It’s a tough job in any year to declare and defend the Top 10 Deals during the annum. For pandemic-plagued 2020 the job is particularly onerous because doing even the smallest of deals was tough sledding. The uncertainties wrought by a disease that demanded wholesale changes in human behavior, brought courthouses to a standstill and the markets, at times, to a wobble was felt as much in Texas as anywhere.
In some cases, it was felt more in Texas.
Take April 20, the day oil prices went south. They didn’t just drop, they plummeted, all the way through zero with the May WTI contract ending that day at -$37.63/bbl. In essence oil traders were offering to pay others to take oil — the historical lifeblood of the Texas economy — off their hands. Within weeks, oil and gas prices recovered and steadied, but worldwide demand had stagnated.
It wasn’t the pandemic or the stimulus that followed that characterized the market; it was immediate uncertainty about just about everything: the future of retail, the future of travel, the future of energy demand … in other words, the future.
So, measuring the top deals is not just a matter of picking the 10 deals with the most dollars. It’s choosing those that had the most significance in our view in these remarkable times. These are not rankings, just deals we think were significant for reasons we explain. You may have different ones in mind, but here are the ones we chose and why we chose them.
Match.com Merges in Reverse
Imagine for a moment you are Match.com GC Jared Sine. In December, you’ve announced to the world that your company is going to spin off. Your company is built around dating and relationships, a complex virtual world that depends on personal chemistry, physical attraction and the exact opposite of social distancing. And, suddenly, comes the pandemic.
In March, your stock hits new lows. But that’s the least of your worries. It’s the essence of your business that is suddenly uncertain, the core value of what you offer that is being challenged: romantic and deeply personal human relationships that are suddenly masked and deprived of the sense of touch.
Any deal needs hard work and good fortune. Great deals require an abundance of both. What happened was that online relationships became necessary and familiar. Match.com stock regained its price and its vigor. And by June Match.com was able to close its deal, a complex reverse-merger spin-off that left the company poised to keep its mojo with a market cap of $30 billion.
7-Eleven Takes the Speedway
It was the biggest deal of the year, and it surfaced only a week after the biggest deal of the year.
Japanese-owned and Dallas-headquartered 7-Eleven announced Aug. 2 that it had purchased the Speedway chain from Marathon Petroleum Corp. for $21 billion in cash — dwarfing Chevron’s $13.6 billion purchase of Noble Energy barely a week earlier. The deal not only had a big price tag, it grew the familiar convenience store chain into a behemoth with a presence in 47 of the 50 states.
The 7-Eleven chain was advised by a Dallas-led team from Akin Gump Strauss Hauer and Feld and by the Nishimura & Asahi firm in Tokyo. The Akin Gump team was led by corporate partners Tom Yang and Nicholas Houpt. The in-house team was led by 7-Eleven GC Rankin Gasaway, a graduate of Texas Tech Law School and a 25-year veteran at the company. He was assisted by company senior counsel Dawud Crooms, a Michigan Law graduate and former M&A specialist in Dallas at Haynes and Boone.
Top Golf/Callaway: $2.5 Billion
There were lots of deals that fit neatly into the spectrum of pandemic-driven assets: personal communications technology, productivity tools, home office furniture. Entertainment? Not so much.
Enter the TopGolf Entertainment Group merger with Callaway, a premiere name for golf-centered equipment and clothing lines. At $2.5 billion, the TopGolf deal would have been big enough to qualify as a big deal, but the 63 TopGolf centers located across the globe feature tech-enabled, open-air, multitier driving ranges that allow amiable social distancing from climate-controlled bays that feature food, drinks and a wide range of competitive golf games; not to mention $1.1 billion in revenues last year.
Latham & Watkins advised Callway. Weil advised TopGolf while working with Deputy General Counsel Liz Bonesio.
Both companies said they recovered ahead of expectations from the economic effects of COVID-19, reflecting the advantage of TopGolf’s emphasis on an outdoor experience. Even more promising, more than half of the company’s 23 million guests in 2019 identifying as nongolfers.
Waste Management/Advanced Disposal: Was $4.9 Now $4.6 Billion
In June Houston-based Waste Management — the largest solid waste disposal firm in the U.S. — announced that it had finally finalized (yes, we intended that) its proposed acquisition of Florida-based Advanced Disposal Services, the nation’s fourth largest solid waste disposal. This one, first announced in April 2019, had lots going against it.
First, there was an antitrust issue with the Justice Department. That was resolved by the two companies agreeing to sell off a combined $835 million in assets to a Canadian corporation. Then the closing, scheduled for spring 2020, was put aside, a presumed casualty of the coronavirus and the attendant stock market shock.
But in June the two sides reached yet another agreement; this time at a reduced price of $4.6 billion to reflect the changes in assets, debt and market valuation since the original deal.
Chevron Consolidates in the Permian with Noble Acquisition
While market-watchers had been warning of a coming wave of upstream consolidation in the Permian basin for months (if not years), that wave seemed to take shape toward the end of the year.
Confronted with a pandemic, lack of funding for deals as Wall Street sentiment for oil and gas cooled, and shareholders increasingly focused on cash flow over growth, buyers turned to all-stock transactions.
A wave started to take shape in the second half of the year, with supermajor Chevron kicking things off with its all-stock $5 billion takeover of Noble Energy announced in July. The deal included about $8 billion in debt, amounting to a $13 billion price tag.
That same month, ConocoPhillips chief executive Ryan Lance said he was encouraged by the low premium Chevron paid in that deal. The Houston-based independent ended up announcing its own deal, a $9.5 billion all-stock takeover of pure-play Concho Resources in October.
Several more deals followed, including the acquisition of Parsley Energy by Pioneer Natural Resources and WPX’s “merger of equals” with Devon Energy. And just this past week, Diamondback Energy announced it would acquire one Permian operator in an all-stock transaction and another for a mix of cash and stock.
And with a school of Permian minnows still out there, the feeding frenzy is expected to continue into next year. One big question, however, will be whether the all-stock bet is enough to satisfy those risk-averse shareholders.
Paul, Weiss, Rifkind, Wharton & Garrison advised Chevron on its deal, while a V&E team of 30 lawyers advised Noble Energy from Houston, led by partners Steve Gill and Doug McWilliams.
Thoma Bravo Reaches the RealPage Number: $10.2 Billion
Just when things seemed ready to go quiet for the holidays, Dallas-area real estate software company RealPage dropped the news of their $10.2 billion deal to transition from publicly traded to privately held following its purchase by tech-focused PE juggernaut Thoma Bravo.
Based in Richardson, a suburb of Dallas, RealPage provides the real estate sector with a broad range of digital services and analytics that range from online payments and utility management to risk management and return on investment for residential and commercial real estate.
RealPage expects to continue operating under its existing management, including chairman and CEO Steve Winn and GC David Monk, who supervised the deal backed by an outside team of 44 lawyers from Kirkland and Ellis.
The $10.2 billion price tag amounts to more than just a big number: It points up the emergence this year of technology as a full-blown competitor with energy deep in the heart of Texas business.
ConocoPhillips Buys a Future in Canada for $375 Million
At this point, you are probably wondering why a Canadian shale acquisition is on this list. And not just a Canadian shale acquisition, but a paltry $375 million Canadian shale acquisition.
Well, hear us out.
When ConocoPhillips announced it was buying up Calgary independent Kelt Exploration’s Montney assets, it wasn’t buying for today. It was buying for the future.
The Montney shale of Alberta and British Columbia is expected to play a pivotal part in Canadian energy growth going forward. Consultancy Wood Mackenzie expects the play’s gas production to grow to 57% of Western Canadian output by 2025 and 65% by 2030. The play is also expected to provide offtake to the massive Shell-led LNG Canada project under construction on the West Coast and any number of similar planned developments around the country (Northwest Territories LNG is a thing, folks. Kinda.).
Reserves values for Montney producers have plummeted in the pandemic, and ConocoPhillips was prudent to pounce on Kelt’s assets. The deal brings ConocoPhillips’ holdings in the basin to 295,000 net acres with a 100% working interest and adds more than 1 billion barrels of oil equivalent resources.
Canadian firm Borden Ladner Gervais represented Kelt Exploration in the deal.
Schlumberger Ramps Down in North American with Liberty Deal
The oil field services sector took a beating this year as operators wound down North American shale operations and pivoted to longer-lived, higher-return plays.
Schlumberger pivoted as well, shifting its focus to its international business and ramping down North American operations. As part of that strategy, the company offloaded its North American hydraulic fracturing unit OneStim to smaller, Denver-based Liberty Oilfield Services. The sale includes Schlumberger’s pressure pumping, pumpdown perforating and Permian frac sand businesses.
But Schlumberger is still calling dibs on a slice that irresistible North American pie: Under the terms of the deal, the company will retain a 37% interest in the combined company. That means that when — or if — operators flock back to North American shale, Schlumberger will already have a leg up.
Vinson & Elkins advised Liberty. Kirkland & Ellis represented Schlumberger.
LyondellBasell Pumps $2B into J/V with Sasol
Downstream deals were scarce in 2020, but LyondellBasell and Sasol broke the streak later in the year with this 50/50 joint venture to operate assets, including a 1.5 million ton ethane cracker in Lake Charles, Louisiana.
The project, sanctioned in 2017, has been plagued by cost overruns, with Sasol spending nearly $4 billion more than anticipated to build it. The problem forced Sasol’s two co-CEOs to depart the company earlier this year.
LyondellBasell, a global downstream player with a major presence in Houston, swooped in during October, pledging $2 billion for a 50% interest and operatorship of the Lake Charles JV, which also includes two polyethylene plants and associated infrastructure. The company has also said it has the potential to acquire Sasol’s remaining interest in the asset, setting the scene for the possibility of more downstream deals to come.
LyondellBasell was advised by Kirkland & Ellis and South African Sasol was advised by Latham & Watkins.
Any Deal Involving a SPAC
The special purpose acquisition corporation has been around for more than a couple of decades, but there is no question that 2020 was the year of the SPAC. SPACs had been growing in recent years: 34 in 2017, 46 in 2018, 59 in 2019. But there were 248 SPACS registered with the SEC by year’s end, and Ryan Maierson at Latham & Watkins in Houston was involved in more than a few of them. So, the special purpose acquisition corporation needs a spot in the top Texas M&A deals of 2020.
The businesses involved in SPAC deals generally involve the intersection of manufacturing and technology. They also, by their nature, bode well for the future. Cash derived from a SPAC IPO is held on account for a specified period of time, generally 18 or 24 months, as its sponsors search for a suitable target for merger. So many of the SPAC deals this year suggest new merger transactions in the fairly near future.
The focus for targets and mergers is staggeringly diverse. Austin-based Hyliion Inc., a manufacturer of electrified power trains for commercial vehicles, merged with a SPAC to become publicly traded with a $1.5 billion cap. In another $1 billion deal, California EV automaker Fisker merged with the Apollo Global Management sponsored SPAC, Spartan Energy Acquisition Corp, to build the Fisker Ocean, an electric SUV. DeskTop Metal, a developer of industrial use 3D printing technologies, merged with Trine Acquisition Company, a SPAC sponsored by HSP Investment Partners. And STEM, a company that uses AI-driven energy storage to help utilities switch economically between various alternate and legacy energy sources, merged with Star Peak Energy Transition in a $1.35 billion deal.
Sure, this was a challenging year for energy, for deals and for society in general. But as we move from one year to another, it’s hard not to be thankful that we’ve gotten this far.