Rarefied air 

20 January 2015 By Jeffrey Goldfarb

Torrid trade winds are blowing through Switzerland’s crisp mountain air. Global business leaders and bankers convene this week for the World Economic Forum fresh off a $3.5 trillion year of mergers, the biggest tally of the post-financial crisis era. While the momentum creates an ideal climate for corporate dealmaking, it’s less clear the atmosphere is conducive to strike the more important political accords for which Davos has become renowned.

The formal program at the 45th annual meeting focuses on how to cope with water shortages, health security concerns like Ebola and other pressing issues under the banner of “The New Global Context.” For many, however, the retreat can blaze a path, albeit a snowy one, to the next acquisition, just as it did for French drugmaker Sanofi a few years ago. Months of frosty negotiations with U.S. target Genzyme finally thawed during an Alpine walk in Davos for the two chief executives and led to a handshake on the $20 billion takeover.

Amid the accommodating credit markets and the resurgence in confidence, no shortage of acquisitive bosses will be in attendance this year. AT&T’s Randall Stephenson, Cisco’s John Chambers, Yahoo’s Marissa Mayer, Alibaba’s Jack Ma and Anheuser-Busch InBev’s Carlos Brito are among those expected to be seen doing their best to avoid slipping on the icy Promenade.

Some of the approximately 2,500 badge-holders may be receptive to overtures. Dish Network CEO Charlie Ergen is sitting on a stockpile of wireless spectrum while Sony’s Kazuo Hirai, in the aftermath of a cyberattack at his film studio, could be warming to the idea of offloading certain businesses. Pearson’s John Fallon is apt to cross paths in the Congress Centre with media chieftains and billionaires keen to talk about whether the Financial Times is for sale.

Bankers will be in abundance to help with any tough sledding. Chief executives from all the systemically important institutions, including JPMorgan’s Jamie Dimon and Deutsche Bank’s Anshu Jain, are making the trip, as are representatives from M&A shops like Lazard’s Ken Jacobs. If nothing else, while in the neighborhood they may want to call on locally headquartered clients like Nestle and Roche, after Switzerland’s central bank effectively granted them a hefty discount on purchasing global assets by removing a cap on the local currency.

Other deal-related talks also could be in store. DuPont boss Ellen Kullman, for example, may want to squirrel away in the Belvedere Hotel with Pepsi boss Indra Nooyi for some pointers on defending against activist Nelson Peltz. The soda maker just last week gave the billionaire’s Trian hedge fund a board seat after a two-year tussle. There’s a risk uppity investor Dan Loeb spoils a ski lunch or two, if while in Davos he opts to stalk his next target. And bosses from private equity firms, including Apax, Blackstone and Carlyle, will be on hand seeking ways to deploy some $1.5 trillion of leveraged capital.

For all the economic significance of whatever groundwork is laid for corporate marriages during the gathering, any geopolitical warming that takes place will be of greater consequence.

This year’s annual meeting begins with an especially conflict-laden backdrop. Global strife has been spurred by murders in Paris over controversial cartoons of the Prophet Mohammad. That comes on the heels of the Ebola outbreak, instability in the Middle East, low oil prices threatening certain economies, renewed worries about Greece and the eurozone, and conflict between Russia and Ukraine. Throw in the specter of disinflation and news of the earth’s hottest year on record and the non-governmental organizations and political leaders in Davos will have decidedly tougher negotiations.

In the past, notable accords have emerged from the proceedings. Turkey and Greece gave rise to the Davos Declaration by swearing off war in 1988. A year later, Hans Modrow and Helmut Kohl talked German reunification. And it was the annual gathering in 1992 where South African President F.W. de Klerk and Nelson Mandela made an historic joint appearance. That is what the roughly 45 heads of state expected this year can look to for inspiration.

The ambience will make it easier for Big Money to make headlines this year, but the diplomatic temperature will be the one worth taking.

 

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