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- First Step to Final Offer 6/24/25
First Step to Final Offer 6/24/25
Brooks Gammill
June 24, 2025
Your weekly round-up of an M&A deal walkthrough, insightful market news summaries, technical quiz questions, and various internships, events, and diversity programs. A key resource to best prepare yourself for finance recruiting. If someone sent you the newsletter subscribe below!
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TECHNICAL QUESTION OF THE WEEK:
How would levering up more affect your valuation? |
MARKET NEWS
Citigroup Appoints Drago Rajkovic as Co-Head of M&A
Citigroup has appointed Drago Rajkovic as its new co-head of mergers and acquisitions (M&A), effective September 2025. Rajkovic joins from JPMorgan Chase, where he served as global chairman of M&A, bringing over 30 years of advisory experience to Citi. He will work alongside Kevin Cox, dividing his time between New York and San Francisco. Rajkovic's notable recent transactions include Salesforce's $8 billion acquisition of Informatica and Hewlett Packard Enterprise's $14 billion purchase of Juniper Networks. This move is part of Citi's broader strategy to strengthen its investment banking division, which has seen a significant increase in M&A fees, up 84% in the first quarter of 2025. The bank continues to experience robust deal activity, advising on major transactions such as Charter Communications' $21.9 billion merger with Cox Communications and Boeing's $10.5 billion sale of its Jeppesen unit to Thoma Bravo.
Source: Reuters
Hedge Fund Leverage Hits Five-Year High as Bank Stocks Surge
Hedge funds have ramped up their leverage to its highest point in five years, reaching around 294%, as they continue to pour investments into bank stocks following the U.S. Federal Reserve's decision to keep interest rates steady. This surge in leverage reflects growing confidence in the financial sector, with hedge funds targeting banks, insurance companies, and trading firms, which are benefiting from the higher interest rate environment. Hedge funds have significantly increased their long positions in financial stocks across North America and Europe, while slightly shorting the sector in Asia. Despite the recent focus on bank stocks, hedge funds are also maintaining positions in energy stocks, as rising oil prices driven by geopolitical tensions continue to capture attention. Overall, hedge funds have seen solid returns this year, with European stocks leading the way at over 10%.
Source: Reuters
M&A DEAL OVERVIEW
KKR Close to Acquiring 85% Stake in Chinese Beverage Maker Dayao
KKR & Co. is in the final stages of acquiring an 85% stake in Dayao, a well-established Chinese beverage producer, according to sources familiar with the matter. While Dayao's founders are expected to retain a minority share, the deal is still awaiting final approval from Chinese regulators. Dayao, which is based in Inner Mongolia, offers a variety of drinks, including carbonated beverages, juices, and protein drinks, and has expanded its reach to markets like Russia and Southeast Asia. Earlier this year, the company was preparing for a potential IPO in Hong Kong to raise up to $500 million. This acquisition would further strengthen KKR's presence in China’s growing beverage market.
Source: Bloomberg
LAST WEEK TECHNICAL QUESTION OF THE WEEK ANSWER:
Correct Answer: C, Both Unlevered FCF and Levered FCF decrease. — If EBITDA decreases, how do Unlevered FCF and Levered FCF change?
Explanation: If EBITDA decreases, both Unlevered Free Cash Flow (FCF) and Levered Free Cash Flow decrease because EBITDA is the starting point for both calculations. Unlevered FCF, representing cash flow available to all capital providers before considering interest and debt repayments, directly declines with lower operating profitability. Similarly, Levered FCF, which is the cash flow available only to equity investors after subtracting interest and debt repayments, also falls since the underlying operating cash generation (EBITDA) is reduced, impacting cash flows available to shareholders.