This year will be the biggest ever for global M&A, with records smashed across categories, according to data from Refinitiv. The number of takeovers may have fallen off a cliff in the initial stages of the pandemic bit, yet the bounce-back has more than compensated. The third quarter of 2021 was the biggest on record and the fifth consecutive quarter to top $1 trillion of M&A deals, the data provider says.

Private equity buyers have been very busy, splashing $839.6 billion this year on buyouts, with UK names like Morrisons, John Laing, Ultra Electronics and Stock Spirits all departing the stock market.Some sizeable deals were not surprising. AstraZeneca (AZN) paying £27.5 billion for hematology, neurology and cancer treatments developer Alexion fits with its own current strategy.

Similar could be argued for Salesforce’s $27.7 billion purchase of messaging platform Slack (extending its enterprise software remit) or S&P Global’s $44 billion acquisition of market researcher IHS Markit, the latter a chase for data that has echoes of London Stock Exchange’s (LSE) own purchase of Refinitiv.

Others came out of the blue.Few, for example, would have predicted digital payments company Square buying Jay-Z’s music streaming venture Tidal, and what about Philip Morris’ bolt from the blue move into healthcare.

The Marlboro cigarettes firm’s £1 billion purchase of the UK’s Vectura means it will in future profit from treating the very illnesses its own products cause, and had some wags pondering if private hospitals and funeral services might be next to complete the circle.

Predicting takeovers is notoriously difficult but Shares has had a stab, picking our best ‘fantasy M&A’ deals that, we believe, could happen.

Readers should note, these are labelled ‘fantasy’ deals for a reason. They are just our own ideas and are not based on any inside knowledge or hard information.

Nonetheless we have tried to give an impression of the likelihood of any deal happening through the use of a sliding scale.

Microsoft buys Roblox 

4/5 (chance it happening, 5 high, 1 low)

If the metaverse is the next big thing, according to Facebook-owner Meta Platforms, Microsoft has a first mover advantage in owning Minecraft. It could turbocharge this position by acquiring Roblox. The metaverse involves digital representations of people who interact at work and play. Elements of this virtual world are already present in both Minecraft and Roblox, and Microsoft owning these two brands would also give it a dominant position in the market for younger gaming fans. Strategically buying Roblox would be a clever move but it wouldn’t come cheap. It currently trades on 84 times EV/EBITDA and has a $67 billion market value. [DC]

Netflix buys Enthusiast Gaming 

4/5

In a similar move, streaming TV giant Netflix is really excited about gaming, believing it could be the secret sauce to keep subscribers hooked on its service, and eSports is a play on that theme. Enthusiast Gaming operates a growing media and content platform for video games and eSports fans. It reported revenue growth of 165% year-on-year in the third quarter, reaching $43.3 million. Total US unique visitors reached 47.8 million in October 2021 which puts Enthusiast Gaming in second place as the most-visited gaming property, right behind Amazon’s Twitch and ahead of Roblox and mobile games creator Zynga. [SF]

Apple buys Netflix 

3/5

It may sound outlandish but even Netflix could become a takeover target. Apple TV is the laggard in the streaming space as it lacks substantial content with mass-market appeal. While subscription numbers are improving, the easy way to leapfrog the competition is to buy Netflix. According to Refinitiv, Netflix has a $285 billion enterprise value which is the market value of its shares and net debt. Apple has about a fifth of that figure in cash and shouldn’t have any problem raising the rest via debt or equity. Offering discounted Netflix subscriptions to those with an iPhone, iPad, iMac or Macbook would help keep people loyal to the Apple ecosystem, and most likely bring in new customers as well. [DC]

Apple buys Peloton 

3/5

Apple could change tack and home in on hardware. Peloton would kill two birds with one stone, expanding services revenue and deepening Apple’s connection to health. Apple is fixated with building best in class products and Peloton certainly has that reputation, and there is also likely to be a large crossover of iPhone-owning Peloton subscribers, strengthening its ecosystem perimeters, and tying in neatly with the Apple Watch too. Apple also has the device supply chain scale to put a serious dent in manufacturing costs of Peloton’s bikes, treadmills, plus possible new products – a rowing machine would be an obvious extension. [SF]

Amazon buys Udacity 

4/5

As students balk at the cost of a higher education experience provisioned digitally, many may turn to lower-cost options. With a partnership between AWS and Udacity already in place, Amazon could capitalise by bringing the company in-house, expanding the e-learning platform’s largely vocational ‘nanodegree’ offerings. In the process, Amazon would secure a pipeline of technical talent, deepen consumer trust, and begin the process of disrupting education, one of the few markets large enough to be worthwhile. [SF]

Caterpillar merger of equals with Deere & Co 

4/5

There is significant logic to a merger between construction and mining kit manufacturer Caterpillar and agricultural equipment maker Deere & Co.

Caterpillar has more end-market and geographic diversification and, as a result, there would be opportunities to use its existing channels to sell Deere & Co’s hardware in new territories. Deere & Co’s strong track record for innovation could also be employed to revamp Caterpillar’s own product portfolio, and because the two serve different industries, any deal would have a decent chance of clearing anti-trust regulations. [TS]

M&S buys Ocado’s stake in their joint venture 

3/5

When Marks & Spencer (MKS) announced back in 2019 it was buying 50% of online delivery firm Ocado’s (OCDO) UK retail operations for £750 million, many investors thought it had paid over the odds. But as the pandemic proved, online delivery is the future, and M&S is sitting on half of a potential gold mine. Taking full control of the venture would create its own delivery platform while it could potentially offer access to third party retail brands, ones that don’t compete with it. Ocado would ask a pretty penny for its 50% stake but given its own hefty investment plans for its robotic solutions business, it could use the cash injection to good effect. [IC]

AstraZeneca buys Amryt Pharma 

3/5

Over the last year AstraZeneca has made a big push in rare diseases, one of the fastest growing areas within healthcare. These can serious, even life-threatening diseases that affect only a small percentage of populations. Last year Astra purchased US rare disease specialist Alexion for $39 billion and in September 2021 it exercised an option to take control of Caelum Biosciences in a deal worth up to $500 million. Amryt Pharma (AMYT:AIM), worth around £430 million, would be a useful bolt-on for Astra given its significant drug development pipeline and a profitable commercial business. [MGam]

LVMH buys Watches of Switzerland 

3/5

High-flying Watches of Switzerland’s (WOSG) success will not have gone unnoticed by LVMH, the luxury goods conglomerate which now owns Tiffany, the US jewellery retailer famed for its engagement rings and ties to Hollywood glamour. Given growing global demand for luxury goods, Watches of Switzerland, which sells Rolex, Omega, TAG Heuer and Breitling watches as well as high-end jewellery, would be a complementary fit for Tiffany and benefit from LVMH’s unrivalled marketing ability. [JC]

Tesco buys B&M 

3/5

Should the variety goods value retailer continue to bag UK market share at pace, B&M (BME) could prove irresistible to a bigger competitor, and Tesco (TSCO) would be an obvious candidate. Tesco would be better off swallowing disruptive, expansionist B&M now rather than wait for it to grow bigger and more competitive as shoppers flock to its bargain-priced groceries and general merchandise, a move that would help the supermarket chain maintain its lead over rivals, while potentially warding-off private equity interest itself, which is clearly eying the space with interest, as proved by Morrisons’ takeover by CD&R this year. [JC]

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