  • The deal spree has been especially lucrative for a handful of banks, with JPMorgan working on three of the four deals.

Broadcom just unloaded a record-breaking $US130 billion bid for fellow semiconductor giant Qualcomm.

If completed, it would be the largest tech takeover of all time — and could net the companies’ investment bankers a massive payday of as much as $US280 million in advisory fees. Qualcomm is reportedly planning to reject the offer.

This isn’t the first mammoth transaction Wall Street bankers have orchestrated involving these two firms. Qualcomm was in the middle of trying to buy NXP Semiconductor’s for $US47 billion — which also would be one of the largest deals of all time — before Broadcom crashed the party and said it would buy Qualcomm, with or without NXP.

In fact, bankers have been bingeing on lucrative M&A deals involving Broadcom, Qualcomm, and NXP over the past three years.

The feeding frenzy so far, including the pending transactions, involves four deals since 2015 worth $US230 billion. The deals could trigger as much as $US790 million in fees for the Wall Street firms running the deals, according to according to Jeffrey Nassof, director of consulting firm Freeman & Co.

That figure includes financing fees — except for the just-announced Broadcom for Qualcomm deal — which adds $US210 million to the tally. Broadcom could reportedly require as much as $US90 billion in debt to close the deal, which means the total amount of advisory and financing fees paid out to banks could surpass $US1 billion.

In many cases, the same banks have advised on multiple transactions. JPMorgan advised Broadcom on its deal with Avago, signed on to help finance Qualcomm’s deal for NXP Semiconductors, and is part of the financing team for Broadcom’s bid for Qualcomm.

Here’s a breakdown of the transactions, as well as how much bankers earned in advisory fees:

March 2015: NXP buys Freescale Semiconductor — $US16.7 billion

Announced in March of 2015 and completed later that year in December.

Dutch chipmaker NXP was advised exclusively by Credit Suisse, which also provided financing for the transaction along with several other banks. Credit Suisse earned $US25 million in fees for advising on the deal, and a share of the $US35 million fee for arranging $US5.3 billion in debt financing, according to according to Jeffrey Nassof, director of consulting firm Freeman & Co.

Morgan Stanley was the exclusive advisor to Freescale, which paid the bank $US42 million in fees.

Advisory fees: $US102 million

May 2015: Avago Technologies buys Broadcom — $US37 billion

Avago announced it would pay $US17 billion in cash and $US20 billion in stock to acquire Broadcom, adopting the latter company’s name and creating the behemoth that’s now pursuing Qualcomm. The deal closed at the beginning of 2016.

Avago hired Deutsche Bank as its financial adviser for the deal, paying $US22.5 million in fees, according to fillings with the Securities and Exchange Commission.

Broadcom hired JPMorgan as its adviser, agreeing to pay a fee of 0.14% of the total deal value, which comes to nearly $US52 million.

Wall Street banks also earned $US100 million in fees for arranging $US16.1 billion in debt financing, according to Nassof.

Advisory fees: $US174.5 million

October 2016: Qualcomm to buy NXP Semiconductor — $US47 billion offer

Last year, Qualcomm ponied up an all-cash offer of $US47 billion to buy NXP. The deal is still in limbo, as NXP shareholders — including feared activist Elliott Management — had been hoping to extract a sweeter offer.

The boutique bank Qatalyst Partners was the lead adviser to NXP, along with Barclays and Credit Suisse. On the buy side, Goldman Sachs and Evercore advised Qualcomm. The boutique firm Centerview Partners advised Qualcomm’s board. And Goldman Sachs and JPMorgan signed on to provide debt financing.

The banks would share a pot of between $US140 million and $US160 million, according to Nassof.

Banks would also earn a $US75 million fee for arranging $US24.6 billion in debt to finance the deal.

Advisory fees: As much as $US235 million

November 2017: Broadcom to buy Qualcomm — $US130 billion offer

Moelis & Co., Citi, Deutsche Bank, JPMorgan, Bank of America Merrill Lynch, and Morgan Stanley are each advising Broadcom on the potential merger. Those banks could share between $US110 million and $US135 million in advisory fees, according to Nassof.

Qualcomm has retained Goldman Sachs and Evercore to mount its defence in the deal; the banks could earn between $US120 million and $US145 million in fees, according to Nassof.

Bank of America, Citi, Deutsche Bank, JPMorgan, and Morgan Stanley are also helping arrange debt financing, and Silver Lake Partners has agreed to supply $US5 billion in convertible debt financing.

Broadcom could reportedly require as much as $US90 billion in debt to close the deal, but it’s too early to say how much banks would net from arranging the financing. If they financed the majority of the transaction through the bond markets, however, the fees could top $US500 million, according to Nassof.

Advisory fees: As much as $US280 million

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