January 2025

Newsletter January 2025

Welcome back! 

Tune in to this month's newsletter to catch up on what's been going on in WiF and beyond in the past couple of months while we've been away.

December & January Recap

• Christmas Dinner: An event we look forward to every year, the annual WiF Christmas dinner was a blast as always. It was a great opportunity to spend some quality time together before the holidays (while having some amazing pizzas) and represents exactly what WiF is: family

• Spring Recruitment Begins: With the start of our second semester comes the start of Spring recruitment. We're looking forward to seeing everyone at our Recruitment Aperitivo and Associations on Display – come say hi!

Don’t miss out on our social media where we post our weekly tips, market news and market quizzes as well as stories of women that keep inspiring us!

News Recap

A Rocky Start to 2025 for US Markets

U.S. M&A has plunged to its lowest levels in a decade, with activity down nearly 30% compared to last January, as market uncertainty rattles investors. The decline follows heightened volatility after Trump’s re-election, coupled with geopolitical tensions. Concerns over trade policies, economic shifts, and the Federal Reserve’s stance on interest rates have left dealmakers in a wait-and-see mode. 

This marks a significant mood shift from the end of 2024, when Trump’s election initially fueled a surge in dealmaking, as executives rushed to capitalize on a perceived pro-business environment. Many expected a more favourable regulatory landscape compared to what they faced under the Biden administration. Now, the economic chaos and uncertainty have transformed this unparalleled confidence into cautious optimism as the quarter continues. 

This lack of confidence extends beyond M&A into the IPO market, which has gotten off to a slow start this year. A prime example is the mid-January listing of U.S. natural gas exporter Venture Global, which was anticipated to be a blockbuster IPO but ultimately priced 40% below its initial target. 

Despite the rocky start, the overall outlook remains that 2025 will be a robust year for M&A, especially if interest rates stabilize and policy direction becomes clearer. Nonetheless, January 2025 has proven that enthusiasm around dealmaking is fragile and can be easily rattled. 

Trump's Tariffs Spark Fears Among US Farmers

Trump’s latest tariff threats are sparking alarm among Iowa farmers, who fear devastating consequences for their livelihoods and the state’s agriculture-driven economy. While tariffs on Mexico and Canada were temporarily suspended after negotiations, a 10% levy on Chinese imports remains, with concerns that further trade restrictions could follow. 

Iowa, a stronghold for Trump in the last three elections, relies heavily on agriculture, which contributes $53.1 billion to the state’s economy. Canada, Mexico, and China together account for half of all U.S. agricultural exports. Farmers fear that if these countries retaliate with their own tariffs, it could sharply reduce demand for U.S. crops and livestock, forcing them to sell at lower prices or struggle to find buyers. 

This has happened before. In Trump’s first term, retaliatory tariffs from China redirected grain and soybean purchases to Brazil and Argentina, a shift that has not reversed. With farm incomes already down 23% since 2022 and costs for seeds and fertilizers rising, many farmers are bracing for more financial hardship.   

Dealflows & IPOs

Largest US Takeover of a UK Company in 2025: American Axle Acquires UK's Dowlais

American Axle & Manufacturing (AAM) is set to acquire British car parts firm Dowlais in a £1.2 billion cash-and-shares deal. Dowlais, which has been listed on the FTSE 250 since 2023 and operates mainly through its GKN Automotive unit, was originally part of GKN before being acquired by Melrose Industries in 2018.   

The move comes amid a broader trend of London-listed companies being targeted by overseas investors, driven by strong US equity markets. The combined entity is expected to be better positioned for the industry’s shift toward electric vehicles, although Dowlais CEO Liam Butterworth has highlighted challenges in Europe, expressing slower-than-expected EV adoption due to policy changes and reduced subsidies. 

Under the deal, AAM will acquire Dowlais at 85.2p per share, a 25% premium on the previous closing price, and the companies aim to take advantage of their combined scale, product portfolio, and technology to lead in the evolving automotive market. Big Deal in Pharmaceuticals: Johnson & Johnson Acquiring Intra-Cellular Therapies

In January, Johnson & Johnson announced its acquisition of the New York City-based biotech company, Intra-Cellular Therapies, specializing in central nervous system disorders, for approximately $14.6 billion. The deal is valued at $132 per share and represents a 39% premium over Intra-Cellular's prior closing price.  

This strategic move gives J&J access to Caplyta (lumateperone), an FDA-approved oral therapy for schizophrenia and bipolar depression. In December, Intra-Cellular submitted an application to the FDA, asking for approval for Caplyta to serve as treatment for major depressive disorder. If it is approved, Caplyta could become a standard of care for depressive disorders. The company reported $481 million in revenue during the first three quarters of 2024, and Caplyta played an important role in this. 

This news was one of the highlights at the JP Morgan health conference in January, and the transaction is expected to close later in 2025, waiting for regulatory approvals and customary closing conditions. Citi is serving as the financial advisor to Johnson & Johnson, and Centerview Partners LLC and Jefferies are providing Intra-Cellular therapies with financial advisory services. 

Johnson & Johnson is not exactly foreign to acquiring companies. Just last year they acquired V-Wave, Proteologix, Shockwave medical ($13.1 billion), Ambrx Biopharma ($2 billion), and Yellow Jersey Therapeutics. Mashreq Bank Completes Sale of Majority Stake in Neopay for $385m

UAE-based banking group Mashreq Bank has finalized the sale of a majority stake in its paytech subsidiary, Neopay, for $385 million. 

The acquiring consortium includes B2B financial infrastructure technology provider Dgpays and Bahrain-based global alternative investment firm Arcapita. Mashreq retains a significant minority stake in the company. 

Neopay, launched by Mashreq in 2022, offers point-of-sale (POS) software, inventory management tools, a card processing system, a merchant acquiring solution, and payment gateway technology. The deal, initially announced in September, marks a key milestone for Neopay as it aims to expand and enter new markets. 

Additionally, Mashreq Group recently obtained a restricted license from the State Bank of Pakistan, allowing its subsidiary to begin pilot operations as a digital retail bank. 

Analysis of the Markets

The Dawn of DeepSeek: Will the New Chinese AI Software Challenge Existing US Companies?

On the eve of the Chinese Lunar Year, the artificial intelligence model DeepSeek created havoc for markets worldwide. DeepSeek’s low cost structure and success in providing similar services to that of OpenAI has led to an increase in competition within the technological markets. Specifically, US technology stocks were the hardest hit, with the "Big Seven" - Apple, Nvidia, Tesla, Microsoft, Amazon, Meta and Alphabet (Google) - all falling, and Nvidia's stock price decreasing by nearly 17%. In particular, Nvidia’s monopolistic stance in the field of AI chips led the company to suffer the most as the potential lowering of entry barriers within this industry could lead to the firm’s future revenues dropping as companies can rely on cheaper AI systems from companies such as DeepSeek.  

Moreover, the bearish sentiment in the US technological market caused other markets to also suffer. For example, the cryptocurrency market saw a rise in volatility and losses with Bitcoin and Ethereum falling by 6% and 7% respectively as analysts argue that crypto investors were spooked by the stock market, leading many to sell. Over time, however, the crypto market stabilised whilst NASDAQ continued to fall. Whilst of course the latter of the two demonstrates a negativity in the technology industry, analysts have argued that the stabilisation of Bitcoin showcases people’s optimism towards the potential long-term benefits a cheaper AI model such as DeepSeek will have in the future. 

Many critics have referred to the entrance of DeepSeek as a “Sputnik Moment”, especially due to the challenge it has and will pose to a previously US-dominated field. Furthermore, the entrance of such a software is argued to impact the ongoing US-China technology war, sparking fear in the US national security community that the United States’ most advanced AI products may no longer be able to compete against cheaper Chinese alternatives. As President Trump spoke, the entrance of DeepSeek is a “wake-up call” and, given the complex and fast-evolving technical landscape, two policy objectives are clear. Firstly, the US must do everything it can to stay ahead of China in terms of AI capabilities. In addition, iit must also prepare for a world in which both countries possess extraordinarily powerful, and potentially dangerous, AI systems. In essence, it needs to dominate the frontier of AI and simultaneously defend against the risks.  

Trump's Tariff Policies Impact the Markets Globally

In January 2025, President Trump introduced a new set of tariffs. These measures include a 25% tariff on imports from Canada and Mexico and a 10% duty on goods from China.  

The financial markets responded rapidly to these announcements. Investors expressed concern over potential disruptions to supply chains and the increased costs for businesses reliant on imports from the affected countries. Analysts projected that these tariffs could result in a 2.8% drag on S&P 500 company earnings, with significant consequences expected from retaliatory measures by Canada, Mexico, and China. 

Apart from corporate earnings, the tariffs raised questions about inflation. Higher import costs could translate into increased prices for consumer goods, exacerbating existing inflationary pressures.  

Economists warned that these tariffs, with the expected countermeasures from trade partners, could reduce U.S. GDP by approximately 1.5 percentage points. This forecast comes from an anticipated reduction in trade activity and potential disruptions in key industries, such as automotive manufacturing, agriculture, and technology. 

Moreover, an analysis by the Tax Foundation estimated that these tariffs leading to a contraction in economic output, could translate into an additional tax burden of $1.1 trillion between 2025 and 2034. 

However, on February 3rd, Trump decided to postpone the additional tariffs on Canada and Mexico for 30 days following strong retaliatory actions especially in Canada where patriotic movements emerged quickly. 

Technicals Explained: Monte Carlo Simulation

The Monte Carlo simulation is a statistical technique used to understand how uncertainty affects outcomes by running many repeated random experiments and analyzing the results. It helps estimating the range of possible outcomes by simulating random scenarios thousands or even millions of times in problems where it is difficult to predict the outcome because there are many variables involved, and some of them are uncertain. 

It works by firstly identifying the process to be analyzed and defining the outcome. Then, the variables that introduce uncertainty are studied and a probability distribution is assigned to each of them. The Monte Carlo method randomly picks values for the uncertain variables based on their probability distributions and calculates the outcome for that combination of inputs. The process is repeated many times (often thousands or millions) to generate a wide range of possible outcomes. 

After running the simulations, statistics (e.g., average, range of possible outcomes, probability of meeting a specific target) can be determined from the obtained large dataset of outcomes. Monte Carlo simulation is widely used in finance and business to model scenarios where there is uncertainty or randomness. Application:

The Monte Carlo simulation is often applied in financial modelling, and commonly used in the context of equity or option pricing. For example, when valuing a company, many variables go into the decision of whether a stock is overvalued or undervalued. When valuing a firm, you make assumptions on revenue growth, operating margins, cost of capital and more to find the free cash flow and, in turn, the appropriate stock price. However, there is still underlying uncertainty within these assumptions, and therefore a simulation can be utilised.  

During the simulation, you focus on the key inputs and what happens to your output when those inputs are changed. Some inputs make bigger impacts, whereas with some there is only marginal differences - you just want to focus on those with bigger impacts (ie higher ratio of value to the input). Intuition and common sense should also be used when selecting distributions of the chosen variables and choosing constraints. The simulation gives a range of values, of which you should look at the distribution, median, minimum and maximum, before being more certain with the selected value. Overall, the analysis is performed to test the impact on the net present value of a business as underlying assumptions and variables change. This type of analysis is complex, and therefore an excel package can be used to run the simulations and make things easier! 

Woman of the Month: Lisa Su

Named TIME's 2024 CEO of the year,  our woman of the month is Lisa Su, whose innovation and leadership is an inspiration to women worldwide.

Dr. Lisa Su, a Taiwanese-American electrical engineer, is the Chair and CEO of Advanced Micro Devices (AMD). She earned her Ph.D. in electrical engineering from MIT and built her expertise at IBM, among other firms, before joining AMD in 2012. In 2014, she became the first woman to lead the company, taking on the role at a vital point when AMD was struggling financially and losing market share to competitors.

Su took charge during a critical period, implementing a strategic focus on high-performance computing, data centres, and graphics technologies. She spearheaded the development of Ryzen and EPYC processors, restoring AMD’s competitive edge. Her leadership exemplifies the 'glass cliff' phenomenon, where women are appointed to leadership roles during crises. Despite the challenges, she not only stabilized AMD but positioned it as a dominant force in the semiconductor industry. In fact, under Su’s leadership, AMD’s market value grew from $2 billion to over $200 billion.

Beyond corporate success, she actively supports women in STEM by championing diversity initiatives, funding scholarships, and advocating for greater female representation in technology and engineering. Her legacy extends beyond business, inspiring future generations of women.

2 Truths & 1 Lie 

Results will be posted to Instagram!

• Hedge funds often use high-frequency trading algorithms to exploit millisecond price inefficiencies in global markets, sometimes front-running institutional orders

• The Basel III framework mandates that banks maintain a minimum leverage ratio of 10% to ensure financial stability and prevent excessive risk-taking

• Negative-yield bonds exist, meaning investors knowingly buy bonds that guarantee they will get back less than their initial investment if held to maturity
  

WiF Recommends 

The Big Short 

While being one of the most popular & an Oscar-nominated movies, The Big Short provides a valuable lesson on the importance of understanding financial instruments you invest in. The movie focuses on how mortgage-backed securities and CDOs (collateralized debt obligations) played a crucial role in the 2008 Financial Crisis.

The Undercover Economist 

Tim Harford’s “The Undercover Economist” provides simplified explanations of financial issues in a simple way with comprehensible examples, such as how supermarket chains make use of price-targeting policies or why China’s economy has grown in recent years. It serves as a perfect bed time read for those seeking something easy, but enriching nevertheless.

So Money with Farnoosh Torabi 

30 minutes of financial inspiration narrated by an award-winning female financial guru, TV host & best-selling author, Farnoosh Torabi. The podcast has been recognized by Inc. magazine as a "Top Podcast to Grow Your Business”, covering the science of building wealth.

What’s next?

We're looking forward to welcoming new members  to WiF in the next month, as well as some very exciting workshops that we have planned!

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