• The business is excellent. Record FY26 revenue of $23.2bn (+26%), a 35% EBIT margin and $35bn returned to shareholders over a decade

• The stock is priced for the bull case. At $347, our base case is worth ~$200 per share (–43%). Our bull case is worth $304, or $349 if the 10-year Treasury falls back to 4.5%

• Peers support the price; Lam’s own history does not. Lam trades in line with re-rated peers at ~34x forward earnings, but at ~3x its own ten-year median trailing P/E

• Our view: LRCX is fully valued. The bull case is achievable, but the price leaves limited margin of safety and is highly sensitive to interest rates

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Lam Research stock is having a terrific year to date

Lam Research shares rose roughly fourfold over fiscal 2026 (July 2025 to June 2026). They closed at $347.49 on 2 October, for a market value of about $436bn. Their operating story justifies investor excitement. Lam posted its fourth consecutive quarter of record revenue in June, and guided the September quarter to $8.1bn, up 52% year on year. Management credits AI for the momentum.

“AI-driven demand continues to reshape the semiconductor industry.” - CEO Tim Archer, Q4 FY26 earnings release

However, the question for investors is not whether Lam is a great business or whether it benefits from the AI spending boom, the real question is: at $347, are you buying reasonable growth at a fair price, or paying today for an outcome that has to go right for the next fifteen years?

To answer it, we rebuilt Lam’s last ten years of financials from its 10-K filings, projected twenty years forward under three scenarios, and tested the result against peers and Lam’s own trading history.

What Lam actually does

Lam builds the machines chipmakers use to build chips. A modern chip is built by repeating two core steps hundreds of times. Deposition lays down ultra-thin films of metal or insulating material, sometimes only a few atoms thick. Etch then carves away material to leave the circuit pattern behind. Lam is a leader in both, plus the clean steps in between. Also, these steps are extremely difficult to do and require incredible technical capabilities. In other words, Lam enjoys very strong competitive moat.

The shift from flat (2D) chips to vertically stacked (3D) designs makes this harder and even more valuable. A 3D NAND memory chip or a gate-all-around transistor needs far more deposition and etch steps per wafer. That rising intensity is the structural tailwind behind Lam.

Lam’s main competitors are Applied Materials and Tokyo Electron, with Hitachi in etch and ASM International in some deposition steps. Positions are very sticky:: once a chipmaker qualifies a tool for a production step, it usually keeps that supplier for the life of that technology node.

The second half of the business matters as much as the tools. Lam’s Customer Support Business Group (CSBG) sells spares, service, upgrades and refurbished tools into its large installed base. CSBG was 36% of FY26 revenue and fell only 11% in the FY24 downturn, against 17% for new systems.

The customer base is concentrated. Four customers each took 10% or more of FY26 revenue, 55% combined; Lam names Micron, Samsung, SK hynix and TSMC as its most significant. China was the largest region at 34% of revenue.

The last 10-years: great growth, but cyclical business

On the headline, Lam’s record is outstanding. Revenue grew from $5.9bn in FY16 to $23.2bn in FY26, a compound rate of 14.7% a year. But that number flatters the business, because of where it starts and ends. FY16 sat early in a memory upcycle, and FY26 sits in the middle of the AI build-out. Measure between comparable points in the cycle and the picture changes:

Measurement window:

1. Ten-year headline (FY16-FY26): 14.7% revenue CAGR

2. Peak to Peak (FY18-FY23): 9.5% revenue CAGR

3. Trough to Trough (FY19-FY24): 9.1% revenue CAGR

The cycle has not gone away. Revenue fell 13% in FY19 and 14% in FY24, and the second downturn came while AI spending was already ramping. Strong AI demand was outweighed by weak memory, PC and smartphone spending.

This matters for valuation. Our base case assumes Lam grows at 9% a year from FY32 to FY41, in line with its own through-cycle history. It is a reasonable assumption, not a pessimistic one.

The AI shift: a better mix, but not more market share

AI has changed what Lam sells and to whom. Foundry and logic customers made up 61% of FY26 systems revenue, up from 30% in FY19. Memory, historically Lam’s core and its most cyclical market, fell from 70% to 39%. Though Memory is far from dead, with Lam’s CEO highlighting a doubling of NAND revenue from the prior quarter in the most recent Q4 FY26 earnings call.

The mix shift arguably makes Lam less cyclical than before, which may be part of the reason the shares have re-rated higher in the last year. Services help too: CSBG has held at 33–40% of revenue since FY19 and grows with the installed base.

One finding stood out in our work. Lam’s share of global semiconductor equipment spending, as reported by SEMI, has stayed at roughly 14–16% since 2018. Lam has grown because the industry grew, not because it took share.

That reframes the bull case. A bet on Lam compounding for decades is really a bet on industry equipment spending compounding for decades. SEMI forecasts total equipment sales of about $156bn in 2027, and Lam guides 2026 wafer-fab equipment spending to the low $150bns.

A high quality business: margins, cash and capital returns

Lam has become much more profitable. EBIT margin rose from 23.7% in FY17 to 35.3% in FY26, and gross margin reached 50.5%. One number in particular deserves attention. Over the decade, free cash flow averaged 0.90x net income, which is healthy. In FY26 it fell to 0.67x, as receivables jumped about $2.0bn on revenue weighted heavily toward the June quarter. Days sales outstanding rose to 84, from 61–67 in the prior two years. For now, we regard this as more of a timing issue and not a quality problem. Nevertheless, this issue is on our radar for upcoming earnings calls (next one is Oct. 21st).

Capital allocation has been shareholder-friendly. Over FY17–FY26, Lam returned $35.1bn, or 103% of its free cash flow: $27.3bn in buybacks and $7.8bn in dividends. The diluted share count fell 31%. Returning more than 100% of cash flow can sound like borrowing to pay shareholders. It was not. Over the decade Lam repaid $1.2bn more debt than it issued. The small gap was funded by employee stock purchases and by running down its investment portfolio. Debt was used tactically in some years, notably FY19, and repaid later.

Two important and reassuring details:

1. R&D was never squeezed. It grew every year, from $1.0bn to $2.4bn, including through both downturns.

2. Buybacks showed price discipline. Lam bought 19.1m shares at an average of ~$128 in the first half of FY26, but only 0.8m in the June quarter at ~$325.

The balance sheet remains conservative: $1.8bn of net cash, gross debt of 0.43x EBITDA, and no maturities before 2029.

The near term: strong, and already in consensus

The next few quarters look strong. Lam’s guidance for the September quarter (Q1 FY27): Revenue: $8.10bn ± $0.40bn, Gross margin: 52.0% ± 1pt, Operating margin: 39.5% ± 1pt, Diluted EPS: $2.15 ± $0.15. At the midpoint, that is 20% sequential growth and 52% year on year. Our base case, anchored to this guidance, produces FY27 revenue of $35.0bn and EPS of $9.68, within a few percent of third-party consensus.

Our divergence comes later. Our base case assumes a digestion year for new-tool sales in FY29, as customers absorb the current wave of capacity. Consensus assumes no such pause, putting FY31 revenue about 17% above our base case.

For us, the real question is about how long the growth lasts, and what it is worth today.

I would normally paywall much of this article’s content - including the valuation section below. For this article, I will be making it entirely free and will later be making the LRCX Analyst Deck (42 slides) and full Valuation Model (excel) available for free as well. My request: consider becoming a paid subscriber.

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Valuation: what is Lam worth?

Quick note on methodology: We value Lam with a discounted cash flow (DCF) model and cross-check it against trading comps. Two common alternatives don’t fit. A sum-of-the-parts needs separate segment profits, and Lam reports as one segment. Precedent transactions need comparable takeovers, and there are none at Lam’s scale.

Because the growth debate is about duration, we forecast twenty years (FY27–FY46) rather than the usual five or ten. This is a crucial point because a longer forecast period allows us to smooth out the cyclical nature of the business. Each scenario runs in three stages: explicit forecasts to FY31, a sustained-growth decade to FY41, and a fade to 4% long-run growth by FY46.

All three scenarios use the same 11.4% discount rate (WACC). It rests on today’s 5.28% 10-year Treasury yield, a semiconductor-equipment industry beta of 1.40 from Damodaran, and an implied equity risk premium of 4.42%. We use the industry beta rather than Lam’s own, more volatile, 1.86.

The base case repeats Lam’s history: 9% growth through FY41 and a 39% terminal EBIT margin, already well above the 29% ten-year average. It values Lam at about $200 per share, 43% below the current price. Even with a discount rate as low as 9.4%, the base case does not reach today’s price.

The bull case assumes consensus-level results through FY31, then 11% growth through FY41 and a 42% terminal margin, near management’s “mid-40s” long-term framework. That takes revenue to $232bn by FY46, roughly ten times today. It is worth $304 per share, still 12% below the price.

The bear case assumes a sharper cycle and 6% long-run growth, and is worth about $102. We don’t think it is the most likely outcome, but it shows how wide the range is.

What you have to believe at today’s price of $347 per share

If the bull case is worth $304, how does the stock trade at $347? The answer is interest rates. The 10-year Treasury yield is 5.28%, its highest level in about two decades. If it fell back to 4.5%, the discount rate would drop to about 10.6%. On those terms the bull case is worth $349, almost exactly today’s price. The base case would rise only to $227.

Put another way, the market price needs two things at once: growth well above Lam’s history for about fifteen years, and lower interest rates. Holding our base-case cash flows, the price implies a discount rate of about 8.6%, against our 11.4%.

Multiples tell a similar story from a different angle. Against peers, Lam looks fairly priced. Its 34x forward P/E sits in line with the peer median of 33x across Applied Materials, KLA, Tokyo Electron and ASM International. Against its own history, it looks expensive. Lam’s ten-year median trailing P/E is 19x; today it is around 60x on trailing earnings, roughly three times that median. The whole peer group has re-rated on AI, so comparing Lam to peers tells you it is not out of line with the sector. It does not tell you the sector is cheap.

Pulling every method together, only two support the current price: the bull-case DCF and peer forward P/E. Everything else sits below it.

If you believe in historical patterns, today’s price implies 35-43% downside

The payoff is lopsided. If the bull case plays out, the stock is worth roughly what you pay for it today: –12% at current rates, about 0% if rates normalize. If Lam simply repeats its history, the base case implies 35–43% downside.

Key risks to our thesis:

• China and export controls. China was 34% of FY26 revenue, and Lam’s 10-K warns those sales are likely to be materially affected by export licensing and regulatory change

• Customer concentration. Four customers made up 55% of FY26 revenue, and five made up 72% of receivables

• The cycle. Revenue fell 13–14% in each of the last two downturns, and memory is still 39% of systems revenue

• Interest rates. Each one-point move in the discount rate shifts our base-case value by roughly $27–36 per share

• Costs and supply. Tariffs on aluminum and steel weighed on FY26 margins; some parts are single-sourced.

The bottom line

Lam Research is one of the best businesses in semiconductors: a leader in the processes that 3D chips depend on, with expanding margins, sticky customer positions and disciplined capital returns. The share price already knows this. At $347, investors are not buying reasonable growth at a fair price. They are paying full value for an above-history outcome: roughly 11% growth for the next fifteen years, margins near management’s long-term ambition, and lower interest rates. That outcome is achievable. AI is a real and durable driver, and the industry may well grow faster than it has in the past. But the price leaves little margin of safety if any one of those assumptions slips.

Our view: Lam Research stock is fully valued. We would become more constructive if Lam shows growth holding above its history beyond FY28, evidence of genuine market-share gains, or a lower interest-rate backdrop. A pullback that brings the price closer to our base case would change the arithmetic too.

Count the deals instead of adding up their value, and the picture flips. Between January and August, 20,201 deals were announced worldwide in our data. This is a 22.2% decline versus the same period in 2025 and fewer than in any year since The Buyside Desk series begins in 2014. And this includes 2020, when the pandemic sent dealmakers home, freezing dealmaking for a quarter until home-office setups could be established. 2026 is running 1.9% below even that trough.

Monthly numbers show an even bleaker picture. Five of the seven weakest months since January 2014 have come between April and August 2026; the other two are April and May 2020. August’s preliminary M&A deal count of 1,931 is the lowest single month in the series, below even May 2020 (1,989). Every month since April has come in below 2,559 and is the lowest pre-2026 count outside the 2020 pandemic trough (February 2015).

At the current run-rate, 2026 would finish at roughly 30,000 deals, against a previous low of 33,450 in 2020 and at least 36,139 in every other year since 2014. Even if September to December matched 2025’s pace exactly, the full-year total would land at about 33,400, roughly level with the Covid pandemic lows of 2020.

War with Iran: when the floor gave way

2026 was already off to a weak start, with Jan and Feb showing modest declines between 6-8%. While not a great start, this level of fluctuation is normal in M&A deal making. The gap vs. 2025 levels widened significantly upon the outbreak of the US and Israeli war with Iran.

The timing lines up with the war with Iran. The US bombing campaign began on 28 February, choking off traffic through the Strait of Hormuz and pushing oil prices higher. A&O Shearman describes a first half in which the war, supply-chain disruption and sticky interest rates lengthened deal timelines, with processes delayed rather than abandoned. Delays show up in the count of announced deals straight away; the open question is how many of them come back.

The smaller the deal, the greater the pain

The collapse in volume sits alongside strength in value. In our data, total disclosed deal value for January–August is $1,779bn, up 2.4% on 2025, even though the number of deals fell by more than a fifth. The 55 deals above $5bn were worth $932bn — more than half of all disclosed value, and the second-highest January–August total for that band since 2014, after 2015.

That matches what the big advisers are seeing. PwC calls it a K-shaped market: deals above $5bn make up almost half of global value, double their share of two years ago, and stripping them out leaves value down 4%. BCG finds global value up 15% in the first eight months while deals below $1bn remain under their long-term norms. LSEG counts more than 28,000 deals in January–July, down 10%, even as value surged.

But The Buyside Desk disagrees with PwC’s characterization of a “K-shape” M&A market. The data simply does not support this conclusion as only deals over $5 billion are tracking above their long-term average. All other categories are declining. Its just that the smaller the deal size, the worse the situation gets. In the small-to-mid market (deals under $100 million), over 1/3rd of deal volume has evaporated this year.

JPMorgan’s mid-year outlook makes tries to make the same point by implying that a “middle market rebound” has been slower because valuation gaps, execution risk and geopolitical uncertainty weigh more heavily on smaller companies. Once again, we disagree with JPMorgan’s characterization that there is any “mid-market rebound” underway. The data clearly shows 2026 has been getting worse month over month, with the worst performance in the mid-market segment (especially as deals get smaller).

What is driving this downturn?

The fall in M&A activity is broad and across the board. Our analysis shows it across virtually all industries we cover (more sector specific breakdowns to come in subsequent analysis). We speculate on a number of contributing factors, 3 of which are flagged below and none of which are likely to be fully resolved in the short-term.

War and an oil shock. The war with Iran is the clearest break point in 2026. US and Israeli strikes began on 28 February, choking off traffic through the Strait of Hormuz and pushing oil prices higher. Beyond the hit to confidence, that fed into inflation and interest-rate expectations. A&O Shearman describes a first half in which the war, supply-chain disruption and sticky rates lengthened deal timelines, with processes delayed rather than abandoned. Delays show up in announced-deal counts immediately.

Interest Rates that did not fall. Markets entered 2026 expecting cuts. Instead the Federal Reserve held its policy rate at 3.50–3.75% from December through August. By the July meeting, rising yields reflected expectations of higher, not lower, policy rates. On 16 September the FOMC then raised the target range to 3.75–4.00%. Cherry Bekaert names a Fed holding steady against a market that expected cuts as one of three forces that hit private equity in the second quarter.

Valuation gaps. When earnings visibility is poor, buyers and sellers stop agreeing on price. GlobalData cites macroeconomic uncertainty and valuation misalignments. PwC describes a middle market where neither side will bridge the gap. S&P Global says the same standoff slowed private equity exits in the first half.

AI disruption and the software reset. Almost every buyer now asks how AI will affect a target’s business. Bain’s private equity midyear report points to an AI-driven collapse in software valuations (“SaaSpocalypse”) with further scrutiny spreading to IT services, professional services, insurance brokerage and asset and wealth management. We will be deep-diving this topic in subsequent posts, as we question whether “SaaSpocalypse” is over-hyped.

What we are watching

The optimistic reading is that much of this year’s drop is postponement. We remain biased towards this interpretation. The earliest signals to watch for a turnaround are an end to hostilities in Iran and lower oil prices, the Fed’s next move on interest rates, and whether the year-end rush brings the mid-market back. December has been the busiest month in 11 of the last 12 years.

For now the numbers are clear. The headline value of M&A is booming. The number of companies actually changing hands is at its lowest in at least 12 years.

A quick note on methodology

The Buyside Desk leverages both proprietary and public sources to map out M&A transactions globally and derive insights. Our data set covers ~1 million M&A deals across sectors and geographies going back over 10 years. If interested in learning more, please fee free to message the author.

Public Sources leveraged for this content:

• PwC – Global M&A industry trends: 2026 mid-year outlook

• PwC – Global M&A trends in consumer markets: 2026 mid-year outlook

• PwC – Private equity: US Deals 2026 midyear outlook

• BCG – The 2026 M&A Report: In Search of a Wider Recovery

• BCG – 2026 M&A Trends Across Key Global Regions

• LSEG – Global M&A update: a record-breaking market that’s becoming increasingly concentrated

• GlobalData – Global deal activity falls 4% YoY during January–August 2026

• A&O Shearman – M&A in 2026: strategic focus, geopolitical pressures and regulatory shifts

• A&O Shearman – Middle Eastern dealmaking endures despite regional instability

• Ropes & Gray – Dealmaker’s Digest, August 2026

• J.P. Morgan – 2026 Global M&A Mid-Year Outlook

• PitchBook – 2026 US Private Equity Outlook: Midyear Update

• Cherry Bekaert – Private Equity Mid-year 2026 Report

• S&P Global Market Intelligence – Pace of private equity exits slows in H1 2026

• Yahoo Finance – Private equity is struggling with exits, even as the AI deal boom takes over Wall Street

• Private Capital Global – What Bain’s midyear report tells us about where the market really stands

• American Banker – War in Middle East may press pause on bank deal boom

• Yahoo Finance – US holds interest rates as Iran war triggers inflation fears

• Federal Reserve – Minutes of the FOMC, 28–29 July 2026

• Federal Reserve – FOMC statement, 16 September 2026

• HMT LLP – What impact is the US/Israeli war in the Middle East likely to have on M&A in the UK’s mid-market?

• Wall Street Horizon – Fewer deals, bigger stakes

Every subscriber to The Buyside Desk gets our monthly Global M&A Tracker. This is a fully editable Excel database of every significant transaction announced, completed, or credibly rumored in the last month, across all sectors and geographies and deal sizes (including small and mid-market transactions)

Not a locked PDF. Not a screenshot. Not a “request access” wall. A working file you download, open, and make your own. Filter by sector, sort by deal size, flag the situations you’re watching, build on top of it.

Tracking M&A across global markets is a full-time job: wire releases, banker briefings, the social rumor mill, regulatory filings. I do this work so you start from a clean, current picture instead of building one.

The file below covers 3,652 transactions worldwide for August 2026. Subscribe to get it — and every month after.

The Buyside Desk Global Mergeracq Data Set Aug 2026

1.44MB ∙ XLSX file

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1. GameStop Bids for eBay — And Gets Rejected

Target: eBay Inc. (NASDAQ: EBAY) Rumored Acquiror: GameStop Corporation (NYSE: GME) Rumored Value: ~$56 billion ($125 per share, 50% cash / 50% stock) Status: Informal offer — rejected by eBay board

This was the most jaw-dropping proposal of the month. GameStop (the meme-stock retailer turned bitcoin treasury holder) submitted an unsolicited, non-binding bid to acquire eBay at $125 per share on May 3. The offer represented a roughly 20% premium to eBay’s prior closing price and valued the e-commerce marketplace at approximately $56 billion. GameStop had quietly built a ~5% economic stake in eBay through derivatives and common stock, and secured a $20 billion debt commitment from TD Bank to help fund the deal.

eBay’s board moved quickly: on May 12 it rejected the proposal outright, calling it “neither credible nor attractive” and citing concerns around financing certainty and the debt burden the transaction would impose. GameStop CEO Ryan Cohen confirmed the company’s intent in a combative CNBC appearance, but without board support from the target, the bid has gone nowhere.

Why it matters for investors: The episode is a Rorschach test. Bulls on GME see it as evidence that Cohen is deploying the company’s $4+ billion cash pile aggressively, pursuing scale through acquisition rather than waiting for organic growth. Bears see a retailer with no core business making a moonshot bid for an asset four times its size. For eBay holders, the 20% bid premium already evaporated after the rejection. But the episode raised a legitimate question: is eBay undervalued, and will a more credible suitor come along?

2. Legal & General: Multiple Bidders Quietly Circling the FTSE 100 Giant

Target: Legal & General Group plc (LSE: LGEN) Rumored Acquirors: Multiple unnamed financial institutions and alternative asset managers Rumored Value: ~$18.9 billion (based on ~£13.9 billion market cap) Status: Rumor — CEO publicly denied

Legal & General, one of the UK’s largest financial services groups managing over £1 trillion in assets, became the subject of intense City chatter in mid-May. According to the Financial Times, a range of financial institutions had been evaluating potential approaches. The logic fits a well-worn playbook: firms like Apollo and Brookfield have been acquiring insurers to access their large, stable liabilities as a low-cost source of capital for private credit and alternatives deployment.

Chief Executive Antonio Simoes was emphatic in his denial, telling the FT he was “100% focused on executing my strategy” and not considering a sale or break-up. L&G shares nevertheless rose around 5% on the speculation.

Why it matters for investors: L&G sits at an interesting strategic crossroads. Its large pension risk transfer business and £1 trillion+ AUM make it an exceptional source of “patient capital” for an alternatives acquiror. A full takeover would be among the largest UK financial deals in history and it would be politically sensitive given L&G’s systemically significant role in UK gilt markets. More realistic near-term scenarios include partial stake sales, reinsurance partnerships, or carve-outs of specific business lines. Even without a deal, the speculation highlights that L&G’s parts may be worth considerably more than its whole.

3. Nordex Eyes Vestas to Build a European Wind Champion

Target: Vestas Wind Systems A/S (Nasdaq Copenhagen: VWS) Rumored Acquiror: Nordex SE (Frankfurt: NDX1) Rumored Value: ~$30 billion (based on Vestas market cap) Status: Rumor

On May 4, reports emerged that Germany’s Nordex SE was exploring a potential acquisition of or merger with Danish rival Vestas Wind Systems. The stated rationale is geopolitical as much as commercial: proponents argue that a combined entity would create a European wind turbine champion capable of countering the rapid rise of Chinese manufacturers and reduce European dependence on Asian supply chains (especially for offshore wind). Other names floated as potential consolidation candidates in the sector include Siemens Gamesa, GE Vernova, and privately held Enercon.

Why it matters for investors: The European wind turbine industry is under serious pressure. Vestas and Siemens Gamesa have both posted large losses in recent years amid cost inflation and supply chain disruptions, while Chinese competitors are undercutting on price in global markets. A Nordex-Vestas combination would create a manufacturer with genuinely global scale. However, there is serious potential execution risk. The two companies have overlapping product lines, different nationalities of ownership, and a combined entity would require significant restructuring. Watch for regulatory signals from Brussels, which has shown appetite for backing European industrial consolidation when framed around strategic sovereignty.

4. Uber Moves to Absorb Delivery Hero

Target: Delivery Hero SE (Frankfurt: DHER) Rumored Acquiror: Uber Technologies Inc. (NYSE: UBER) Rumored Value: ~$11.6 billion (€33 per share) Status: Active — formal offer received, Delivery Hero conducting strategic review

This is perhaps the most advanced rumor on the list. Uber, which had already accumulated a ~19.5% stake in Delivery Hero, formally offered €33 per share for the remaining equity in late May. This implies a full company valuation of approximately €10 billion ($11.6 billion). Since then, Uber has continued building its position, purchasing Aspex Management’s stake to bring its total holding to 36.83%.

Delivery Hero operates food and quick commerce delivery across 70+ markets in Europe, the Middle East, Asia, and Latin America. They confirmed receipt of the offer and are evaluating it through a formal strategic review process.

Why it matters for investors: For Uber, Delivery Hero would dramatically expand its global delivery footprint beyond Uber Eats’ existing markets, particularly in high-growth emerging markets. It would also help Uber compete against DoorDash internationally. For Delivery Hero shareholders, the offer represents a potential exit from a business that has struggled to achieve sustained profitability. Given Uber’s growing ownership position, a deal appears more likely than not. The key questions are price and timing. Any bump above €33/share would materially benefit remaining minority holders.

5. Sherwin-Williams and Nippon Paint Make a Joint Raid on AkzoNobel

Target: Akzo Nobel NV (Euronext Amsterdam: AKZA) Rumored Acquirors: The Sherwin-Williams Company (NYSE: SHW) and Nippon Paint Holdings (TSE: 4612) Rumored Value: ~$10.5 billion (indicative offer of €73 per share) Status: Rumor — joint proposal confirmed then abandoned (June 3)

In one of the boldest tactical moves in the coatings industry in years, Sherwin-Williams and Nippon Paint jointly submitted an unsolicited all-cash proposal for AkzoNobel in late May, offering €73 per share. The proposal envisioned a split of the business: Nippon Paint would retain AkzoNobel’s Decorative Paints and Industrial Coatings divisions, while Sherwin-Williams would separately acquire Automotive & Specialty Coatings, Marine & Protective Coatings, and Powder Coatings.

AkzoNobel rejected the offer, citing insufficient deal certainty on regulatory clearances and business separation mechanics, and noting that the approach did not meet the “Superior Proposal” threshold under AkzoNobel’s existing merger agreement with Axalta Coating Systems. On June 3, Nippon Paint and Sherwin-Williams formally ended their pursuit.

Why it matters for investors: Even though the bid collapsed, the episode confirmed that AkzoNobel is a strategic prize coveted by two of the world’s largest coatings companies. The Axalta-AkzoNobel merger-of-equals (which both boards continue to recommend) now proceeds without a rival bidder. For Sherwin-Williams investors, the abandoned bid raises questions about what comes next for capital deployment. For Akzo Nobel holders, the key question is whether the Axalta deal creates comparable value to what Sherwin-Williams/Nippon Paint were offering in cash.

6. Intact Financial Explores a Bid for Hiscox

Target: Hiscox Ltd (LSE: HSX) Rumored Acquiror: Intact Financial Corporation (TSX: IFC) Rumored Value: ~$8.1 billion (based on £6.1 billion market cap) Status: Rumor — exploratory, no formal offer

On May 16, Insurance Post reported that Canada’s Intact Financial was exploring a potential bid for London-listed specialty insurer Hiscox. Hiscox shares surged as much as 15.3% intraday to an all-time high of £18.90 on the news. Intact CEO Charles Brindamour has publicly stated his ambition to expand in commercial lines and specialty insurance, and is said to be a longtime admirer of Hiscox’s business model.

No formal offer has been made, and neither company has commented publicly on the reports.

Why it matters for investors: Hiscox’s core business is specialty and commercial insurance for small businesses, high-net-worth individuals, and catastrophe reinsurance. It is a high-quality, capital-light franchise that has historically traded at premium multiples. Intact, already one of North America’s largest P&C insurers, would gain significant London market and Lloyd’s exposure through a deal. For Hiscox shareholders, the stock reaction itself is instructive: the 15% single-day spike suggests the market views current valuations as undemanding relative to a takeover scenario. Even if Intact walks away, a bid approach tends to put a stock “in play.”

7. Curium Pharma Targets Lantheus in a $7 Billion Radiopharmaceutical Play

Target: Lantheus Holdings Inc. (NASDAQ: LNTH) Rumored Acquiror: Curium LLC (Curium Pharma, private — portfolio company of CapVest Partners) Rumored Value: ~$7 billion Status: Rumor — Lantheus evaluating, active discussions reported

On May 22, reports emerged that Curium LLC, a leading nuclear medicine company backed by private equity firm CapVest Partners, had approached Lantheus Holdings with an acquisition proposal valuing the company at approximately $7 billion. Lantheus confirmed it was evaluating the proposal and considering strategic alternatives. Discussions are reported to be ongoing, with a deal potentially materializing within weeks. Lantheus shares rose approximately 7.4% on the news.

Lantheus is the maker of PYLARIFY, the leading prostate-specific membrane antigen (PSMA) PET imaging agent used in prostate cancer diagnosis, as well as other diagnostic imaging products.

Why it matters for investors: Radiopharmaceuticals are among the hottest segments in healthcare right now, sitting at the intersection of oncology diagnostics and targeted therapy. Lantheus’s PYLARIFY franchise is a market-leading product with strong volume growth as PSMA PET imaging becomes standard of care for prostate cancer. At $7 billion, Curium would be paying a significant premium for a high-growth asset, but one that arguably de-risks their pipeline and combines complementary commercial networks. For Lantheus shareholders, the key question is whether $7 billion adequately reflects the long-term value of PYLARIFY and the broader pipeline. Given recent deal multiples in the radiopharmaceutical space, some analysts believe a higher number is defensible.

8. ZIM’s Shipping Saga: A Rival Bid Complicates the Hapag-Lloyd Deal

Target: ZIM Integrated Shipping Services Ltd (NYSE: ZIM) Rumored Acquiror: Sakal Group and associated investors Rumored Value: $4.5 billion ($37.50 per share) Status: Rumor — rival bid to existing Hapag-Lloyd agreement

This is the M&A drama with the most twists. Hapag-Lloyd had already reached an agreement to acquire ZIM for $35 per share in an all-cash deal worth approximately $4.2 billion, and ZIM shareholders voted 97.36% in favor of the transaction on April 30. Then, on May 5, Israeli businessman Dany Sakal and a group of investors submitted a competing all-cash proposal at $37.50 per share, representing a 7.1% premium to the Hapag-Lloyd price and a 43.8% premium to where ZIM traded before the original deal was announced.

ZIM’s board, however, has stated the Hapag-Lloyd agreement is binding, leaving it no discretion to engage with the Sakal proposal. The deal also remains subject to approval from the State of Israel, which holds a “golden share” allowing it to block any sale deemed contrary to national strategic interests, which adds further geopolitical complexity.

Why it matters for investors: With shareholder approval already secured, the Hapag-Lloyd transaction is the most likely outcome. But the Israeli government’s golden share remains a genuine wildcard. If Israel were to block the Hapag-Lloyd deal on strategic grounds (maintaining Israeli ownership over the country’s flagship shipping line), the Sakal bid could re-emerge as the primary alternative. The $2.50/share spread between the two bids is meaningful: ZIM holders who tendered at $35 may be watching closely to see if Israeli regulatory dynamics force any renegotiation.

9. NSK and NTN to Merge, Creating the World’s Largest Bearing Maker

Target: NSK Ltd (TSE: 6471) Acquiror: NTN Corporation (TSE: 6472) Rumored Value: ~$4.3 billion (70% stake in NSK) Status: Informal / basic agreement announced — deal targeted for October 2027

Japan’s NSK and NTN, the world’s third- and fourth-largest bearing manufacturers respectively, announced a basic agreement in May to merge operations through a joint holding company to be established in October 2027 and listed on the Tokyo Stock Exchange Prime Market. Both companies would be delisted as part of the integration, with the combined entity expected to hold approximately 24% global market share, surpassing Sweden’s SKF (currently ~18%) to become the world’s number one.

The strategic drivers are clear: accelerating EV adoption is reducing demand for bearings used in internal combustion engines, while Chinese manufacturers are aggressively competing on price in global markets. Together, NSK (founded 1916) and NTN (founded 1918) employ nearly 50,000 people globally and generate combined revenues exceeding ¥1.7 trillion (~$10.9 billion).

Why it matters for investors: This is classic Japanese industrial consolidation and long telegraphed as necessary. For NSK and NTN shareholders, the merger promises synergies from combined R&D, manufacturing rationalization, and stronger pricing power vis-à-vis automotive OEM customers. The establishment of a new listed holding company creates a fresh investment vehicle in a sector undergoing significant structural change. The key risk is execution: merging two century-old Japanese manufacturers with deeply embedded cultures is a multi-year integration challenge that will test management at every level.

10. IMAX: Hollywood’s Favorite Premium Asset Goes on the Block

Target: IMAX Corporation (NASDAQ: IMAX) Rumored Acquirors: Multiple — including Apple, Sony, Netflix, Amazon, Disney, AMC, Cinemark, and Sphere Entertainment Rumored Value: ~$1.4 billion (based on CAD ~$1.9 billion market cap) Status: Rumor — IMAX reportedly fielding early-stage buyer interest

IMAX shares surged nearly 11% in late May after the Wall Street Journal reported the company was in the early stages of fielding potential buyers. CEO Rich Gelfond has previously told shareholders that IMAX is “an incredibly valuable player, either as a wholly differentiated publicly-traded company or as part of a larger company” (a comment that left the door conspicuously open). The company generated a record $1.28 billion at the global box office in 2025, up more than 40% year-over-year.

Potential acquirors span a wide range: theater chains like AMC and Cinemark are logical operators, while technology and streaming platforms such as Apple, Netflix and Amazon could use IMAX as a premium theatrical anchor for their broader content strategies. Sony and Disney have obvious content alignment motivations.

Why it matters for investors: IMAX is a rare asset: a globally recognized brand in premium entertainment with a capital-light licensing model, recurring revenue from system installations, and strong box office leverage. Its current valuation remains below pre-pandemic highs despite record box office performance and looks increasingly anomalous. In a consolidating media landscape where streaming giants are rethinking their theatrical relationships, IMAX represents an irreplaceable piece of the premium entertainment experience. A strategic acquiror could unlock significant synergies; for current shareholders, even a modest takeover premium would represent a meaningful re-rating from here.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The author does not hold positions in any of the companies mentioned. All data sourced from publicly available SEC filings, press releases, and financial reports.

The Buyside Desk Global Mergeracq Tracker (may 2026)

1.3MB ∙ XLSX file

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Tracking M&A is a full-time job. Between the wire releases, the banker briefings, the rumor mill on social media, and the regulatory filings, it is genuinely difficult to maintain a clean, current picture of deal activity. This is especially true when covering global markets and sectors simultaneously.

This is one reason you should subscribe to The Buyside Desk. Every subscriber gets access to our monthly Global M&A Tracker. This is a fully editable Excel database covering every significant transaction announced, completed, or credibly rumored in the last month.

No paywalls. No request-access friction. Download it, open it, and make it your own.

The file is a live Excel spreadsheet, not a locked PDF or screenshot. You can filter by sector. You can sort by deal size. You can add your own notes, flag the situations you are watching, and build on top of it however you see fit. We built it to be useful for M&A practitioners, private equity analysts and investors actually work.

The Excel file below includes details on 3262 M&A transactions globally for the month of May 2026

That is exactly what we have built for you.

Starting today, every subscriber of The Buyside Desk gets access to our monthly Global M&A Tracker — a fully editable Excel database covering every significant transaction announced, completed, or credibly rumored in the last month.

No paywalls. No request-access friction. Download it, open it, and make it your own.

The file is a live Excel spreadsheet, not a locked PDF or screenshot. You can filter by sector. You can sort by deal size. You can add your own notes, flag the situations you are watching, and build on top of it however you see fit. We built it to be useful for M&A practitioners, private equity analysts and investors actually work.

The Excel file below includes details on 4163 M&A transactions globally for the month of April 2026

The Buyside Desk Global Mergeracq Tracker (apr 2026)

1.56MB ∙ XLSX file

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This will be updated each month going forward. Subscribe for full access. Prior months will be uploaded retroactively in the near future.

If you’re an investor, analyst, or M&A professional, this deal has something for everyone: activist dynamics, defensive M&A, contested proxy filings, governance questions, and a legitimately uncertain outcome leading causing an interesting investor arbitrage (special) situation.

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Who Are the Parties?

Forager Capital Management is a Birmingham, Alabama-based investment firm run by Managing Partner Edward Kissel. Forager has followed Repay since its IPO and has quietly built a ~13% stake in the company to become the single largest shareholder of record. The firm is not a passive investor. It recently completed the acquisition of Quipt Home Medical, a publicly listed company, for approximately $260 million. They have the financial firepower and transactional experience to close a deal of this nature.

Repay Holdings Corporation (NASDAQ: RPAY) is an Atlanta-based fintech company that provides vertically-integrated payment processing solutions with niche focus on healthcare, personal lending, automotive and consumer finance. The company’s platform supports payments across digital wallets, ACH, credit/debit cards, and electronic checks. Repay went public via SPAC in 2019 and has grown through a series of acquisitions. It currently has approximately 85.9 million shares of Class A common stock outstanding, with a market capitalization of roughly $333 million as of this week (early May 2026).

The Deal Timeline: A Rapid Escalation

This situation went from private outreach to public proxy fight in under three weeks. Here’s the sequence:

April 13, 2026: Forager contacts Repay management (John Morris, CEO; Rob Houser, CFO; Stewart Grisante, General Counsel) to request a “preliminary, exploratory discussion” about a potential acquisition. Forager explicitly noted it had not yet formed a definitive plan or proposal.

April 14, 2026 (within 24 hours): Without any substantive dialogue, Repay’s Board adopts a shareholder rights plan (a “poison pill”), effective immediately and running through April 2027. The plan triggers if any holder acquires 12.5% or more of outstanding Class A common stock. This threshold was clearly calibrated to box out Forager, which already sits at ~12.9%. Forager described the board’s speed as “difficult to reconcile with a genuine commitment to maximizing shareholder value.”

April 17, 2026: Forager goes public. It files an amended Schedule 13D/A with the SEC and releases a formal letter to the board proposing to acquire 100% of Repay’s outstanding shares at $4.80 per share in all-cash. This represents a 75% premium to the stock’s 30-day volume-weighted average price of $2.75. The total enterprise value, including debt, is approximately $1 billion. The same day, Repay confirms receipt of the proposal and states the board will review it with financial and legal advisors (J.P. Morgan Securities and Sullivan & Cromwell LLP).

April 28, 2026: Ten days have passed. No engagement. Forager issues a public statement expressing concern that the board’s only responses have been to adopt a poison pill and issue a preliminary earnings release. Forager says these actions “raise questions about whether the appropriate focus is being placed on evaluating a compelling proposal versus implementing defensive measures.”

May 1, 2026: Repay files a Preliminary Contested Proxy Statement (PREC14A) with the SEC, signaling that a formal proxy fight is now on the table. In the same filing, the board denied a separate request from Veradace Partners (an 8.4% stockholder) to waive bylaw timing requirements for director nominations, ruling that Veradace failed to comply with required procedures.

May 4, 2026 (Q1 Earnings Call): In what was a highly charged call, Repay CEO John Morris and CFO Rob Houser did not take questions on the Forager proposal. Management confirmed the board had unanimously rejected the $4.80 offer, characterizing it as one that “significantly undervalues the company” and is “not in shareholders’ best interest.” That same day, Forager issues yet another public statement noting that 17 days had elapsed without any substantive communication whatsoever from the board or its advisors.

The Valuation Question: Is $4.80 Really “Significantly Undervaluing” Repay?

Forager’s Case

At $4.80 per share, Forager’s offer represents a 75% premium to the 30-day VWAP at the time of the proposal. In a year where take-private premiums have averaged well below 40%, this is an aggressive bid. Forager has pointed out that this premium is “among the highest observed in announced take-private transactions this year.” The offer provides immediate, certain, all-cash value in an environment where RPAY has been trading in the $2.50–$3.50 range for much of the past year.

Repay’s Case

The board isn’t wrong that there’s a credible bull case above $4.80. Here’s the math the board is likely pointing to:

• DA Davidson maintains a Buy rating on RPAY with a price target of $8.00 per share, reflecting the strategic value of the pending Kubra acquisition and REPAY’s growth trajectory toward double-digit revenue growth.

• InvestingPro’s Fair Value estimate places RPAY at approximately $5.82 per share, suggesting the $4.80 offer does represent a discount to intrinsic value under more optimistic assumptions.

• Analyst price targets range from $3.50 to $10.00, reflecting genuine uncertainty about execution on Kubra and longer-term growth potential.

• Q1 2026 adjusted EBITDA margins of ~43% and full-year guidance of $340M–$346M in revenue (+10–12% YoY) suggest a business with real profitability discipline.

The crux of the disagreement is whether you trust management’s ability to close and integrate Kubra, deleverage the balance sheet, and actually achieve double-digit revenue growth. If you do, $4.80 is a lowball offer. If you’re skeptical then $4.80 looks like a good deal.

The Kubra Wildcard

Overlaying all of this is Repay’s announced acquisition of Kubra Data Transfer for $372 million. This would roughly double Repay’s total revenue by adding a bill presentment and payment processing platform serving utility companies and government agencies. Management has been emphatic that Kubra is the company’s most compelling long-term value creation opportunity, offering interaction with over 40% of US and Canadian households monthly.

But Kubra has attracted vocal opposition from Veradace Partners, which owns 8.4% of Repay and publicly objected to the acquisition on April 9. Veradace cites poor capital allocation, elevated leverage risk, governance failures and a sharp stock selloff following the announcement. Veradace wants the Kubra deal terminated and two board seats.

The board denied Veradace’s director nomination request on procedural grounds, which itself raises governance questions. Repay’s filing of a preliminary contested proxy statement on May 1 suggests management is prepared to fight on two simultaneous fronts: defending the Kubra deal and rebuffing Forager’s acquisition proposal.

From a strategic standpoint, completing Kubra would substantially change Repay’s risk/valuation profile, likely making the $4.80 bid a non-starter for shareholders (assuming the integration goes smoothly).

Repay’s Q1 Financials: Context for the Bid

Here’s where RPAY stands operationally, which directly informs whether the board’s confidence in rejecting $4.80 is well-founded:

• Q1 2026 Revenue: $80.8 million (+4% YoY) which slightly missed estimates

• Adjusted EBITDA: $34.4 million (~43% margin)

• Adjusted EPS: $0.22/share (beat estimates by $0.01)

• Business Payments growth: +18% YoY (the standout

• Consumer Payments growth: +4% YoY

• FY2026 Revenue Guidance: $340M–$346M (+10%–12%)

• FY2026 Adjusted EBITDA Margin: ~42%

• Free Cash Flow (Q1): $5.4 million (16% conversion; weighed by one-time items including debt refinancing)

One notable item: Repay refinanced its maturing 2026 convertible notes using $37M in cash and a $110M revolving credit draw in Q1 which tightens near-term liquidity even as management touts financial strength. The debt picture will only get more complicated post-Kubra, with the company targeting a return to below 3x net leverage within 18 months of closing.

The Current Share Price and What the Market Is Telling Us

As of this writing (May 6, 2026), RPAY is trading around $4.00–$4.11 per share — approximately 15–17% below the Forager bid price of $4.80. The stock surged approximately 27% on April 17 when the Forager offer became public (from mid-$3s), and has since settled back as the board’s defensive posture became clear and the Q1 earnings call left investors without a clear resolution.

The market-implied probability of the deal closing at $4.80 (based on the ~$0.70–$0.80 spread) is roughly 25–35%, which reflects the market’s view that there is a meaningful but not dominant chance this deal gets done at current terms. The spread also prices in some probability of a sweetened offer.

Insights for Investors

Arb opportunity, but not risk-free. The ~17% spread to the offer price offers a meaningful return if the deal closes, but RPAY traded at $2.50–$2.75 before Forager appeared. If this falls apart entirely, there’s real downside risk especially if Kubra closes at a high leverage ratio and execution risks materialize.

Watch the shareholder registry. With Forager at ~13% and Veradace at ~8.4%, approximately 21% of shares are controlled by institutional activists who either want a sale or major strategic changes. This is a large enough block to create serious pressure on management going into the annual meeting.

The poison pill expiration matters. The rights plan runs until April 2027. This limits Forager’s ability to accumulate further shares in the open market without triggering dilution for other stockholders. But it doesn’t prevent a proxy fight or a tender offer. Expect Forager’s next move may be to go directly to shareholders via a tender.

Kubra is the swing factor. If the Kubra deal closes cleanly in Q2 2026 as expected, the board’s argument that $4.80 undervalues the company becomes more credible. If Kubra hits a snag, Forager’s offer starts looking more attractive to all holders.

Insights for M&A Professionals

This situation illustrates several dynamics that make this an excellent M&A cast study.

The “poison pill within 24 hours” problem. Repay’s lightning-fast poison pill adoption, well before any formal proposal was even made, is legally defensible but optics-damaging. It signals entrenched management rather than a good-faith deliberative process. Expect shareholder advisory firms like ISS and Glass Lewis to scrutinize this closely.

Defensive M&A as a “just say no” strategy. Using the Kubra acquisition to claim a higher standalone value (while simultaneously piling on debt) is a classic defensive M&A playbook. It’s a legitimate strategy, but it creates execution risk and, if Kubra underperforms, significant board liability.

The dual-activist dynamic. Both Forager (pro-acquisition) and Veradace (anti-Kubra) are pressuring management from different angles simultaneously. This is rare and destabilizing for incumbent boards. Management must choose: engage with Forager and risk legitimizing the offer, or continue ignoring both activists and risk losing the proxy vote.

Proxy contest mechanics. The PREC14A filing means Repay has drawn first blood in the proxy war. Forager could respond by nominating its own slate of directors that would force shareholders to choose between the incumbent board and Forager-backed nominees. Given Forager’s 13% stake, it would need to win over approximately 38–40% of remaining holders to achieve a majority. While tough, this is not impossible especially given that they can likely count on Veradace’s support (8% of the shares).

Will This Deal Close? Our Take

Here are the three scenarios, ranked by probability:

Scenario 1: Sweetened Offer / Negotiated Deal (40% probability)

The most likely resolution is a negotiated transaction at a price somewhere above $4.80. The board has unanimously rejected $4.80, but that’s a negotiating position. M&A deals often involve early rejections. Forager has demonstrated financial capacity and deal-closing credibility. If Kubra faces regulatory delays, Forager raises its bid to the $5.25–$5.75 range, and activist pressure continues to build, the board may be compelled to engage. This is the scenario where shareholders win big.

Scenario 2: Deal Falls Apart / Repay Remains Independent (35% probability)

If Kubra closes cleanly, the board has a credible narrative: “We were right to reject $4.80. Look at our combined revenue base now.” Under this scenario, Forager eventually reduces its stake or accepts minority investor status, and RPAY attempts to execute on its post-Kubra strategic plan. The risk here for shareholders is that Repay’s stock returns to pre-bid levels ($2.50–$3.00) if execution disappoints. For investors currently holding at $4.00+, this would be a painful outcome.

Scenario 3: Proxy Fight / “Hostile” Shareholder Vote (25% probability)

If the board continues to stonewall and refuses to engage, Forager may escalate to a tender offer directly to shareholders, or file its own proxy to replace board members. With ~21% of the float controlled by activists (Forager + Veradace, who want different outcomes but both want change), a contested vote is a real possibility. A successful proxy could ultimately lead to a new board that is more receptive to a deal. Notably, in Delaware law (where Repay is incorporated), a determined acquirer with sufficient shareholder support can ultimately prevail even against poison pills.

Our Verdict: The terms will be sweetened, but not immediately. Forager’s public pressure campaign citing market comps and going directly to shareholders is the playbook for forcing a board to the table without triggering a full proxy fight. We expect Forager to raise its bid by $0.50–$0.80 per share (to the $5.25–$5.60 range) over the next 4–6 weeks, contingent on Kubra’s status. If that sweetened offer is also rejected, a tender offer or proxy fight becomes near-certain.

The board’s complete refusal to engage (even through advisors) is increasingly difficult to defend fiduciarily. At some point, ISS and Glass Lewis will weigh in, and their recommendations will be critical for the annual meeting proxy vote.

Bottom Line

The Forager-Repay situation is a live case study in everything that makes M&A compelling: a motivated acquirer with a credible bid, an entrenched board pursuing a high-stakes counter-strategy, competing activist blocs, and genuine uncertainty about which path creates the most value.

At $4.80, the offer is real, the premium is legitimate, and the deal is financeable. Whether it’s the right price is genuinely debatable, and this creates opportunities for investors looking at special situation / merger arbitrage

For investors holding RPAY: the risk/reward from current levels ($4.00–$4.11) to the offer price ($4.80) is approximately 17% upside, against meaningful downside if both the deal and the Kubra integration disappoint. That’s an asymmetric trade worth watching closely.

For M&A professionals: study the poison pill timing, the defensive acquisition thesis, and the dual-activist dynamic. Whatever the outcome, this is a textbook example of how hostile bid situations actually unfold. This one is messy, public, and will be decided as much by governance mechanics as by economics.

Stay tuned. This one has plenty of runway left.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The author does not hold positions in RPAY or any affiliated entity. All data sourced from publicly available SEC filings, press releases, and financial reports.

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A quick recap

The SPS is one of the most contentious and confusing aspects of the investment case for Fannie Mae and Freddie Mac.

In September 2008, Treasury put Fannie and Freddie into conservatorship and signed the Preferred Stock Purchase Agreements. In return for an unlimited backstop, it received non-voting senior preferred stock in each GSE plus warrants to buy 79.9% of the common at a nominal price, expiring September 7, 2028.

The GSEs drew a combined $193 billion between 2008 and 2012. That amount was added straight to the liquidation preference. Treasury was owed 10% annual dividends on the outstanding balance (12% if missed). The GSE’s were forced to mark losses to market via (unfair and unrealistic) loss provisions. Under that strain, they could not reliably pay dividends on the SPS amount. But the losses never materialized, and just as the companies were about to reverse the accounting provisions, and thereby repay Treasury in full (with interest), the government unilaterally amended the PSPA to sweep of every dollar of net worth above a tiny reserve. That’s the Net Worth Sweep.

Under this shameful agreement, Fannie and Freddie have sent Treasury roughly $301 billion. Yet the SPS liquidation preference never shrank. Instead if grew. As of Q1 2026, Fannie’s stands at $230.5 billion, Freddie’s at $143 billion. Combined: $373.5 billion. The CBO sees it climbing toward $400 billion by year-end as commitment fees keep accruing.

The paradox is obvious. They paid back more than they borrowed, with interest, but Treasury’s contractual claim is larger today than when the checks first went out.

**Note: I know this has glossed over many details on the Net Worth Sweep. But it will have to suffice for the purposes of this article.

The Money Arithmetic

Bill Ackman and Pershing Square laid this out in November 2025. The numbers hold up better than the critics admit.

Under the original PSPA, Treasury was entitled to 10% dividends on the outstanding liquidation preference. Run the actual $193 billion draws through a timing-adjusted 10% calculation and you get roughly $276 billion in total contractual dividends owed. The GSEs have paid $301 billion—about $25 billion more than the deal required. That works out to an internal rate of return for Treasury of roughly 11.6%.

Ackman’s core point: the economic substance of the investment has been satisfied. The government took real risk when it mattered most and collected more than the agreed return. The $373.5 billion liquidation preference is a legal artifact of how preferred equity works in that dividends don’t reduce principal, and the LP was designed to grow, not shrink. The Net Worth Sweep itself is Exhibit A: without the 2012 amendment, normal dividend mechanics might have allowed a repayment path; instead, the sweep extracted every available dollar.

By any normal investment metric, Treasury got its money back plus a solid return. But the instrument is preferred equity, not a loan. The contract doesn’t contain a repayment mechanism that reduces the LP when dividends are paid. Unfortunately for shareholders, both realities can coexist: taxpayers were made more than whole on an economic basis, and Treasury still holds a $373.5 billion contractual claim. This has been upheld by the courts despite considerable efforts to fight it. Resolving this claim is a political and administrative call. Neither Congress or the courts will help.

The Five Possible Paths to Resolution

There’s no single button. Here are the five plausible structures, each with different effects on the capital stack, the budget, investors, and the mortgage market.

1. Administrative PSPA amendment (Ackman-style “deemed repaid”): Treasury and FHFA amend the agreements to declare the SPS economically satisfied and zero out (or nominalize) the entire liquidation preference. No new legislation needed. Then exercise the warrants for 79.9% of the common on a fully diluted basis. Treasury ends up owning exactly 79.9% of the common equity; existing common holders retain 20.1%. Cleanest path for relisting.

2. Full LP-to-equity conversion: Amend the PSPA to convert the entire $373.5 billion LP directly into new common shares at a negotiated price per share. Combined with warrant exercise, this would push Treasury’s ownership well above 80%—likely 90–95%+ depending on the conversion ratio and enterprise value. Massive dilution for everyone else.

3. LP-to-debt conversion: Turn the SPS claim into long-dated GSE bonds. Moves it out of the equity stack and helps with ERCF capital treatment, but adds leverage and doesn’t fully clean the structure.

4. Guarantee fee / explicit backstop: Cancel the SPS in exchange for an ongoing annual guarantee fee on agency MBS. Mirrors the Ginnie Mae model—explicit, priced government backing.

5. Hybrid (partial forgiveness/restructuring + warrant exercise + residual SPS): Forgive or restructure a portion of the LP (say, the economic “excess” plus some negotiated amount), exercise the warrants for the 79.9% stake, and leave a reduced residual SPS on the books (perhaps $150–250 billion after partial write-down/conversion). Treasury secures dominant but not total ownership.

Paths 1-3 and 5 are feasible without Congress, though PAYGO budget scoring is a practical hurdle. The guarantee-fee route almost certainly needs legislation. The Hybrid path depends heavily on the terms “negotiated” (in quotation marks since the government will negotiate with itself on this one).

A quick note on how the Hybrid and Deemed Repaid Paths Compare

Importantly, the Trump administration’s “North Star” in this process are (1) reducing mortgage rates (or at least not making changes that increase them) and (2) achieving an IPO of Fannie and Freddie. As such, the “Pure Repaid” vs. “Hybrid” path decision matters greatly.

• Pure Deemed Repaid (Ackman proposal): The entire $373.5 billion LP is extinguished to zero or nominal. No residual senior claim remains. The Net Worth Sweep ends completely. Treasury exercises the warrants and owns exactly 79.9% of the common; existing common keeps 20.1%. The balance sheet is clean—no ongoing dividend priority ahead of private shareholders. This maximizes enterprise value (higher trading multiples because public investors see a true privatization story), supports faster capital deployment, and makes a successful NYSE relisting far easier. It also aligns cleanly with lower mortgage rates: no overhang means the GSEs can operate with stronger perceived stability, potentially allowing g-fee relief without spooking MBS markets. Key Downside: larger upfront budget scoring hit.

• Hybrid Path: A chunk of the LP (roughly $100–150 billion, starting with the IRR excess) gets forgiven or restructured. Another slice may convert to debt or equity. But a meaningful residual SPS stays on the books at a reduced level, still senior to both junior preferreds and common, with a modified dividend or accrual obligation (e.g., 10% or lower on the smaller balance). Treasury still exercises the warrants for its 79.9% common stake; existing common keeps the same 20.1% post-dilution. The companies must continue servicing that residual SPS first, which forces heavier earnings retention on top of ERCF requirements. Result: delayed or minimal dividends to junior preferred and common for years, a valuation drag (public investors discount the stock for the lingering senior claim), and slightly messier IPO optics. It does offer better political cover and a smaller budget score, but it complicates the IPO goal and could subtly weigh on MBS pricing if markets see incomplete resolution.

In short, the deemed-repaid path delivers the cleanest capital structure for a high-quality IPO and the strongest support for lower housing costs. The hybrid trades some of that cleanliness for easier politics and scoring. The major question would be how much does President Trump care about politics and budget scoring?

The Ackman Path: Administrative Amendment

In my opinion, this remains the cleanest, fastest option. Amend the PSPA (the sixth time) to acknowledge the SPS as satisfied, zero the LP, exercise the warrants, and relist. Treasury walks away with 79.9% of the common in two much stronger companies.

Why taxpayers should like “deemed repaid”: instead of clinging to an illiquid $373 billion LP claim of uncertain collectability, Treasury gets roughly 80% of a relisted, growing enterprise that analysts peg at $300–400 billion combined enterprise value (potentially higher once the overhang is gone and ERCF revisions take hold). That equity stake could easily be worth $240–320 billion in market value, with upside from future sales or dividends. Full conversion to 100% ownership would essentially nationalize the firms, crush private-market discipline, tank valuation multiples, invite more litigation, and look politically radioactive. Eighty percent is already ironclad control without those downsides. The warrant expires September 7, 2028. Technically Treasury could unilaterally change the deadline, but why should they when a clearer and simpler path is in front of them.

Other paths that require Congress to act are non-starters. Congress has not acted on this issue for going on 18 years and is unlikely to start now.

My thesis: the SPS gets resolved via the “deemed repaid” path because this is how Treasury can best satisfy their own stated priorities: lowering mortgage rates and housing finance costs while delivering a credible IPO and conservatorship exit.

The IRR math is real and publicly defensible. The Net Worth Sweep extracted more cash than the original terms contemplated. The warrant clock is ticking. The ERCF revision running in parallel removes the old capital-gap excuse. And this Trump administration is the most privatization-minded since the conservatorship began.

…But there are significant, and very real, challenges

There are legitimate challenges to the “deemed repaid” path that investors should be aware of.

First, the SPS was never structured as a loan. It’s preferred equity. Dividends don’t reduce principal by design. Legally, Treasury can’t just declare it “repaid” without an amendment that survives scrutiny [Note: they are negotiating with themselves, so they it has to survive their own scrutiny…if that makes any sense]

Second, budget scoring would sting. CBO/OMB might treat extinguishing $373 billion as a large one-time cost, triggering PAYGO issues. However, it is unclear how much the Trump administration would prioritize this consideration. [Note: the appointment of Marc Calabria to OMB, where he serves as Associate Director for Treasury, Housing and Commerce will almost certainly make this an issue]

Third, litigation risks from JPS holders. Cancelling the LP (SPS deemed repaid) moves them up the capital stack and materially improves their odds of par recovery as well as dividend reactivation. But they could still sue if Treasury’s PSPA amendment to deem SPS repaid funnels value straight to Treasury’s warrants/commons without explicit priority for JPS.

Fourth, optics about “bailing out hedge funds” is real. But I suspect the Trump administration does not have this very high on their priority list.

What to watch for in the coming months

• FHFA’s July 2026 report: concrete language on SPS treatment under capital reform is a strong signal

• Public comments from Secretary Bessent or Director Pulte on the IRR math, “taxpayers made whole,” or IPO timing

• Any OMB/Treasury signals on budget scoring for PSPA changes

• Warrant-exercise authorization

• Litigation settlements or congressional noise on explicit guarantees

I have long advocated for the SPS being deemed repaid…

To me, the “SPS deemed repaid” thesis is the most compelling and contested idea in the GSE trade. The economics are real, the administrative tools exist, the clock is ticking, and the administration’s own priorities of lower mortgage rates and a successful IPO/end to conservatorship now point strongly toward the cleanest resolution possible.

I expect a structured sixth PSPA amendment that extinguishes the vast majority (or all) of the LP, exercises the warrants for Treasury’s 79.9% common stake, and sets up a clean transition out of full conservatorship. Any hybrid elements would be engineered with a minimal or rapidly vanishing residual SPS to avoid undermining the IPO or rate goals. To the extent that the “explicit-guarantee” approach is tried, it will be handed to Congress to run in parallel. More likely, it gets quietly dropped.

By deeming SPS repaid and extinguishing the LP, Treasury gets a story it can defend, materially improves JPS recovery odds (cleaner waterfall, closed capital gap), dilutes common via the warrant (as always expected), leaves MBS and senior debt largely untouched, and hands taxpayers 80% of two growing companies rather than a stale LP claim.

…but the trade remains binary on the PSPA terms

Watch for language on an ERCF revision. This is likely to be the first major signal that Fannie and Freddie will exit conservatorship before the end of President Trump’s term.

This issue breaks down the four themes that defined the opening stretch of 2026, the headline deals you need to know, and the ones that got away.

1. The AI arms race goes full-throttle M&A

The biggest deal of the year (or decade?) landed in January when SpaceX absorbed xAI in an all-share transaction valuing the Elon Musk AI venture at $230 billion. Not bad for a company that barely existed two years ago. The deal consolidates Musk’s AI ambitions under the SpaceX umbrella and signals that the AI infrastructure race has entered its capital-intensive phase.

But xAI was just the headline. The AI M&A wave ran deep:

• Google closed its $32B acquisition of Wiz in March, the largest cybersecurity deal ever, giving Alphabet a cloud-native security stack it badly needed.

• Palo Alto Networks swallowed CyberArk for $25B in February, creating a cybersecurity platform spanning network security and identity management.

• IBM acquired data streaming platform Confluent for $11B in March, betting that real-time data infrastructure is the connective tissue of enterprise AI.

• In April, SpaceX was back — this time reportedly circling Anysphere (the company behind the Cursor AI coding assistant) at a $60B valuation. If completed, it would mark another Musk play to own the AI developer toolchain.

• Even the rumour mill was AI-flavored: OpenAI was linked to Pinterest ($15.8B) — a play for visual training data — and Stripe reportedly explored absorbing PayPal ($40B), though PayPal quickly denied the talks.

The message is clear: the companies building the AI future aren’t waiting for organic growth. They’re buying it.

2. Pharma’s buying spree: the patent cliff has arrived

Big Pharma has been talking about the looming patent cliff for years. In early 2026, they stopped talking and started writing checks. The sector produced a remarkable density of $7B+ deals across all four months:

• Abbott Laboratories acquired cancer diagnostics leader Exact Sciences for $23B in March — the largest diagnostics deal in history, positioning Abbott as the dominant player in early cancer detection.

• Waters Corporation paid $18.8B for BD Biosciences in February, a bold move to build an end-to-end life sciences analytical platform.

• Novartis bought RNA therapeutics pioneer Avidity Biosciences for $12B in February, doubling down on next-generation drug modalities.

• Danaher launched a $9.9B cash bid for patient monitoring specialist Masimo at $180/share.

• Gilead Sciences paid $7.8B for Arcellx in February, acquiring a next-gen CAR-T therapy pipeline to extend its cell therapy franchise.

• Eli Lilly entered the in vivo cell therapy space with a $7B acquisition of Kelonia Therapeutics.

• In April, India’s Sun Pharmaceutical made a $11.75B cross-border bid for Organon, targeting women’s health and biosimilars.

The thread connecting all of these? Platforms over products. Buyers are focused on acquiring technology platforms, diagnostic capabilities, and therapeutic modalities that can generate pipelines for a decade. It’s a structural shift in how pharma thinks about M&A.

3. European Banking is riding a consolidation wave

The banking sector delivered some of the period’s most consequential announced deals. This was most pronounced in Europe, where the long-awaited cross-border consolidation finally appears to be happening.

The marquee deal: UniCredit’s $39.3B bid for Commerzbank, announced in March. This is the deal European banking watchers have been waiting for. A cross-border merger that, if completed, would create a continental banking champion. The deal faces significant regulatory and political hurdles in Germany, but UniCredit’s persistence (after months of stake-building) suggests real commitment.

Meanwhile in the US and Asia…

• Fifth Third Bancorp acquired Comerica for $10.9B in February, creating a top-10 US regional bank.

• Huntington Bancshares bought Cadence Bank for $7.4B, extending its Southeast footprint.

• In Asia, HSBC moved to take full control of Hang Seng Bank in a $13.6B deal in January, consolidating its Hong Kong franchise.

The pattern here is scale. With higher capital requirements, tighter margins, and the cost of technology modernization rising, mid-size banks are looking to scale.

4. Energy, Infrastructure and the “Mega-Deal Industrial Complex”

The physical world hasn’t gone away. If anything, the capital intensity of the energy transition and infrastructure buildout is producing deals that rival the tech sector in size.

• Constellation Energy closed its $29.1B acquisition of Calpine in January — creating the largest clean energy producer in the US by generation capacity. With AI data centers driving unprecedented power demand, this deal looks prescient.

• Deutsche Telekom reportedly explored acquiring the remaining 47% of T-Mobile US it doesn’t own for ~$101B in April. If it materializes, it would be among the largest telecom transactions ever.

• Kone announced a €29.4B ($34.4B) acquisition of TKE in April, creating an elevator and escalator behemoth. The deal consolidates an industry that’s been circling itself for years.

• A consortium of SMBC, Apollo, and Brookfield completed a $28.2B take-private of Air Lease Corporation in April, the largest aircraft leasing deal on record.

• In France, a consortium of Bouygues, Iliad, and Orange announced a $24B restructuring of SFR, reshaping the French telecom market.

Other notable industrial deals: McCormick’s $20B cash acquisition of Unilever’s food business in March ($44.8B enterprise value including assumed debt), and Brad Jacobs’ QXO platform making a $17B play for building products distributor TopBuild in April.

What is means for the rest of 2026

Three takeaways

1. AI is the new strategic imperative. Every sector — tech, pharma, finance, industrials — is making AI-adjacent acquisitions. The deals aren’t just in “AI companies” anymore; they’re in the data, infrastructure, and platforms that make AI work.

2. Scale is in vogue. From banking to mining to telecom, the cost of technology, regulation, and competition is forcing consolidation across every industry that hasn’t already consolidated.

3. The rumor-to-deal pipeline is enormous. The volume of reported-then-denied deals (Stripe/PayPal, Nvidia/Dell, Musk/Ryanair) suggests that boards and advisors are running far more processes than are reaching the announcement stage. Many of these “denied” approaches will likely resurface — just as Rio/Glencore did.

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Over the last few quarterly updates, a curious re-framing of capital levels has not gone unnoticed. For instance, see the quote below from Freddie Mac CFO Jim Whitlinger’s prepared remarks

"Excluding buffers, our capital shortfall was $105 billion at the end of the first quarter, largely because the $73 billion of Senior Preferred Stock does not qualify as regulatory capital."

Read that again. He is saying that, as a technical matter, if its $73 billion of Senior Preferred Stock (SPS) qualified as regulatory capital their capital shortfall (excluding buffers) would collapse from $105 billion to roughly $32 billion. And that is against the current, unreformed ERCF. Pair that with a revised ERCF and the math shifts dramatically. [Note: Treasury’s SPS does not meet the ERCF’s Basel III-aligned capital definition, and we will return to this later]

In my previous article A golden window of opportunity for Fannie Mae and Freddie Mac I outlined why the Fed’s recent capital rule changes for MBS represented a big opportunity for FHFA to revise the ERCF. It makes no sense for the GSEs to have capital requirements more punitive than banks for the same underlying asset class. A simple harmonization of ERCF to make it consistent with the new regime is a clearly logical step.

Since this article, there have been some new developments. Largely, and surprisingly, unnoticed by most investors in Fannie Mae and Freddie Mac. Three things are now in motion simultaneously: Trump’s March 2026 executive order directed FHFA to revise capital requirements. The Fed/OCC/FDIC published 1,500 pages of proposed banking capital reforms on March 19. And the SPS acting as a giant pain in the capital stack. This last point is increasingly being framed by both the companies themselves as an obstacle to be dissolved, not managed around. These positions, taken by executives at both GSEs, would have been unthinkable under previous administrations (including Trump’s first term).

If all three resolve, both GSEs could technically exit conservatorship the day the ERCF final rule takes effect. No waiting. No IPO required to fill a capital hole. The timeline moves becomes very feasible within President Trump’s current term.

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The Regulatory Chain Reaction begins…

1. The Executive Order

On March 13, 2026, Trump signed ‘Promoting Access to Mortgage Credit,’ a housing affordability-focused EO that, for our purposes, does two specific things. It tells the Fed, FDIC, OCC, and NCUA to revise capital regulations for banks which includes risk weights on portfolio mortgages, mortgage servicing rights, and warehouse lines. And it tells FHFA to consider revising capital requirements and to submit a report within 120 days recommending changes.

The 120-day clock expires mid-July 2026. That report is the first hard milestone in the ERCF revision story, and the market will parse every word of it.

The underlying logic is straightforward: GSE guarantee fee pricing is a direct function of capital requirements. When the Biden administration implemented the ERCF in its g-fee pricing in 2022, average fees jumped 7–10 basis points overnight — from the 45-48 bps range to roughly 55 bps. The GSE share of new mortgage originations has declined every year since, hitting 37.6% in 2025, the lowest in nearly two decades. The administration’s position is that this outcome is incompatible with its stated goal of making mortgages affordable. The EO is the opening bid on reversing it.

2. The Banking Capital Overhaul

On March 19, only six days after the EO, the Fed, OCC, and FDIC jointly released the most significant recalibration of U.S. bank capital requirements since the post-crisis reforms. Three separate NPRMs, spanning 1,500 pages, with comments due June 18. The relevant provisions:

• — LTV-based tiering for residential mortgage risk weights, replacing the flat 50% standard weight. Lower-LTV loans get meaningfully lower charges.

• — The securitization risk weight floor drops from 20% to 15%, reducing capital charges on agency MBS holdings at banks.

• — Mortgage servicing asset capital deductions are replaced with a flat 250% risk weight — a net improvement for most community banks.

• — Overall bank capital requirements decrease modestly across the board, with larger cuts for smaller, more traditional lending-focused institutions.

The direction is unambiguous. The agencies are explicitly trying to ease credit conditions in the mortgage market. And here’s the problem that creates for the ERCF: the ERCF was designed to mirror the ‘advanced approaches’ framework used by the largest U.S. banks. If the banking framework those requirements were anchored to is now being revised downward, maintaining an ERCF calibrated to the old, more conservative version is analytically incoherent.The GSEs would be required to hold capital against the same credit risks at a higher rate than the banks who buy their paper. That cannot stand, and the EO signals that Washington knows it.

Independent analysis at the time the ERCF was adopted estimated that actual capital needed for safety and soundness, based on Fannie’s and Freddie’s own stress test results, was $120-135 billion combined. The ERCF demanded $312 billion, or a whopping 2.4x what the stress tests indicated. Since then, both companies’ stress test results have improved materially.

3. The Capital Math

Now, using yesterday’s actual Q1 2026 numbers, here’s what the capital picture looks like across four dimensions: current ERCF requirements, the SPS deduction, the effect of a revised ERCF, and where each enterprise lands if you combine both.

Lets walk through the figures in the above table. Fannie Mae’s adjusted total regulatory capital deficit was approximately -$18 billion at Q1 2026 (vs. total requirement, including buffers, of around $205 billion). That looks daunting. But that -$18B figure is almost entirely the result of one thing: the $120.8 billion of SPS on Fannie’s balance sheet is subtracted from regulatory capital because Treasury’s preferred doesn’t meet the ERCF’s qualifying capital definition.

Treasury deeming the SPS repaid changes picture dramatically. Fannie’s ERCF-qualifying capital jumps to approximately $103 billion. Against a revised ERCF requirement in the $88–112 billion range, Fannie is at or near compliance right now. Not in five years. Right now.

Freddie’s picture is almost identical in structure, if somewhat tighter in the numbers. As CFO Whitlinger stated on yesterday’s call, the $73 billion SPS is “largely” responsible for the $105 billion capital shortfall (excluding buffers). Remove that deduction, and Freddie’s qualifying capital becomes approximately $69 billion. Against a revised ERCF minimum (excluding buffers) in the $47–60 billion range, Freddie meets minimum requirements immediately. It would still need to build into full buffer compliance of roughly $6–26 billion depending on the revised calibration. At a current run-rate of $3.6 billion quarterly earnings, this puts Freddie Mac on pace to close the gap within 1–2 years.

The combined run rate is $7.3 billion per quarter — $29.2 billion annualized. Any remaining buffer gap after a revised ERCF + SPS resolution closes within a few quarters. Not years. Quarters.

A plausible timeline emerges…

Revising the ERCF requires a formal APA notice-and-comment rulemaking that includes a proposed rule, comment period and a final rule. The July 2026 report is not the rule; it’s the preview. The most realistic sequencing from there: proposed rule in Q3 2026, comment period through late 2026, final rule in H1 2027. That timeline lands the ERCF final rule in the same window where PSPA resolution discussions will be at their most advanced. The two processes are running in parallel, not sequentially.

A note of caution: Treasury’s SPS decision is a wildcard

I have long advocated that the simplest and most logical solution for Treasury to deal with their SPS is to simply recognize past dividend payments and deem it repaid. But investors need to be clear eyed that this is uncertain. There have been no indications from Treasury as to their preferred course of action, and this remains the single biggest risk to the timeline above and to shareholders in the companies.

I will do a follow-up article going into the details of what Treasury could do with their SPS in a subsequent article. Suffice to say, if you believe that the SPS being deemed repaid is a likely path, then the recent Executive Order and Fed Capital Rule changes mark a significant milestone. One way or another, investors won’t need to wait long - Q2 2026 could herald a major signal for whether Fannie Mae and Freddie Mac exit conservatorship during President Trump’s current term.

Paid subscribers receive the weekly M&A deal tracker excel. This week included 522 deals (both completed and rumored).

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This premium buy-side research is behind a paywall and it is worth it. This report is a long-form, data driven detailed analysis of Prudential Financial and why it offers a compelling value vs. its market peers.

Report includes:

• Overview and investment thesis

• Deep dive into Prudential’s business

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• Analysis of key financial metrics vs. peers (ROE, ABV, AUM, EPS, Dividends, Buybacks

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• Investment thesis and justification for price target

  DealFlow: Buy, Sell, Grow is a reader-supported publication. To access premium buy-side research, become a paid subscriber

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On March 19, 2026, the Federal Reserve, FDIC, and OCC took a major step toward reshaping U.S. banking regulation. In a coordinated set of proposals, the agencies outlined revisions to the U.S. Standardized Approach and an expanded risk-based approach for larger banks. The changes are explicitly designed to be more risk-sensitive and less punitive than the 2023 Basel III endgame proposal, particularly for traditional lending activities like residential mortgages and mortgage servicing. Overall, large banks could see capital requirements fall by approximately 4.8 percent, with midsize institutions benefiting from a 5.2 percent reduction and smaller banks up to 7.8 percent.

The driving rationale, as articulated by Fed officials and echoed in coverage including The Wall Street Journal, is to reverse the migration of mortgage origination, holding, and servicing out of the regulated banking system into nonbanks and GSEs. By making on-balance-sheet mortgage activity more capital-efficient, regulators hope to broaden participation, improve liquidity, and support housing access without compromising safety.

This article takes a deep dive into these proposals, with a sharp focus on the mortgage-specific provisions. It then compares them to the far more conservative Enterprise Regulatory Capital Framework that governs Fannie Mae and Freddie Mac. Finally, it explores the central hypothetical:

• What if FHFA rewrote the ERCF to mirror the new bank rules exactly?

• How much capital would each GSE actually need?

• How does that compare to their current GAAP net worth?

• And, assuming the senior preferred stock held by Treasury is deemed repaid through administrative or legislative action, how quickly could the Enterprises exit the seventeen-year-old conservatorship?

All figures are drawn from the GSEs’ official disclosures, the agencies’ March 19 proposals, and contemporaneous analyses. While no such alignment has been proposed or announced, the potential for it is a golden opportunity for FHFA (Fannie and Freddie’s regulator) to finally get the ball moving on returning these two financial giants to public markets.

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What if a single transaction could dismantle the entrenched duopoly in U.S. payments processing, generate billions in synergies, and elevate a regional player to national prominence—while navigating intense antitrust review and investor skepticism? That was the core proposition of Capital One’s $35.3 billion all-stock acquisition of Discover Financial Services, unveiled in February 2024 and consummated on May 18, 2025, following a protracted regulatory process. As of March 2026, with one year of integrated operations, the results are unfolding: robust revenue growth and stabilizing credit quality, tempered by persistent ROE declines and integration costs exceeding initial estimates.

Building on my prior analysis of Cisco’s $28 billion acquisition of Splunk, where understated projections potentially left significant value untapped, this examination dissects the Capital One-Discover transaction for deal professionals and enthusiasts. We will detail the strategic rationale, trace the negotiation chronology, analyze the valuation framework in depth, evaluate its assumptions, review regulatory challenges, compare to analogous deals, assess post-merger outcomes, and extract key insights.

Strategic Rationale: Capital One’s Push for Scale and Independence in a Competitive Landscape

In consumer finance, where data analytics and network control drive margins, acquisitions are essential for maintaining competitiveness. Capital One, established in 1994 as a credit analytics specialist, had amassed $482 billion in assets through targeted lending products like the Venture rewards card and retail partnerships. However, by 2023, it faced pressures including elevated delinquencies in subprime segments, competition from FinTechs such as Affirm, and substantial fees paid to Visa and Mastercard for transaction processing.

Discover, with $143 billion in assets, offered a complementary profile: a focus on prime borrowers, a proprietary payment network processing 4% of U.S. card volume and extending to over 200 countries through Diners Club and PULSE, and a strong debit business. Despite these strengths, Discover contended with operational issues, including a 2023 card misclassification incident resulting in a $365 million charge and FDIC enforcement actions, alongside a CEO transition that pressured its stock.

The deal’s value proposition centered on vertical integration. Capital One anticipated $2.7 billion in pre-tax synergies by 2027, comprising $1.5 billion in cost reductions from eliminating overlaps in technology, branches, and operations, and $1.2 billion in revenue enhancements from internal debit routing, which could reduce interchange fees by 20-30%. Beyond efficiencies, the merger enabled cross-selling of premium products to Discover’s 100 million customers, advanced AI applications in lending, and broadened merchant networks to 70 million acceptance points. Following closure, Capital One shifted toward higher-end segments, reducing subprime exposure to emulate American Express’s model while enhancing fraud prevention through aggregated data.

“Critics are wary of the size of the deal, but some analysts say it could create a stronger challenger to Visa and Mastercard.” - Bloomberg

Challenges were evident: Potential cultural mismatches between Capital One’s agile culture and Discover’s established systems risked employee attrition, with 1,100 Discover positions eliminated by March 2026. Technology migrations posed outage risks, and antitrust concerns over the combined 30% subprime market share necessitated a $265 billion community benefits commitment, which critics argued overstated new investments at under $5 billion according to organizations like the National Community Reinvestment Coalition. Nevertheless, the merger promised to chip away at Visa and Mastercard’s over 80% market control, potentially lowering merchant costs over time.

One year post-closure, performance indicators show progress amid headwinds. Third-quarter 2025 revenues increased 23% year-over-year to $15.4 billion, bolstered by Discover’s assets, with organic purchase volumes rising 6.5%. Credit trends improved, with domestic card net charge-offs at 5.04% and delinquencies at 3.93% in early 2026. However, integration expenses exceeded projections, contributing to a $4.3 billion net loss in Q2 2025 from acquisition-related accounting, including $510 million in quarterly intangible amortization. Return on equity fell to 9.63%, below the sector average of 9.78%, leading to analyst downgrades such as Seeking Alpha’s Strong Sell rating, which forecasts an 11.6% downside to a $160.90 fair value due to efficiency shortfalls.

Negotiation Chronology: Mapping the Path from Initial Outreach to Regulatory Approval

Large-scale mergers require meticulous orchestration, often spanning months of discussions, assessments, and adjustments. Similar to the Splunk-Cisco process (initial engagement in 2021 leading to closure in 2023), the Capital One-Discover timeline involved strategic pauses and escalations and complexities.

The groundwork predated 2023, with both companies periodically evaluating growth opportunities amid rising interest rates, fintech competition, and regulatory pressures. Discover maintained independence but entertained advisor contacts following its July 2023 misclassification issue, which incurred a $365 million liability and prompted an FDIC consent order.

The process accelerated in August 2023: Discover’s CEO resigned on August 14, causing a stock decline. Chairman Thomas Maheras received inquiries, including from Stephen Crawford, an advisor to Capital One CEO Richard Fairbank, around mid-August. This led to a September 13 meeting in New York, where Fairbank proposed a stock-for-stock transaction at a 30% premium. Capital One had engaged Centerview Partners and Wachtell, Lipton, Rosen & Katz by mid-August.

In December 2023, the merger discussions between Capital One and Discover hit a significant roadblock when Capital One’s due diligence uncovered critical red flags related to Discover’s compliance and credit risk management. Key issues included a long-standing card product misclassification dating back to 2007, where certain credit card accounts were incorrectly placed in higher merchant pricing tiers, resulting in ongoing merchant settlement discussions, regulatory scrutiny, and an SEC investigation. Discover had already recognized approximately $290 million in estimated penalties as of September 30, 2024, tied to a 2023 FDIC consent order mandating enhancements to consumer compliance, governance, and risk practices. Additionally, concerns arose over the adequacy of Discover’s compliance management system and credit risk framework, which Capital One deemed insufficient for alignment with its standards and regulatory expectations. These findings prompted Capital One’s management to inform Discover on December 7 that it would not proceed, citing the diligence status and external factors like Discover’s rising stock price, which would necessitate a higher exchange ratio.

The temporary halt, reviewed and affirmed by Capital One’s board on December 14, highlighted the potential for substantial remediation costs—estimated within the overall $2.8 billion in acquisition and integration expenses, including one-time fixes for Discover’s issues—and raised uncertainties around regulatory approvals, operational integration, and financial synergies. This pause delayed the process by several weeks, allowing time to assess whether the risks outweighed the benefits, but discussions resumed in January 2024 after market shifts and further evaluations, ultimately leading to the deal’s revival and completion.

Valuation Framework: A Detailed Examination of Projections, Dividend Discount Model, and Comparable Transactions

Valuations in this transaction were based on structured analyses by financial advisors Centerview Partners (for Capital One) and PJT Partners (for Discover). These relied on unaudited management projections, emphasizing conservatism amid economic uncertainty. The analyses incorporated standalone forecasts for both companies, adjusted for synergies, and excluded certain one-time items like Discover’s student loan portfolio disposition (implied NPV of ~$7.25 per share, excluded due to uncertainty). Below, we break down the key components into management projections, the dividend discount model (used as a proxy for DCF), and market comparables.

Management Projections: Building Blocks of Standalone and Synergized Forecasts

The unaudited prospective financial information formed the core inputs, derived from consensus estimates (e.g., from FactSet or street research) for near-term years (2024-2025) and extrapolated for longer horizons (up to 2030, varying by advisor). These projections included net income available to common shareholders (NIAT), earnings per share (EPS), return on average tangible common equity (ROATCE), tangible book value per share (P/TBV), risk-weighted assets (RWAs), total loans, and total capital returns (e.g., dividends and buybacks). Assumptions reflected steady growth amid economic headwinds, with Capital One targeting CET1 ratios of 13% and Discover 12% for capital adequacy. Synergies were layered on top: $2.7 billion pre-tax by 2027

• For Capital One standalone (Centerview’s view, 2024-2030; extrapolated with ~1% NIAT growth in 2026 and ~3% thereafter; RWAs ~3.5% annual growth from 2026)

• PJT’s Capital One standalone projections (2024-2028; NIAT growth 13% in 2025, 7% thereafter; loans/RWAs ~5% annual growth from 2025; capital returns at 68% payout ratio)

• For Discover standalone (Centerview’s view, 2024-2030; NIAT growth ~8% in 2026, 5% in 2027, 11% in 2028-2029, 4% in 2030; RWAs ~3% in 2026, 5% thereafter; 2024 includes student loan sale impact)

• PJT’s Discover standalone projections (2024-2028; NIAT growth ~10% annual average; loans/RWAs ~7-8% growth)

Dividend Discount Model: Discounting Future Cash Flows to Present Value

The primary valuation method was a dividend discount model (DDM), serving as a proxy for discounted cash flow (DCF) tailored to the banking sector. DDM was preferred over traditional DCF because banks’ cash flows are heavily constrained by regulatory capital requirements (e.g., Basel III and CET1 ratios), making free cash flow unpredictable and less relevant—leverage and capital structure are integral to operations, not separable as in non-financial firms. Instead, DDM focuses on distributable dividends (excess cash after maintaining capital buffers), providing a more accurate reflection of shareholder value in a regulated environment where dividends are stable and tied to risk management. This approach aligns with financial institutions’ unique dynamics, where working capital and capex have minimal impact, and earnings are often directed toward reserves rather than unrestricted FCF.

Centerview and PJT applied sensitivities to growth, discounts, and terminals, yielding implied per-share ranges for Discover. Centerview’s DDM (2024-2030 forecasts; discount rates 12.75-13.75% via CAPM: 4% risk-free, 1.4-1.5 beta, 5-6% equity risk premium; terminal P/E 8.5-10.5x on 2030 NIAT; perpetual growth implied ~2-4% in sensitivities): Implied Discover value $120.50-$141.75 per share (standalone), adjusting for synergies to support the exchange ratio (0.88-1.23x ex-synergies, 1.06-1.75x incl.).

PJT’s DDM (2024-2028 forecasts; discount rates 11-13%; terminal P/E 8.5-10.5x on 2028 NIAT): Implied Discover value $117.46-$145 per share.

Market Comparables: Benchmarking Against Peers and Precedents

Comparables analyses supplemented DDM, using selected public companies for multiples and precedent transactions for premiums. Peers were chosen for similarity in consumer finance/banking (e.g., focus on cards, lending).

These supported the deal’s premium as aligned with market norms, though critics noted limited fintech inclusion.Centerview’s comparable companies: P/E (9-11x 2024E EPS) and P/TBV (1.78-2.11x via ROATCE regression) for peers like American Express, Ally Financial, Synchrony Financial. Implied Discover ranges: $107.75-$130 (P/E), $103.25-$121 (P/TBV).

PJT’s similar: P/E 9-11x, P/TBV 1.78-2.11x, yielding overlapping ranges.

Premiums paid: 10-35% applied to Discover’s unaffected $110.49 price (February 16, 2024 close), implying $121.50-$149.25 per share.

Precedent transactions (selected banking deals) informed the range but were not detailed with specific multiples.

Reviewing the P/E comparables we see overlap with the sensitivity analysis and a rough triangulation approach on the final deal value at a roughly 10.5x P/E. This represented a 27% premium to Discover’s market value at the time of the deal.

Scrutinizing the Valuation: Assessing Assumptions and Potential Enhancements

The 27% premium appeared reasonable given Discover’s challenges, but parallels Splunk-Cisco’s conservative approach, where growth projections may have understated potential. NIAT forecasts (3-11% for Discover) overlooked opportunities in network globalization or AI enhancements. Discount rates (11-13.75%) were elevated; reducing to 10-12% might increase per-share value by $10-20.

Comparables were appropriate but limited; incorporating fintech benchmarks like SoFi (12-15x P/E) could justify higher multiples. The premiums range was expansive; a 20-30% banking median aligns with the deal’s 27%, yet deeper precedent transactions (e.g., Synchrony-Ally alignments) were underemphasized. Without alternative scenarios (e.g., 5-7% perpetual growth if synergies surpass $2.7 billion), Discover may have conceded $5-10 billion. Analyst views diverge: BTIG’s post-closure Buy rating cites $21.39 EPS potential, while others highlight ROE shortfalls, estimating fair value at $161.

Navigating Regulatory Hurdles: The Beltway Battles That Shaped the Outcome

Regulatory approval in banking mergers extends beyond financials to public policy. Antitrust concerns over subprime concentration attracted Department of Justice criticism, with groups like the American Economic Liberties Project deeming it anticompetitive and predicting fee hikes. Capital One rebutted by emphasizing network competition, though detractors questioned the efficacy of claimed efficiencies.

The process: Applications filed March 2024; July public hearings; extensions under Biden-era stringency. A post-election administrative change in April 2025 expedited Federal Reserve and OCC approvals, alongside Delaware clearance in December 2024. The $265 billion benefits package (focused on low- to moderate-income lending and branch expansions) was promoted as transformative but critiqued for minimal incremental value.

“Regulators have been tough on big financial mergers, though there are nuances in Capital One’s $35.3 billion takeover bid for Discover.” - New York Times

Benchmarking Against Peers: Contextualizing the Deal in Banking’s Consolidation Wave

To evaluate Capital One-Discover, consider it alongside 2025’s heightened M&A activity (over 150 announcements, with October’s $21.4 billion marking the peak since 2019). Comparisons include Fifth Third-Comerica, Huntington-Cadence, PNC-BBVA (2021 benchmark), and cross-sector to Splunk-Cisco.

Fifth Third’s $10.9 billion all-stock Comerica deal (announced October 6, 2025; expected Q1 2026 close) aimed for regional dominance, yielding a $288 billion entity with leading positions in the Midwest and Texas. The 1.8663 exchange ratio provided a 20% premium to Comerica’s 10-day VWAP ($82.88 implied). Synergies: $850 million gross pre-tax (35% of Comerica’s 2026 expenses), with revenue opportunities in payments and wealth. Timeline: Comerica explored options in summer 2025 amid liquidity issues; CEO contact September 18; Dallas meeting September 19; nonbinding indication September 23; finalization through September 30; execution October 5. Advisors mirrored Capital One’s (Goldman Sachs, J.P. Morgan). Valuations: Conservative DCF/comps supported fairness, with risks in integration and enhanced regulatory category. Unlike Capital One’s network focus, this emphasized footprint expansion, with milder antitrust but comparable community commitments.

Huntington’s $7.4 billion Cadence acquisition (mid-2025 announcement) created a $276 billion top-10 bank via Sunbelt growth and deposit diversification. Valuation: 1.5x tangible book value premium; synergies $800 million (30% cost reductions). Shorter timeline (6 months to close) leveraged regulatory easing. Early 2026 data indicates 15% EPS accretion but initial ROE pressure—echoing Capital One’s trajectory with less subprime exposure.

PNC’s $11.6 billion cash purchase of BBVA USA (announced November 2020; closed June 2021) offers historical perspective: 1.34x TBV and 19.7x 2019 earnings, with $900 million synergies (35% of BBVA expenses) forming a $560 billion national player. Integration overruns ($980 million expenses) delayed benefits, akin to Capital One’s cost escalations. Outcomes: 21% 2022 EPS lift, though the $88 billion benefits plan faced scrutiny—similar to Capital One’s. PNC achieved >19% IRR, illustrating long-term rewards despite early hurdles.

Post-Merger Assessment: Progress, Pain Points, and Forward Outlook

Retrospective analysis highlights resilience: Q3 2025 revenues rose 23%, with synergies advancing (e.g., debit routing implemented early 2026). Yet, Q2’s $4.3 billion loss, cost overruns, and subprime portfolio adjustments underscore challenges. Capital returns via $16 billion buybacks and dividend increases supported shares, but ROE declines indicate ongoing inefficiencies. Credit trends reflect normalization, with charge-offs steady and reserves easing.

“The Discover acquisition drove double-digit growth, but organic card spending and loans also expanded.” - PYMNTS

“[integration costs] will surpass the original $2.8 billion estimate.” - Capital One CEO Richard Fairbank stated during the Q2 2025 earnings call

The company added that it’s still on track for $2.7 billion in total net synergies, due to cost savings and revenue synergies from the combination. But it seems this is taking far longer to achieve than originally anticipated.

Key Insights and Implications: Synthesizing Lessons for Future Transactions

The Capital One-Discover merger exemplifies M&A’s capacity to transform sectors: a calculated integration of networks and data that navigated negotiations, valuations, and regulations to yield a payments contender. It demonstrates how deals emerge (opportunistic timing during vulnerabilities), valuations are constructed (through layered projections and sensitivities), and improvements can be made (by incorporating upside cases to maximize outcomes).

For dealmakers, the takeaways are pragmatic: Align pursuits with market lows for favorable premiums; integrate diligence pauses as risk mitigators; broaden comparables to include emerging peers; and prepare for regulatory variability, where shifts can compress timelines. In banking’s ongoing consolidation, this transaction signals opportunities in tech-enabled scale but warns of execution risks. Conservative assumptions can protect against downside, but can deprive shareholders of real value.

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1. OpenAI acquires IO Products for $6.5 billion

The first one jumped off the front pages of most business news publications. OpenAI, the leading AI research and deployment company known for ChatGPT acquired IO Products for $6.5 billion. IO Products is the AI hardware and devices startup co-founded by former Apple chief design officer Jony Ive (the famed designer behind the iPhone)

The deal is an all-equity transaction and is OpenAI's largest acquisition to date. Strategically, this positions OpenAI to expand into physical AI hardware. With this deal, OpenAI acquires 55 hardware experts that are among the industry’s best. I find OpenAI’s hardware ambitions fascinating and am keen to see what kinds of products they develop.

2. Alfa Laval acquires Fives Cryogenics for $939 million

Alfa Laval, a Swedish industrial company specializing in heat transfer, separation, and fluid handling technologies, acquired the cryogenics business unit from Fives Group for $939 million. Fives Group is a French industrial engineering firm focused on process technologies and equipment.

The heat exchangers and pumps developed by Fives Energy Cryogenics are essential for the efficient liquefaction, regasification, and transportation of gases like LNG and hydrogen, as well as industrial gases such as carbon dioxide and nitrogen. In fact, Fives Energy Cryogenics is a world leader in this domain, with 65 years of experience designing and manufacturing cryogenic heat exchangers and pumps for gas liquefaction.

"This acquisition is a strategic milestone for Alfa Laval. By integrating Fives Energy Cryogenics' cutting-edge cryogenic technology to our portfolio, we are not only extending our technological capabilities but also reinforcing our commitment to driving the energy transition. This acquisition positions us at the forefront of innovation in important future markets, enabling sustainable volume growth and value creation" - Tom Erixon, CEO and President of Alfa Laval.

3. Perenco acquires Woodside Energy’s Trinidad assets for $206 million

The energy industry continues to light up in terms of dealmaking (even the previous Alfa Laval deal is related to LNG transport). Perenco, an Anglo-French independent oil and gas company with E&P operations in multiple regions, has acquired select assets from Woodside Energy for $206 million. Woodside is an Australian energy firm engaged in liquefied natural gas (LNG) and oil production. The deal involves Woodside's interests in the Greater Angostura and Ruby shallow water oil and gas fields offshore Trinidad and Tobago.

The deal will combine Perenco’s newly acquired assets with their existing operations in the Teak, Samaan and Poui (“TSP”) and Cashima, Amherstia, Flamboyant and Immortelle (“CAFI”) fields. This will make Perenco as a major oil and gas producer in the country, responsible for roughly 12% of the total production with a gas production base of >500 mmscfd and oil production >10,000 bpd.

“This acquisition is an exciting, promising addition to Perenco’s acreage in Trinidad and Tobago. It shows our continued commitment and ambition towards developing energy resources and contributing towards the country’s economic growth. This milestone will increase our gross production levels in excess of 100,000 boepd and allows us to further strengthen our partnership with the Government of Trinidad & Tobago. We are confident that our specific skill in mature field assets and marginal resources will secure long-lasting production from the Angostura asset, while prioritizing the safety of our people and environmental sustainability. We are pleased to welcome our new colleagues to the Perenco family and would like to recognize all the players who contributed towards the success of this acquisition. I would like to thank the Ministry of Energy and Energy Industries and all the people at Perenco and Woodside who worked diligently to make the short transition period a success.”

4. Quanterix acquires Akoya Biosciences for $69 million

Quanterix, a US company fueling scientific discovery through ultra-sensitive biomarker detection has acquired Akoya Biosciences, a spatial biology firm offering single-cell imaging solutions. Quanterix’ technology is used to quantify proteins at low levels in blood, serum or plasma. Akoya’s imaging solutions enable researchers to phenotype cells with spatial context and visualize disease progression and therapy response. The deal will establish Quanterix as a scaled leader in early detection of disease for neurology, oncology and immunology markets in blood and tissue. This expands Quanterix’ total addressable market to $5 billion, and enable cross-selling with Akoya’s installed base.

The deal terms were initially announced as an all-stock transaction for $286 million in January 2025. But this was amended downwards in April 2025 amid market concerns. The deal is a cash and equity transaction, with $20 million in cash and the remaining $49 million in equity. Qunaterix will target $40 million in annual cost synergies post-transaction. The final terms of the deal will see Quanterix shareholders own 84% of the combined entity.

“The acquisition of Akoya positions us to deliver comprehensive protein biomarker solutions that leverage signatures in blood and tissue, together providing a more holistic and predictive view of a patient’s disease. This transaction extends our portfolio into new markets and is expected to expand our served addressable market from $1 billion to $5 billion. We believe the combined business will benefit from significant scale, a strong balance sheet and an accelerated path to profitability by 2026” - Masoud Toloue, CEO of Quanterix

5. Sanoh Industrials acquires Winkelmann Powertrain for $13.9 million

Another area I have noticed increased M&A activity has been in automotive suppliers, and I come back to this area for the final deal of this article. Sanoh Industrial Co., Ltd., a Japanese automotive parts manufacturer specializing in tubes, pipes for vehicles, has acquired Winkelmann Powertrain, a Mexican company producing powertrain components for the automotive industry.

The deal is part of Sanoh’s “Last Man Standing Strategy” which aims to secure Sanoh as the #1 global market share leader in automotive tubing. By integrating Winkelmann’s Powertrain business as a subsidiary of Sanoh, they will establish a dominant position in fuel injection for vehicles made in Mexico for the US market. The deal is a big bet on continued demand for ICE vehicles and the slower than anticipated adoption of EV’s in the US market.

About the author: Stephen McNamara is a Sr. M&A Advisor with ONEtoONE Corporate Finance, an international investment banking and mid-market M&A advisory group with offices in 30+ countries. Contact details are in the “Contact” section of DealFlow: Buy, Sell, Grow.

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Deal size over $1 billion

I would be remiss if I didn’t mention Nippon Steel’s acquisition of US Steel for $14.9 billion. This marks the end of a truly bruising and highly political takeover process. US Steel has struggled with high costs for years, and Nippon’s offer to takeover the company with a promise of new investment into the firm was first proposed in 2023. But of course, US Steel is considered a “strategic asset” with national security concerns and the politics heated up quickly. President Biden effectively blocked the transaction and US-based bidders dropped out. President Trump managed to approve the deal under strict conditions that leave the US Government with control over the US Steel entity via a “golden share” agreement.

“[The golden share grants] the right to appoint an independent director…and Consent rights of the President of the United States, or his designee, on specific matters” - Reuters

If I had to guess, the US Steel saga is far from over. It may lie dormant for awhile, but with the President now able to appoint someone to the Board and have an effective veto over “certain matters”, it is only a matter of time before the politics heats up once more. It is unclear if Nippon, or the US Government, will come to regret this acquisition in the long-run.

Deal size $500 million to $1 billion

For motorcycle enthusiasts, a major M&A announcement: India based Bajaj Auto will acquire Austria’s KTM for $924 million. KTM is an Austrian motorcycle manufacturer struggling with a financial debt restructuring that was threatening to send the firm into insolvency and liquidation. Production facilities in Austria had already been halted, the company was in the courts trying to get a restructuring plan approved - and the deadline was end of May 2025. Bajaj has stepped in, just in time, with the first 200 million Euro installment as part of a larger court-approved rescue. The remaining funds are now approved and on the way (loans plus convertible bonds), with Bajaj gaining majority control over the company. The deal will build on their longtime partnership with KTM and further expand their presence in high-end performance motorcycles. As a condition of the deal, Austrian jobs will be preserved.

“The most important thing in all decisions is the successful future of KTM and the long-term safeguarding of jobs.” - CEO of KTM

Deal size $100 million to $500 million

In an all Singapore affair, Alliance Energy Services has acquired PEC Energy for $165 million. Alliance Energy is part of Liberty Energy Solutions Ltd, which provides energy engineering solutions and proprietary equipment / products to oil and gas refineries and petrochemical facilities globally. PEC is a Singapore based provider of maintenance and integrated EPC services for the oil and gas, petrochemical, chemical and pharmaceutical industries. The deal will expand Alliance / Liberty’s range of services and customer base, mostly in Asia and Middle East markets. Interestingly, Liberty is owned by Private Equity firm ShawKwei & Partners, which specializes in industrial service companies with revenues between $50-$800 million USD. ShawKwei focuses on acquisitions in the industrials and industrial services sectors with expertise in performance improvement / turnaround situations.

“We are excited to welcome PEC into Liberty Energy…PEC’s strong management team, technical expertise, and reputation for reliability and service excellence align well with our strategy of building a global platform for best-in-class energy solutions.”
- Kyle Shaw, Chair of Liberty Energy

Deal size $50 million to $100 million

There were only 4 identified deals in this size range last week. The most interesting was Colt CZ Group’s acquisition of Steel Stamp Inc for $59.5 million. Colt is based in the Czech Republic, and is a global manufacturer of firearms. They have manufacturing hubs in the their home country as well as the USA, Canada, Sweden, Switzerland and Hungary. Steel Stamp is a US based maker of firearm components and has been a long-term supplier to Colt CZ Group. The deal represents a 5x EBITDA multiple of the company’s firearms business.

“The strategic rationale for the transaction is to achieve vertical integration in selected product categories. With this acquisition, Colt CZ Group gains control of a reputable, high-quality precision machining company, that serves as a key supplier of revolver frames, cylinders, spare parts, and other firearm components for the commercial market,” - Radek Musil, CEO of Colt CZ Group

Deal size under $50 million

We remain in the wider defense space - lots of M&A action going on - for the “under $50 million” category this week. UK based Gooch & Housego, a manufacturer of photonics components and systems, acquired US based Global Photonics for $17.5 million. Global Photonics is a manufacturer of optical systems military land applications, as well as for aerospace and industrial sectors. The deal extends Gooch & Housego’s presence as a supplier to the US defense sector, as well as builds their US based manufacturing presence.

I think that defense sector M&A has been heating and am fully expecting more deals to come.

This was the second major announcement about Fannie Mae and Freddie Mac in the last two weeks, and investors should take note of the change in tone. In the first announcement, President Trump said “I am giving very serious consideration to brining Fannie Mae and Freddie Mac public…and will be making a decision in the near future”. Now note the above post: “I am working on taking these amazing companies public”. In other words - President Trump’s decision has been made and the conservatorships will end on his watch (i.e. by the end of 2028). I didn’t expect my previous analysis to get validated so quickly, but I’ll take it.

Now the major questions become (1) What needs to happen to achieve President Trump’s objectives? and (2) How much are Fannie Mae and Freddie Mac worth?

I’ll address these questions in reverse order, with this article focusing on updating my price targets. I build on my prior content and cover valuation methodology (including a review of Pershing Square’s methodology), shareholder dilution and my price targets for Fannie Mae and Freddie Mac. The details are behind a paywall (paid subscribers can continue reading). Suffice to say, the shares are up ~600% in the last 12 months and I think they still have massive upside potential. Free subscribers should consider upgrading to paid for this one - the potential upside on these stocks is huge. It might be the single best investing decision you’ll make.

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Deal size >$1 billion

There was only one deal over $1 billion that closed last week. And it is technically a stretch, as the deal was for $600 million and another $1.3 billion pending certain performance milestones related to clinical development. I’m referring to Sanofi’s acquisition of DREN 0201, in a $1.9 billion acquisition (per the terms above). The deal is for a drug in clinical development that would boost Sanofi’s immunology portfolio. DREN 0201 (now rebranded SAR448501) targets immune related diseases such as Lupus and, as you can tell by the name, is still in clinical development. Dren Bio (the parent company that developed DREN 0201) will continue to operate as an independent entity, and use the proceeds to further develop their pipeline of antibody therapeutics.

Deal size $500 million to $1 billion

n/a. There were no deals in this size range that closed last week. Its the first time this has happened since I started writing my M&A news section. What can I say…maybe the holidays did have an outsized impact on the M&A markets.

Deal size $100 million to $500 million

I have to admit that I don’t typically follow the crypto / bitcoin news that much. But the following deal caught my interest. Ursalpha Digital Ltd, registered in the Virgin Islands acquired Cango for $352 million. Cango is a Chinese firm headquartered in Shanghai (though listed on the NYSE) that originally specialized in car financing. In November 2024 (7 months ago), Cango pivoted to Bitcoin mining with a major acquisition of crypto mining equipment (all of which was outside of China, as cryptocurrency mining is illegal there). They, in effect, exited their original car financing business to focus on crypto. Ursalpha Digital is a subsidiary of Bitmain, one of the largest Chinese cryptocurrency miner companies, again based outside of China for legal reasons. With this acquisition, Cango will exit its legacy car financing business entirely as well as the Chinese market entirely. They intend to relocate their headquarters outside of mainland China though no location has been announced yet. Originally, I thought this might be a form of capital flight from China, but that does not seem to be the case here. Rather it is a strategic pivot into Bitcoin mining that has invited the dealmaking spirits.

Deal size $50 million to $100 million

For deals in this size category, we go to the world of luxury watch retailing with The Hour Glass Ltd. (a Singapore based luxury watch retail group) buying THGrau (Australia) for $58 million. The deal took some research to unpack, as technically THGrau is a Australia based Special Purpose Vehicle with limited disclosures. However, it seems THGrau was a holding entity for prime retail locations, and the acquisition could significantly expand The Hour Glass group’s retail locations in the country. This could be good for fans of Rolex, Patek Philppe and Hublot brand watches known to be sold by The Hour Glass group.

Deal size <$50 million

Once again, dealmaking in this size category was sparse and of the deals identified only two were cross-border transactions. The most curious one was Taiwan based WW Holding’s acquisition of Vietnam based Virtue King for $3 million. WW Holding is a specialized manufacturer of luxury, sports and luggage bags. It owns 4 subsidiaries: Wilson Bag (focused on luxury, business and sports bags), Wellpower (focused on sports equipment / protection gear and medical protection gear), TWT (specialized in luggage and business bags) and now Virtue King which is specialized in Golf bags. WW Holding’s strategy since 2009 has been focused on expanding their manufacturing footprint in Southeast Asia, and this acquisition of Virtue King (including their Vietnam based manufacturing facilities) fits squarely with this approach.

That is it for the week. As I said before, dealmaking was pretty sparse this week. Hopefully there is more action in the week ahead. To me the most interesting deal this week was the Cango / Bitcoin deal. I don’t typically pay much attention to the crypto world, but it sure is interesting to see an established car-financing company abandon their legacy business, pivot to crypto and then leave their country of origin as a result (all within 7 months).

Yet these companies have been in under government conservatorship for 17 years (a consequence of the Great Financial Crisis in 2007-2009). As a result, they trade Over-The-Counter, lost among the wilderness of penny stocks. President Trump came to office in 2016 with the aim of ending their government conservatorship and restoring them to private market glory. But he ran short of time as the companies had virtually no capital on their books, and needed years to build this up. Their penny stock status remained. In 2020, the Biden administration had no interest in dealing with the future of these firms. The upshot: Fannie Mae and Freddie Mac continued to build capital…lots of it…and almost nobody was paying attention. I wrote my first buy-side research article on these firms back in January. These were deep dive reports covering the detailed histories, financials and valuations of the companies. I asserted that as they continued to build capital, the probability of exiting conservatorship increased and so to did the anticipated share values.

Trump returned to office with these companies in a much stronger position than in his first term. Then, last week, President Trump posted that he was seriously thinking of ending the conservatorships. This single message sent the shares up >50% in one day !

With this single post, President Trump has massively increased the odds that the conservatorships will end before he leaves office in 2028.

So I think this is a great time to revisit my previous deep dive on Fannie Mae ($FNMA) and Freddie Mac ($FMCC), including my valuation models and price targets. I will do this in two parts. The first part (this post) will cover why I think both companies can accumulate enough capital via retained earnings alone to exit conservatorship. This is a critical achievement, as it means additional shareholder dilution (in excess of the outstanding government warrants) is less likely. In Part 2, I will review my valuation model and price targets and comment on the price target from Pershing Square (Bill Ackman’s hedge fund). The details are behind a paywall (paid subscribers can continue reading). Suffice to say, the shares are up ~600% in the last 12 months and I think they still have massive upside potential. Free subscribers should consider upgrading to paid for this one - the potential upside on these stocks is huge. It might be the single best investing decision you’ll make.

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Deal size >$1 billion

Our first deal is an all American affair. PepsiCo has acquired VNGR Beverage for $1.95 billion. VNGR is the company that owns Poppi Prebiotic Soda, a brand of soda beverages that emphasizes sodas made with prebiotics, fruit juices and apple cider vinegar. In other words, with way less sugar and an appeal to wellness oriented consumers. The company itself was only founded in 2015, and it even appeared on a pitch for Shark Tank. As consumer preferences have shifted, Pepsi has undertaken a strategic portfolio transformation program. The deal will see Pepsi improve its product portfolio offerings, while significantly boosting Poppi’s growth potential.

"Poppi represents a compelling strategic fit within our short- and long-term vision for the future of beverages…Its rapid growth, strong consumer engagement, and differentiated functional positioning make it a dynamic addition to our portfolio. We are excited to scale poppi's momentum and unlock new growth through our capabilities – we're just getting started." - Ram Krishnan, CEO of PepsiCo Beverages U.S.

The deal terms are also interesting, and includes $300 million of cash tax benefits for PepsiCo as well as a performance-based earnout contingent on Poppi obtaining certain performance metrics.

Deal size $500 million to $1 billion

Deals in this size range were few and far between this week. In fact, I could only identify 2 globally that closed in the last week (I exclude rumored or announced M&A). For the most interesting of the two, we turn to Asia. SG (“Sagawa”) Holdings, the leading Japanese freight and logistics company has acquired Morrison Express, the Taiwan based global freight forwarder for $900 million. Morrison Express is renowned for its expertise in semiconductor and high-tech logistics. The deal significantly expands SG’s presence in Asia and further allows it to offer end-to-end supply chain solutions across air, ocean, rail and road freight. The combined entity will also benefit from their combined global networks. For those interested in understanding how semiconductors and high-tech products are physically moved around the world, this is a deal worth watching.

"Morrison Express' established relationships within the technology sector and strong Asian market presence, combined with their expertise in semiconductor logistics, perfectly complements our existing capabilities and forward-thinking approach to supply chain management…The acquisition will significantly enhance global network coverage, allowing the SG Holdings Group to provide better logistics solutions across different regions” - Bokuto Yamauchi, Head of Global Strategy for SG Holdings

Deal size $100 million to $500 million

For this deal size category we return to the United States. Alumis, a US based autoimmune disease therapeutics company, has acquired Acelyrin, a late-stage clinical bio-pharma company for $242 million. Interestingly, the deal terms will see Alumis and Acelyrin shareholders own 55% and 45% of the combined company after close. The deal happened over the objection of Trium Capital, which owned 5.4% of Acelyrin, who argued that the deal terms were worse for shareholders than simply liquidating the company.

“We believe all the offers received by [Acelyrin] thus far are inferior to a winding down of the company and returning capital to shareholders…A liquidation of the company provides certainty of value well above the value from any of the offers. We believe there is no reason for shareholders to accept any transaction that provides upfront value less than value that can be expected in a liquidation” - Trium Capital, letter to shareholders on April 28 2025

“This merger represents the culmination of a thorough strategic review process by our Board and management team to determine the best and most value-maximizing path forward for ACELYRIN. We are confident that Alumis is the right partner to optimize the development of lonigutamab and together deliver long-term stockholder value.” - Bruce Cozadd, Chairman of the Board for Acelyrin

I always find it interesting when there are significant differences in views. In this case, a major shareholder disagreed with the deal terms but did not convince enough shareholders to vote against the deal. I guess we’ll have to wait and see who turns out to be correct.

Deal size $50 million to $100 million

In the UK, Anima Care has acquired CVS’ crematoria operations for $56.4 million. Anima Care is part of Funecap Group, a major European funeral services provider, and provides end-of-life care and funeral services for pets. Interestingly, Anima Care made an unsolicited bid for CVS’ Crematoria business which had 2024 revenues of roughly $16 million and adj. EBITDA of $5.8 million. The transaction values the business at ~10x EBITDA. A post-closing service agreement will see Anima Care continue to provide clinical waste disposal and cremation services to CVS practices going forward. The deal is a typical “bolt-on” acquisition for Anima’s core business, while allowing CVS to focus on its core offerings.

“This disposal reflects our commitment to focusing on our core veterinary services while ensuring quality end-to-end services for our clients. The capital generated will support our strategic expansion and deliver value to the Group.” - Richard Fairman, CEO of CVS

Deal size <$50 million

Our last deal of the week, though smaller in size is no less interesting or significant. China’s leadership in battery and new vehicle technology is on clear display. Hubei Wanrun, a leading Chinese battery manufacturer, has acquired Safra, France’s only domestic producer of hydrogen fuel-cell buses for $7.8 million. Safra has been in receivership since Febraury and the deal had to be approved by France’s courts. As part of the deal, Wanrun will retain 120 of 169 Safra employees, and they are planning to continue construction of hydrogen buses as well as renovating trains and subways to convert diesel coaches to hydrogen fuel cells. While the deal was approved by the judge, it was opposed by the workers’ unions, the State Economic, Social and Environmental Council as well as multiple elected officials. According to them, Wanrun’s terms remain vague and it seems there is not a lot of trust - even if 120 jobs are being preserved and Wanrun is a top manufacturer. They seem to be worried that this deal will allow Wanrun to flood the EU market with their products. But taken from another perspective, it could be a valuable way to get highly competitive and innovative technology into the EU market. Expect more deals like this in the future.

"We have a lot of questions because Wanrun's offer is vague; we don't know what they're going to do" - Ludovic Vialard, CGT union representative.

"Wanrun manufactures electric buses in China, but not hydrogen-powered ones…it will send nearly finished buses to Safra, which will provide the necessary certifications to flood the European market." - Laure Malleviale, departmental secretary of the Tarn CGT union. "

That is it for the week. Personally, I think the smallest deal (Wanrun’s acquisition of Safra) is the most interesting. I’m expecting a lot more cross-border M&A from Chinese firms acquiring EU firms in the automotive technology sector.