Jun 16, 2023
The bank guarantees behind the world's biggest deals
Bank guarantees have been used by finance teams around the world for many years, and the benefits they offer organisations mean they are an ideal solution to support high-value business deals and unlock vast amounts of capital.
So, it’s no surprise that some of the biggest international transactions in recent history have relied on the issuance of a bank guarantee to finalise the process.
From acquisitions to bond issuance, we’ve found the highest-value deals in recent history, all of which were underpinned by a paper bank guarantee.
Anheuser-Busch InBev's acquisition of SABMiller, US$103bn:
In 2016, the Belgian multinational beverage company, Anheuser-Busch InBev, secured a bank guarantee to finance its acquisition of SABMiller, a major global brewing company.
The bank guarantee helped secure the necessary funds for the deal which was valued at approximately US$103 billion.
The merger of these two corporations resulted in the value of Anheuser-Busch InBev’s value surpassing US$275bn (The New York Times, 2016).
This remains the largest deal in the history of the beverage industry, and still ranks within the top 10 of all commercial mergers and acquisitions ever completed.
Saudi Aramco's bond offering, US$12bn:
The world's largest oil company, Saudi Aramco, secured a bank guarantee from a consortium of banks for its inaugural international bond offering in 2019 (CNBC, 2019).
The bond sale raised US$12 billion by offering investment into a range of different tranches, and a bank guarantee played a crucial role in sparking the huge demand and investor confidence that helped make this offering a success.
Alibaba Group Holding Ltd.’s IPO, US$25bn:
In 2014, the parent company of the Chinese e-commerce giant, Alibaba Group Holdings Ltd, secured a bank guarantee and utilised a consortium of banks including Citigroup Inc., Credit Suisse Group AG, and Morgan Stanley for its initial public offering on the New York Stock Exchange (The New York Times, 2014).
The bank guarantee helped Alibaba raise a then-world-record USD$25 billion.
Despite taking place almost 10 years ago, this remains the second largest initial public offering of all time, surpassed only by Saudi Aramco’s in 2019.
SoftBank Group Corp's acquisition of ARM Holdings, US$32bn:
In 2016, SoftBank, a Japanese multinational conglomerate, secured a bank guarantee from Mizuho Bank to support its acquisition of ARM Holdings, a British semiconductor and software design company (The Guardian, 2016).
The deal was valued at approximately US$32 billion and remains Softbank’s largest acquisition to date.
ARM is touted to offer an IPO on the NASDAQ later this year, with an official announcement to be made in August (Reuters, 2023).
Dell's acquisition of EMC Corporation, US$67bn:
Another major deal took place in 2016, as multinational computer technology company Dell Technologies secured a bank guarantee to finance its acquisition of EMC Corporation, a data storage and cloud computing company.
The deal was valued at approximately $67 billion making it one of the largest technology mergers in history.
The deal was underwritten by JP Morgan, Barclays, Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and RBC Capital (CRN, 2016).
Bayer AG's acquisition of Monsanto Company, US$63bn:
In 2018, German multinational pharmaceutical and life sciences company, Bayer, secured a bank guarantee to finance its acquisition of American agrochemical and agricultural biotechnology corporation, Monsanto Company.
The deal was valued at around $63 billion, and it was reported by Reuters that Bank of America, Credit Suisse, HSBC, Goldman Sachs, and JP Morgan & Chase Co were the financial institutions behind this deal (2016).
Verizon Communications Inc. bond offering, $49bn:
In 2013, American telecommunications company Verizon secured a bank guarantee for a record-breaking $49 billion bond offering, a record previously held by Apple.
This remains the highest-value corporate bond offering in history and was used to fund its US$130bn acquisition of Vodafone Wireless (Reuters, 2013) and the bank guarantee helped boost investor confidence in the bond offering.
Royal Dutch Shell's acquisition of BG Group, $70bn:
Anglo-Dutch multinational corporation Royal Dutch Shell’s acquisition of BG Group, once British Gas’ exploratory arm, concluded in 2017 and was supported by the use of a bank guarantee.
The deal was valued at approximately US$70 billion, with some of the highest ever bank fees paid to the three advisors on this deal – Bank of America Merrill Lynch, Goldman Sachs and Robey Warshaw LLP (Reuters, 2017).
This remains the largest ever UK acquisition (Statista, 2020).
AT&T's acquisition of Time Warner Inc., $85bn:
AT&T, a telecommunications conglomerate, secured a bank guarantee to finance its acquisition of Time Warner in 2018 in a deal valued at approximately $85 billion including debt (The New York Times, 2018).
This acquisition was a protracted process with high profile resistance from the US Department of Justice. AT&T have since spun off proceeds of the acquisition including media assets to Discovery in a deal worth US$43bn.
Takeda Pharmaceutical Company's acquisition of Shire plc, $62bn:
Takeda, a Japanese pharmaceutical company, secured a bank guarantee to finance its acquisition of biopharmaceutical company, Shire.
The deal was valued at approximately US$62 billion and remains the largest acquisition by a Japanese company in history.
Takeda’s team of advisors included investment banks Evercore, JP Morgan, and Nomura while Shire’s line-up included Citigroup, Goldman Sachs, and Morgan Stanley.
The modern-day alternative: Digital bank guarantees
Up until 2021, there was no alternative to utilising a paper instrument, meaning all of these deals would have been required to be underpinned by a paper bank guarantee.
In addition to the lengthy negotiations to get these deals over the line, the arrangement of securing a paper guarantee would have extended this process, and these timings would have been factored into the process.
Since then, acquiring a bank guarantee has become vastly more efficient and straightforward with our Arc platform.
There is no maximum value to the amount that can be secured with a digital bank guarantee, so any of the above deals could have been supported with our platform in the click of a button.
The benefits of digital bank guarantees may have also simplified some of the conditions within these deals, as the ability to amend and transfer within the platform eliminates the need for some of the lengthy legal negotiations that are common with deals of this size.
As a relatively new way to utilise financial instruments, the benefits of digital bank guarantees are still being explored and discovered by some of the world’s biggest organisations.
As more organisations learn about these benefits and sign up for the Lygon platform, the future of large deals like the above are increasingly likely to be secured with the use of a digital bank guarantee.
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