💼 Repairs and Rebounds: M&A Moves Under a Shining Sun

Good morning,

While the markets are still basking in the warmth of optimism this week (or at least pretending to), the big players are busy hammering out deals and mergers to fortify their empires. While we’re not suggesting you drop a ladder onto your portfolio and start patching up leaks just yet, it’s clear that some are already preparing for the storm clouds that may be on the horizon.

This week, we’ve seen a few heavyweight moves in the M&A space, with some companies playing it safe and others betting that their gamble will pay off. The market may be riding high at the moment, but don’t let that fool you into thinking the landscape is without its risks.

“The time to repair the roof is when the sun is shining”.
—John F. Kennedy (35th U.S. President)

Dimon’s Future: The End of JPMorgan’s Golden Age?

JPMorgan's golden years may be over... or at least they will be when Jamie Dimon finally steps down. At the ripe age of 69, Dimon’s retirement could spell the end of an era, and analysts are not ready to let him go. With a 20% average return since 2006 and strong political clout, Dimon has set a high bar for any successor.

What this means Dimon’s departure could send JPMorgan into an identity crisis, with some shareholders already demanding he stay on through the next election. The risk of succession could weigh heavily on the stock.

Point of interest While JPMorgan is talking succession planning, the question isn't who will replace Dimon – it’s can anyone replace him?

Stock Picks

• Low Risk: JPMorgan Chase $JPM ( ▼ 0.08% ) – Despite the Dimon succession drama, the bank is solid and still one of the top picks for a long-term hold.

• Medium Risk: Goldman Sachs $GS ( ▼ 0.56% ) – A strong player in the investment banking game, with some potential upside if JPMorgan falters.

• High Risk: Bank of America $BAC ( ▲ 0.58% ) – A bit more vulnerable to market fluctuations, but has a strong brand and might benefit from investor shuffling.

• Wildcard: Citigroup $C ( ▼ 0.07% ) – A risky bet, but if Dimon’s departure shakes JPMorgan’s leadership, Citi could make a surprising push forward.

Moody’s Downgrades U.S. Credit Rating – Time to Panic?

Moody’s has downgraded the U.S. credit rating due to rising debt levels, sending tremors through the markets. Scott Bessent promptly dismissed this as a “lagging indicator,” but it’s clear that the U.S. debt problem is far from solved.

What this means While the downgrade isn’t an immediate market disaster, the increasing debt could limit economic growth and keep investors on edge.

Point of interest The U.S. debt spiral may start affecting the real economy if not addressed.

Stock Picks

• Low Risk: U.S. Treasury Bonds – A safe place to park cash amid market uncertainty, despite the downgrade.

• Medium Risk: The Vanguard Total Stock Market ETF $VTI ( ▼ 0.67% ) – Exposure to the broader market could still provide decent returns, but debt levels are a potential risk.

• High Risk: High-Yield Bonds – Riskier, but they may offer attractive yields as investors seek alternatives to government debt.

• Wildcard: U.S. Dollar $USD ( ▼ 1.49% ) – As debt concerns grow, the dollar may be under pressure, but it’s still a relatively safe bet compared to emerging-market currencies.
  

Trump’s Tariff Shenanigans: Walmart Feels the Heat

Trump’s trade drama escalated this week with Walmart warning of price hikes driven by tariffs. It’s clear that these moves are part of his ongoing strategy to make China “pay” for their role in the U.S. economy.

What this means These tariff-driven price hikes could create waves in the retail sector, particularly in consumer goods. Expect more price hikes and profit margin squeeze for big-box retailers.

Point of interest Walmart’s struggles are indicative of broader retail pain as tariffs hit the supply chain.

Stock Picks

• Low Risk: Costco $COST ( ▼ 0.42% ) – Strong supply chain and pricing power, well-positioned to weather the tariff storm.

• Medium Risk: Target $TGT ( ▼ 0.35% ) – Still a retail leader but could face margin pressure if tariffs escalate further.

• High Risk: Amazon $AMZN ( ▲ 0.21% ) – Could suffer if tariffs hit its global supply chain, though its size gives it some buffer.

• Wildcard: Walmart $WMT ( ▼ 1.36% ) – Short-term pain ahead, but its massive footprint and pricing power mean it might rebound when the dust settles.

Charter and Cox: A $34.5B Cable Merger Shakes the Industry

Charter Communications and Cox are merging in a deal worth $34.5 billion, combining two giants in the U.S. cable industry. This mega deal will likely reshape the competitive landscape of cable, internet, and streaming services.

What this means With consolidation at play, the deal could spark further M&A activity in the sector and create a larger competitor to streaming giants.

Point of interest Consolidation might lead to better customer offerings or worse monopolistic practices. Time will tell.

Stock Picks

• Low Risk: Comcast $CMCSA ( ▼ 0.1% ) – The cable giant still has significant market share despite the merger trend.

• Medium Risk: Dish Network $DISH ( ▲ 1.94% ) – Could benefit from consolidation in the industry as smaller players get squeezed out.

• High Risk: T-Mobile $TMUS ( ▲ 0.74% ) – A high-risk play if T-Mobile pushes further into broadband services post-merger.

• Wildcard: Charter Communications $CHTR ( ▲ 0.53% ) – A wildcard due to the scale of the deal, but the integration could lead to future profits or missteps.

The PE Carry Loophole Faces a New Hurdle

The carried interest loophole, a favorite tax benefit of private equity, faces new political headwinds as reform efforts ramp up. The industry is under increasing pressure to close this loophole, which has long allowed private equity managers to pay lower tax rates on their earnings.

What this means A crackdown could hurt private equity returns and spark a broader conversation about tax reform. This might be a key issue to track as 2024 elections approach.

Point of interest If closed, this loophole could dent private equity investment flows and profitability.

Stock Picks

• Low Risk: BlackRock $BLK ( ▼ 0.6% ) – As a major player in PE, BlackRock might adapt and stay strong even with tax changes.

• Medium Risk: KKR & Co. $KKR ( ▼ 1.43% ) – An established PE player that might see near-term pressure but remains well-positioned long-term.

• High Risk: Apollo Global Management $APO ( ▼ 1.68% ) – Risky in the short term as it navigates the regulatory changes.

• Wildcard: Carlyle Group $CG ( ▼ 0.79% ) – The wildcard because it’s a smaller player but could stand to gain if the big players stumble.

M&A / Investments

1. Capital One's Acquisition of Discover
   Capital One completed its $35B all-stock acquisition of Discover, forming the largest credit-card issuer in the U.S. This significant deal reshapes the credit card market landscape.

2. Charter Communications Merges with Cox Communications
   Charter Communications merged with Cox Communications in a $34.5B deal, a cash-and-stock merger that includes debt, marking a major consolidation in the U.S. telecommunications sector.

3. Strathcona Resources’ Hostile Bid for MEG Energy
   Canadian oil giant Strathcona Resources is pursuing a $4B hostile takeover of MEG Energy, after its initial offer was rejected, signaling aggressive moves in the energy sector.

4. Warner Bros. Discovery in Talks to Acquire TNT Sports Stake
   Warner Bros. Discovery is in advanced talks to acquire a 50% joint venture stake in UK broadcaster TNT Sports, strengthening its footprint in the sports broadcasting industry.

5. UK's Legal & General Acquires Proprium Capital Partners
   UK-based asset management giant Legal & General acquired a 75% stake in real estate private equity firm Proprium Capital Partners, expanding its real estate portfolio significantly.

VC Deals

1. Cyera’s $500M Funding Round
   Israeli data security startup Cyera is in talks to raise $500M at a $6B valuation, with leading investors like Lightspeed, Greenoaks, and Georgian showing strong interest.

2. Akido Raises $60M for AI and Care Delivery
   Akido, an AI and care delivery company, raised a $60M Series B, which will enhance its offerings in healthcare technology, led by Oak HC/FT.

3. SpotitEarly's AI Cancer Detection Raises $20.3M
   SpotitEarly, a startup leveraging AI and dogs to detect cancer, secured $20.3M in funding from various investors, showing promise in medical innovation.

4. Moonvalley AI Video Startup Raises $53M
   Moonvalley, an AI video startup, raised a $53M round from fourteen investors, focusing on revolutionizing video production with AI.

5. CrediLinq Raises $8.5M for Embedded Finance Platform
   Singapore-based CrediLinq raised an $8.5M Series A to expand its AI-powered embedded finance platform, with backing from OM/VC and MS&AD Ventures.

Wrapping up

And so, as Kennedy might’ve put it, “We choose to make these deals not because they are easy, but because they are hard.” Or, perhaps, because they are the only way to keep up with the changing tides of business. Whether you’re on the side of consolidation or disruption, this week’s deals show that the real winners are those who can predict the weather ahead. So, keep your umbrellas handy, your portfolios diversified, and your coffee strong. Until next week, when we’ll see if the markets can keep the sun shining or if it’s time to start repairing the roof.

Until next time,
The Briefcase Team 💼

Access Our Private Portfolio