New M&A Developments: January 1, 2022, through September 30, 2023

Introduction

This article is an introduction to the following article,^[1] which was written by this author and published in the October 2023 issue of the Penn State Law Review’s online companion, the Penn Statim:

Summary of New Developments in the M&A Marketplace as of December 31, 2022, with Comments on 2023 Developments through September 30, 2023

The Summary of New Developments article is based on the recent update of the New Developments section of chapter 1 of this author’s six-volume book, Mergers, Acquisitions and Tender Offers, which is published by the Practising Law Institute and updated twice a year. This New Developments section is divided into the following principal sections:

• Section I, Recent Data: Macro View of the Recent Economic and Financial Impact of M&A, Sections 1:7.5 through 1:7.10;
• Section II, Recent Data: Structural Issues in Recent M&A Deals, Sections 1:7.11 through 1:7.19;
• Section III, Recent Data: Takeover Defenses, Tender Offers, and Related Issues, Sections 1:7.20 through 1:7.31;
• Section IV, Recent Data: Cross Border M&A, Sections 1:7.32 through 1:7.36; and
• Section V, Recent Data: Other M&A Issues, Section 1:7.37 through 1:7.43.

It must be emphasized that this Summary of New Developments focuses principally on the recent economic and financial aspects of M&A, and not on substantive legal developments. Those developments are addressed in the relevant chapters of the book, which has twenty-eight chapters. All mentions of specific chapters in the following text refer to Mergers, Acquisitions and Tender Offers.

The following sections of this article briefly discuss some of the highlights addressed in the five major sections of the Summary of New Developments. The emphasis here is on “some,” as there are many important concepts not discussed in this document.

Part I, Macro View of the Recent Economic and Financial Impact of M&A (Sections 1:7.5 through 1:7.10 of the Article)

The Rollercoaster Ride in Recent M&A. From 2013 through 2020, U.S. M&A activity was fairly level in both dollar value and number of deals. However, there was a “rollercoaster ride” from 2020 to 2022, with a significant increase in both deal volume and number of deals from 2020 to 2021, followed by a significant decrease in both of these measures from 2021 to 2022. Worldwide M&A activity generally followed this same pattern.

The fall in U.S. M&A activity from 2021 to 2022 was largely attributable to rising interest rates, which were engineered by the Federal Reserve Board in its fight against inflation.

M&A and GDP. M&A deal volume tends to move in lockstep with the growth or decline in aggregate Gross Domestic Product (GDP).^[2] If GDP falls, which happens in a recession such as the recent one attributable to COVID-19, then M&A deal volume tends to fall.

M&A activity is also generally correlated with increases and decreases in the stock market. As inflation increases, interest rates will generally increase, and stock prices will generally fall. In addition, the S&P 500 (a broad measure of the value of stock) and total M&A transaction value generally move in lockstep, with both moving up or down together. However, during the COVID-19 years from 2019 to 2020, the stock market went up rather dramatically, while M&A volume dropped significantly, as did gross domestic product (GDP). This is an indication that the stock market is forward looking, whereas the growth in GDP from year to year is a function of the then-current economic performance.

Also, generally, when domestic M&A activity is robust, foreign M&A activity also tends to be robust, and when domestic activity declines, as was the case in 2022, foreign activity tends also to decline. This may mean that M&A activity, whether domestic or foreign, is driven by the same factors.

Cash or Stock? Most M&A transactions are all-cash deals, and this has remained true in recent years. As discussed in chapter 9, all-cash deals are virtually always taxable to the Target’s shareholders. On the other hand, if the consideration is all stock of the Acquirer, the transaction is generally tax free to the Target’s shareholders. In most years, in approximately 15% of all deals, stock of the Acquirer is the sole consideration.

Top Target Industries. For 2022, the top target industry in terms of both number of deals and dollar value of deals was “Technology Services.”

Domestic vs. Foreign Deals. Although in many years the value of U.S. deals exceeds the value of foreign deals, in all but one year since 2013 (2015), the number of foreign deals exceeded, by a wide margin, the number of U.S. deals. This indicates that the average value of foreign deals is substantially less than the average value of U.S. deals.

Overall Assessment of M&A in 2022. This brings us to the following overall assessment of M&A in 2022 by the Wachtell Lipton law firm, one of the most active law firms specializing in M&A:

The year 2022 was a tale of two halves for M&A. The beginning of the year was active, as robust deal-making carried over from the record-breaking levels of 2021 . . . . [However,] M&A activity slowed considerably after the first half of 2022, [as a result of] [1] a substantial dislocation in financing markets, [2] an increasingly volatile stock market, [3] declining share prices, [4] concerns over inflation, [5] rapidly increasing interest rates, [6] war in Europe, [7] supply chain disruption, and [8] the possibility of a global recession[.]^[3]

The article points out that “[n]otwithstanding lower overall activity, a number of megadeals were signed in 2022.”^[4]

Part II, Structural Issues in Recent M&A Deals (Sections 1:7.11 through 1:7.19 of the Article)

Relative Numbers and Values of Public and Private Deals. While the number of public acquisitions and mergers is significantly less than the number of such private deals, the aggregate deal value of public deals is significantly more than the aggregated deal value of private deals. For example, for 2022, there were 216 acquisitions of publicly held U.S. Targets for a total of $653 billion, while, on the other hand, in the same year, there were 10,900 acquisitions of privately held domestic Targets for a total consideration of $252 billion.^[5]

Thus, while the business press is full of articles discussing deals in which a publicly held Target is acquired, the number of these deals is nowhere near the number of non-public deals. However, the average value of these public deals generally exceeds by a wide margin the average value of private deals.

The EBITDA Valuation Metric. As discussed in chapter 11, which deals with valuation, a common deal metric is the comparison of (1) the Target’s earnings before interest, taxes, depreciation, and amortization (EBITDA) with (2) the Target’s total invested capital (TIC) or enterprise value (EV). Both TIC and EV mean the fair market value of the firm’s total debt (net of cash held) and equity. In addressing the EV/EBITDA ratio of the market generally as of the beginning of 2023, the Litera 2023 M&A Report explains:

Perhaps the biggest finding in this report is around EV/EBITDA valuations, which appear to be coming down at long last. Since 2016, the median M&A multiple has hovered around 10x, briefly wading into 11x territory in the buying frenzy of late 2021. For the first time in six years, however, the median EV/EBITDA multiple fell below 10x in Q3 2022, and the fourth quarter is following the same trajectory.^[6]

In virtually all cases, the M&A multiple will be higher than the S&P 500 multiple because Acquirers have to pay a price that is higher than the going market price in order to get a sufficient number of a Target’s shareholders to accept the transaction.

Impact of Rising Interest Rates and PE Deals. It can be expected that as interest rates rise, thereby increasing the cost of financing acquisitions, the price Acquirers will be willing to pay for Targets will fall. Also, the increased interest rates in 2022 and 2023 have led some Private Equity (PE) deals (see chapter 14) to be done on an all-equity basis.

The Level of PE Activity. As an illustration of the significance of PE in M&A deals, it has been reported that over the years the following PE firms have completed the indicated number of deals: (1) Shore Capital Partners—586; (2) The Carlyle Group—485; and (3) KKR—438.^[7]

Overpayments by Acquirers. In public deals, there is a tendency for the Acquirer to overpay. Investors’ concern about overpayment is illustrated in the 2020 acquisition of Slack by Salesforce. In that transaction, one source reported that the shares of Salesforce fell from around $264 before the deal became known to $220.78 at the end of the day the transaction was announced. The loss was 16.5% of the pre-announcement value, representing a $18.7 billion loss in value, which apparently was more than the amount paid for Slack.^[8]

Part III, Takeover Defenses, Tender Offers, and Related Issues (Sections 1:7.20 through 1:7.31 of the Article)

The Pill. As discussed more fully in chapter 5, the most potent defensive tactic against a hostile takeover attempt is the Shareholder Rights Plan (i.e., Poison Pill), and although there had been a decrease in the number of companies with pills from 2006, there appears to have been a slight uptick in the number since COVID. However, a pill can be adopted in a “moment” after a Target’s board receives “notice” of an unwelcome offer.

The potential ineffectiveness of a pill in preventing a hostile takeover is illustrated in the 2022 acquisition by Elon Musk of Twitter. For example, an article in the New York Times on April 15, 2022, discussing the adoption of Twitter’s pill was entitled “Twitter Counters a Musk Takeover with a Time-Tested Barrier.”^[9] Twitter’s “Time-Tested Barrier” was effective for exactly ten days, because, as a result of shareholder complaints and threats of suit, Twitter’s board entered into a merger agreement with Musk on April 25, 2022.^[10]

This is an illustration that in Delaware, where Twitter is incorporated, a Target cannot use a pill to “Just Say No.” On the other hand, it may be possible for a Target incorporated in certain other states, such as Pennsylvania, to use a pill to “Just Say No.”

There is often a lot of interest in hostile tender offers. These are transactions in which a hostile Acquirer makes an unwanted bid directly to the shareholders of the Target. Tender offers can also be non-hostile as a first step in effectuating a two-step merger. As indicated in chapter 4, in many cases a consensual tender offer followed by merger can be effectuated much more quickly than a one-step merger.

Notwithstanding the large interest in hostile tender offers, they are rare. For example, in 2018 and 2019, there were only three; in 2020, there were six; in 2021, there was one; and in 2022, there were four. The treat of a hostile tender offer can cause a Target’s management to pay closer attention to their jobs; however, with the pill and the threat of a pill, potential hostile Acquirers are significantly deterred.

Deal Protection Devices; Direct and Reverse Termination Fees. A significant amount of time and effort goes into the planning and negotiating of a consensual deal, and an Acquirer will naturally be concerned that it will spend a lot of time and effort in securing a deal and then seeing the deal snatched by a higher bidder. One way of reducing the risk of loss is for the Acquirer to negotiate for a termination fee to be paid by the Target if the Target accepts a higher bid from a third party. As demonstrated in chapter 5, there can be a breach of the fiduciary duties of the Target’s directors if the termination fee is so high that potential topping bidders would be deterred from putting in a higher bid.

In addressing this issue in 2022, the average termination fee when measured against (1) the Target’s Total Invested Capital (i.e., equity and debt) was 4.1%, and (2) deal size was 3.3%.^[11] As discussed in chapter 5, absent unusual circumstance, a court is likely to find a termination fee at these levels acceptable.

While termination fees are generally present in negotiated acquisitions of a public Target, they are rare in acquisitions of closely held Targets.

A termination fee paid by the Target to the Acquirer is commonly referred to as a Direct Termination Fee. A termination fee running from the Acquirer to the Target if the Acquirer walks away from the transaction is referred to as a Reverse Termination Fee, and as discussed in chapter 5, as a general matter, they do not present the same fiduciary duty issues as a Direct Termination Fee. Consequently, generally there is no limit on the size of a Reverse Termination Fee. In many transactions, such as in the Twitter deal, the Direct and Reverse Termination Fees are the same size.

In most public deals and in virtually all private deals, there will be a “No Shop” provision, which will, after the signing of the deal, prevent the Target’s board from actively seeking a higher deal. As indicated in chapter 5, while these provisions are generally acceptable in Delaware, they generally cannot be used by a Target’s board to “Just Say No” if it is approached by a potential higher bidder.

In some deals, the Target’s board may be given a “Go Shop,” which will for a specific period of time after the signing of the deal permit the Target’s board to seek an alternative buyer. As a general matter, the Termination Fee the Target will have to pay if it goes with a topping bidder that arises in the Go Shop period will be less than the Termination Fee that will have to be paid if the topping bidder shows up after the Go Shop period.

Banks and Bankruptcies. Virtually every business executive and business lawyer is aware of the bankruptcies of several banks that occurred in 2023. As addressed more fully in chapters 16 and 17, as a result of the Federal Reserve Board’s tight monetary policy (i.e., higher interest rates) for fighting inflation, there were the following three major bank bankruptcies during calendar year 2023 as of June 15, 2023:

1. Signature Bank;
2. Silicon Valley Bank; and
3. First Republic Bank of San Francisco.

In each of the above three transactions the banks were taken over by a profitable bank holding company. As of November 9, 2023, there were also bankruptcies by the following two banks: Citizens Bank, Sac City, Iowa and Heartland Tri-State Bank, Elkhart, Kansas.^[12]

As discussed more fully in chapter 16, which deals with bankruptcy generally, and chapter 17, which deals with bank acquisitions, as a general matter, the cause of these bankruptcies was higher interest rates engineered by the Fed in its fight against inflation. Rather than borrowing low and lending high, these banks got caught into the trap of having to borrow high and lend low.

Most Active Investment Banks and Law Firms. As indicated from the following Figure 1-30 in the Summary of New Developments article, many of the usual investment banking firm and law firm “suspects” were the most active in M&A for 2022:

Figure 1-30

Top 10 M&A Investment Banking Firms and Law Firms Ranked by U.S. Deal Volume 2022

Sources: (a) 2022 Mergerstat Financial Advisor Rank by Total Value, 2023 FactSet Review at 74. (b) 2022 Mergerstat Legal Advisor Ranking by Total Value, 2023 FactSet Review at 75.

Proxy Contests. As discussed more fully in chapters 5 and 8, a proxy contest can involve, inter alia, (1) an attempt by an insurgent individual or group to gain control of the board of a publicly held company, and (2) an attempt by a potential Acquirer to replace the board of a publicly held Target company with the purpose of facilitating the acquisition of the Target by the Acquirer. Proxy contests may also involve the efforts of an activist shareholder, such as Carl Icahn, to use such a technique to gain control of the board for the purpose of changing the Target corporation’s business policies. Activist proxy contests are generally addressed in the next section.

The number of these contests ranged from 102^[13] in 2018 to 85 in 2022, with the number going straight down yearly from 2018 to 2022. The reasons for this drop are not clear to this author; however, it can be expected that the SEC’s new “Universal Proxy” rules, which were adopted in 2021, could have had a depressing impact on the number of proxy contests.

Activist Shareholders. As discussed in chapter 28, activist shareholders are involved in many proxy contests. However, the activist does not prevail often; for example, in 2022 the Activist prevailed in eight of the 85 contests. As indicated next, an activist may employ a short selling strategy.

Short Selling and the Attack on Ichan Enterprises. Although short selling strategies are not included in the Summary of New Developments, there could be a heightened interest in short selling strategies as a result of the short selling attack on Icahn Enterprises, controlled by Carl Ichan, arguably one of the “Kings of Short Sellers.”

A traditional short selling investment strategy could include the following steps taken by the Short Seller:

1. The Short Seller borrows stock of the Short Selling Target;
2. The Short Seller then sells the borrowed stock on the open market at the going price, say $20 per share;
3. The Short Seller then talks down the price of the stock through publicly distributed analyses that show that the stock of the Short Selling Target is over-priced; and
4. After the expected fall in the price of the stock of the Short Selling Target, say to $12 per share, the Short Seller purchases the stock at $12 per share and uses that stock to close out the original borrowed stock position, which was $20 per share.

When the dust settles, the Short Seller has a profit of $8 per share before expenses.

Thus, rather than following the usual investing strategy of buying low and then selling high, the short seller sells high and then buys low, with that stock used to close out the high price position that was financed with debt.

As discussed in chapter 28, Icahn Enterprises, L.P., a publicly held firm controlled by Carl Icahn, came under a short selling attack in 2023 by a short selling firm, Hindenberg Research. As a result of that attack, there was a significant drop in the trading price of Ichan Enterprises, leading one source to title its report on the situation as “Icahn Got Icahn’ed.”

As a result of this situation, it can be expected that there will be a heightened interest in short-selling strategies.

Part IV, Cross Border M&A (Sections 1:7.32 through 1:7.36 of the Article)

In General. Chapters 19 through 22 address various aspects of inbound (i.e., acquisitions by a Foreign Acquirer of a US. Target) and outbound (i.e., acquisitions of by a U.S. Acquirer of a Foreign Target) cross border M&A. This section provides a high-level review of some of the financial and economic considerations of this activity.

Wachtell Lipton publishes an annual Cross-Border M&A Guide,^[14] and the 2023 Guide, which was issued in early 2023 covering principally 2022 activity, provides the following overview of cross border M&A activity during 2022:

[Cross Border M&A Generally:] Cross-border merger and acquisition (“M&A”) transactions are a significant part of the global M&A landscape, representing approximately a third of all deal activity annually in recent years.

[The “Reversion to the Mean”:] After a record-shattering year for M&A in 2021, the year 2022 represented a reversion to the mean in terms of M&A volume, reflecting the impact of [1] Russia’s invasion of Ukraine, [2] interest rate spikes, [3] challenging debt markets, [4] ongoing supply chain disruption, and [5] the Covid-19 pandemic.

Worldwide M&A volume decreased to $3.6 trillion in 2022, compared to an average of $4.3 trillion annually over the prior ten years (in 2022 dollars). Cross-border deal volume in 2022 was $1.1 trillion, equivalent to 32% of global M&A volume and consistent with the average proportion (35%) over the prior decade.

[Inbound Transactions:] Acquisitions of U.S. companies by non-U.S. acquirors constituted $217 billion in transaction volume and represented 19% of 2022 cross-border M&A volume.^[15]

It is interesting to note that, as would be expected, the bulk of M&A activity takes place in North America and Europe.

The Impact of the Exchange Rate. The foreign exchange rate can have a significant impact on inbound acquisitions and outbound acquisitions. For example, if the dollar becomes weaker (that is, it takes less of a foreign currency to purchase a dollar) when measured against the currencies of the major trading partners of the United States, then (1) it will be cheaper for potential Acquirers located in such countries to buy U.S. Targets, and (2) at the same time, it will become more expensive for potential U.S. Acquirers to buy Targets located in such countries. The reverse is true if the dollar becomes stronger (that is, it takes more of a foreign currency to purchase a dollar).

The UNCTAD World Investment Report. This Report, which was not available at the time of the writing of the Summary of New Developments, gives the following high-level overview regarding the level of M&A in 2022:

The multitude of crises and challenges on the global stage – the war in Ukraine, high food and energy prices, risks of recession and debt pressures in many countries – negatively affected . . . cross-border mergers and acquisitions (M&As), [which] were especially shaken by stiffer financing conditions, rising interest rates and uncertainty in financial markets.^[16]

It can be expected that the war between Israel and Hamas, which began in October 2023 (and is still raging as this article is being written in early November 2023) will have a depressing impact on cross border M&A involving a company located in, or doing significant business in, the Middle East.

Another section of the UNCTAD Report provides the following observations on the M&A component of Foreign Direct Investment (FDI), which is investment by a company located in one country, such as the U.S., into another country, such as France:

In 2022, FDI flows to developed countries as a group fell by 37 per cent, largely in Europe and North America. In the other developed countries, they rose . . . In the United States, flows declined by 26 per cent to $285 billion, mainly due to the halving of cross-border M&As, which generally account for a large share of inflows. Among the 10 largest [M&A transactions], only one occurred in the United States. The decrease in M&As had a direct impact on the equity component of FDI, which fell by 35 per cent. . . . [I]n Canada [FDI] decreased by 20 per cent to $53 billion, as cross-border M&A sales fell by 37 per cent.

While cross-border M&As declined to $11 billion, announced greenfield [new investment] projects rose 28 per cent, to $25 billion.^[17]

U.S. Acquirers of Foreign Targets, and Foreign Acquirers of U.S Targets. From 2018 to 2023, the number of Foreign Targets of U.S. Acquirers in outbound acquisitions exceeded the number of U.S. Targets of Foreign Acquirers in inbound acquisitions. Thus, over this period there were, and generally there are, more U.S. Acquirers of Foreign Targets than Foreign Acquirers of U.S. Targets. However, the number of inbound and outbound acquisitions for each of those years were not dramatically different. For example, in 2022, there were (1) 2,519 acquisitions by U.S. Acquirers of Foreign Targets and (2) 1,842 acquisitions by Foreign Acquirers of U.S. Targets.^[18]

In elaborating on one aspect of inbound activity, a 2021 article entitled American Companies You Didn’t Know Were Owned By Chinese Investors contains, inter alia, discussions of the following U.S. companies that have significant Chinese shareholders: (1) AMC; (2) Shanghai Automotive Industry Corp (SAIC), which has a partnership with GM; (3) Spotify; (4) Hilton; and (5) GE’s appliance division.^[19]

CFIUS-Type Restrictions. As a result of the growth in cross border acquisitions and ownership, many countries have adopted investment restrictions for investments by foreign persons similar to the Committee on Foreign Investment in the United States (CFIUS) law in the United States, which is discussed in chapter 19. On this development, the UNCTAD World Investment Report 2023 says:

[T]he trend observed in recent years towards introducing or tightening national security regulations that affect FDI in strategic industries continued and expanded. The approach to FDI screening varies significantly from country to country, resulting in a patchwork of different regimes. Together, countries with FDI screening regimes accounted for 71 per cent of global FDI flows and 68 per cent of FDI stock in 2022, compared with 66 and 70 per cent, respectively, in 2021. Furthermore, the number of merger and acquisition (M&A) deals valued at more than $50 million withdrawn by the parties for regulatory or political concerns in 2022 increased by a third, and their value increased by 69 per cent.^[20]

These foreign CFIUS-type restrictions are discussed in chapter 20, which deals with outbound acquisitions.

Part V, Other M&A Issues (Sections 1:7.37 through 1:7.43 of the Article)

Recent Developments with Special Purpose Acquisition Companies (SPACs). SPACs, which are addressed generally in chapter 6, are companies organized through a blank check initial public offering (IPO). In these transactions, at the time of the IPO, the issuing company has no business other than the plan to use the funds raised in the IPO to acquire an operating company. When a SPAC completes an acquisition, the transaction is sometimes referred to as a de-SPAC. Obviously, SPAC transactions are heavily regulated by the SEC.

As indicated in the Summary of New Developments article, the number of SPACs between 2018 and 2022 has been on a “roller coaster” ride with (1) 2018 and 2019 having 29 SPACs each; (2) 2020 jumping to 98; (3) 2021 more than doubling at 210; and (4) 2027 more than halving to 127. Also, through August 2023, there were just 22, an 80% decline. ^[21]

Introduction to Blockchain and Cryptocurrency M&A. Although this topic is introduced in the Summary of New Developments, this author has limited expertise in this area. However, it appears that the SEC disclosures by Coinbase, which was the first major crypto company to go public in an initial public offering, can provide helpful information on this topic. For example, Coinbase’s April 1, 2021, IPO prospectus provides the following background information on Bitcoin, the largest cryptocurrency:

Bitcoin sparked a revolution by proving the ability to create digital scarcity: a unique and finite digital asset whose ownership could be proven with certainty. This innovation laid the foundation for an open financial system. Today, all forms of value – from those natively created online such as in-game digital goods to traditional securities like equities and bonds – can be represented digitally, as crypto assets. Like the bits of data that power the internet, these crypto assets can be dynamically transmitted, stored, and programmed to serve the needs of an increasingly digital and globally interconnected economy.

Today, we enable customers around the world to store their savings in a wide range of crypto assets, including Bitcoin and USD Coin, and to instantly transfer value globally with the tap of a finger on a smartphone.^[22]

Coinbase’s more recent SEC filings may be helpful in understanding this topic as well.

For an excellent review of many of the legal issues impacting cryptocurrencies in the context of M&A, see the following article: Blockchain M&A: The Next Link in the Chain.^[23] Among other things this article addresses the following issues:

1. U.S. Federal Securities Laws Considerations. [See chapter 6]
2. Commodities Regulation Considerations.
3. Federal and State Money Transmission Considerations.
4. U.S. Anti-Money Laundering Considerations.
5. Sanctions Considerations.
6. 1940 Act Considerations.
7. IP Rights Considerations.
8. Privacy and Cybersecurity Considerations.
9. CFIUS Considerations [See chapter 19]
10. Tax Considerations [See chapter 9]

The Impact of Environmental, Social, and Governance (ESG) on M&A. Two lawyers from Wachtell Lipton paint the following picture of the potential impact of ESG on M&A in 2022:

In the past year, ESG has played an increasingly prominent role in activist campaigns, most dramatically exemplified by Engine No. 1’s success in electing three directors to Exxon Mobil’s board, as well as by the development of the two-front activist “pincer” attack in which an ESG activist attack is followed by an attack from an activist focusing on financial returns. Activists have also leveraged ESG to further their M&A theses: Third Point called for the breakup of Royal Dutch Shell, Elliott called for the separation of SSE’s renewables business and Bluebell called on Glencore to divest its coal business.

ESG’s influence is also increasingly evident in the context of M&A negotiations and larger deal considerations. As one example, it has become ever more critical for acquirors to comprehensively diligence the ESG profile of potential Targets—a result of the SEC’s increased focus on the adequacy of ESG disclosures and the growing legal, financial and reputational costs of ESG underperformance.^[24]

This topic is discussed from a due diligence perspective in chapter 3.

The Impact of ChatGPT and Other Artificial Intelligence (AI) Firms on M&A. Business activity with AI is fast moving as indicated by the announcement in January 2023 by Microsoft of the expansion of its partnership with OpenAI, a leader in the AI business. A Microsoft press release^[25] on the transaction explained:

Today, we [Microsoft] are announcing the third phase of our long-term partnership with OpenAI through a multiyear, multibillion dollar investment to accelerate AI breakthroughs to ensure these benefits are broadly shared with the world.

This agreement follows our previous investments in 2019 and 2021. It extends our ongoing collaboration across AI supercomputing and research and enables each of us to independently commercialize the resulting advanced AI technologies.

Supercomputing at scale – Microsoft will increase our investments in the development and deployment of specialized supercomputing systems to accelerate OpenAI’s groundbreaking independent AI research. We will also continue to build out Azure’s leading AI infrastructure to help customers build and deploy their AI applications on a global scale.

New AI-powered experiences – Microsoft will deploy OpenAI’s models across our consumer and enterprise products and introduce new categories of digital experiences built on OpenAI’s technology . . . .

Exclusive cloud provider – As OpenAI’s exclusive cloud provider, Azure [a computer system] will power all OpenAI workloads across research, products and API services.^[26]

Obviously, this is a very complex topic, and the discussion here and in the Summary of New Developments is designed only to alert the reader to some of the issues related to AI.

Preliminary Report on M&A Activity in 2023. This section of the Summary of New Developments article discusses some of the M&A developments occurring in 2023 that are not discussed in the preceding sections. The developments discussed here generally occurred after the submission of the New Developments sections to PLI at the end of June 2023 and before September 30, 2023, several days before the publication of the Summary of New Developments on the Penn Statim.

This section of the article shows that both worldwide “Value” and “Number of Deals” were down dramatically through August 2023. With respect to the dollar size of deals, through August 2023, there were twenty-nine deals with an acquisition price of $5 billion or more, whereas in the same period during 2023 there were forty-nine deals of that size.^[27]

Conclusion

In closing, it must be noted that the above discussion addresses only some of the many issues addressed in the Summary of New Developments. The Summary can be accessed free of charge on the Penn Statim website.

1. I thank my following Penn State Law Research Assistants for comments on this article: Akshaya Senthil Kumar, an LLM student, and William Schroeder, a third-year student. ↑

2. GDP is the dollar value of aggregate purchases of new products and services by (1) consumers, (2) firms, (3) federal, state, and local governments, and (4) foreign persons (netted against foreign purchases by U.S. persons). ↑

3. Igor Kirman, Victor Goldfeld, Elina Tetelbaum, Wachtell Lipton Rosen & Katz, Takeover Law and Practice: Current Developments, Harv. L. Sch. F. Corp. Governance (May 3, 2023), https://perma.cc/95JP-2CD3. ↑

4. Id. ↑

5. FactSet Mergerstat, 2023 FactSet Review, at 25 (Table 1-3, Composition of Aggregate Net Merger and Acquisition Announcements, with respect to Number of Deals) and at 31 (Table 1-5, Composition of Net Merger and Acquisition Announcements, 2018-2022, with respect to Value of Deals) (May 2023). ↑

6. Litera Corp., 2023 M&A Report: Return to Normal: Resilience and Resetting 12 (Dec. 1, 2022), https://perma.cc/QS5E-BVKA. ↑

7. Id. at 12. ↑

8. Alex Wilhelm & Ron Miller, Salesforce Slumps 8.5% As Its Post-Slack Selloff Continues, Tech Crunch (Dec. 2, 2020), https://techcrunch.com/2020/12/02/salesforce-slumps-8-5-as-its-post-slack-selloff-continues/. ↑

9. Lauren Hirsch & Kate Conger, Twitter Counters a Musk Takeover with a Time-Tested Barrier, N.Y. Times (Apr. 15, 2022), https://perma.cc/T5LK-Q5DK. ↑

10. See Twitter Inc., Current Report (Form 8-K) (Apr. 25, 2022). ↑

11. 2023 FactSet Review at 76, Termination Fee Average and Median Percentage of Total Invested Capital and Deal Size 2022.↑

12. FDIC, Bank Failures in Brief — 2023, https://www.fdic.gov/bank/historical/bank/bfb2023.html (last updated Nov. 3, 2023). ↑

13. 2018-2022 Proxy Contest Winners for U.S. Incorporated Companies, FactSet Universal Screening, as of June 2023. ↑

14.  Wachtell, Lipton, Rosen & Katz, Cross-Border M&A Guide 1 (Apr. 2023), https://perma.cc/UNC3-6CMF. ↑

15.  Id. ↑

16. UNCTAD, World Investment Report 2023, Ch. 1, International Investment Trends, at 2 (2023). ↑

17. Id. at 8. ↑

18. 2023 FactSet Review at 72, U.S. Acquisitions of Foreign Businesses 2004–2022, and at 140, Foreign Acquisitions of U.S. Companies 2008–2022.↑

19.  Don Buckner, American Companies You Didn’t Know Were Owned By Chinese Investors, MadeInAmerica.com (Jan. 12, 2021), https://perma.cc/GHK8-ESZK. ↑

20. UNCTAD, World Investment Report 2023, Ch. 1, International Investment Trends, at 56 (2023). ↑

21. Number of special purpose acquisition company (SPAC) IPOs in the United States from 2003 to August 2023, Statista (Aug. 21, 2023), https://www.statista.com/statistics/1178249/spac-ipo-usa/. ↑

22. Coinbase Global, Inc., Registration Statement (Form S-1) (Feb. 25, 2021). ↑

23. F. Dario de Martino, Blockchain M&A: The Next Link in the Chain, Stan. J. Blockchain L. & Pol’y (Jan. 4, 2021). ↑

24.  Victor Goldfeld et al., Mergers and Acquisitions: 2022, Harv. L. Sch. F. Corp. Governance (Jan. 27, 2022), https://perma.cc/5TGQ-VXGB. ↑

25.  Microsoft and OpenAI Extend Partnership, Microsoft (Jan. 23, 2023), https://perma.cc/Y9NR-TUKS. ↑

26.  Id. ↑

27. Refinitiv, M&A Monthly Snapshot: August 2023, 1–2 (Aug. 2023), https://perma.cc/VU63-NRPJ. ↑