M&A deals in 2014 eclipse levels in past 5 years
Global dealmaking in the first nine months of 2014 has eclipsed the level achieved in each of the past five years, after another quarter of resurgent activity fuelled hopes of a sustained boom.
In the first three quarters of the year, the value of mergers and acquisitions hit $2.66tn, according to data from Thomson Reuters – a 60 per cent increase on the same period in 2013, as the number of transactions worth $5bn or more hit a new high.
These deal values add to a growing sense among bankers – on Wall Street and in Europe and Asia – that global corporations have recovered the confidence they lost in the aftermath of the financial crisis.
“I have never seen a market more resilient than it is today, in terms of absorbing geopolitical and financial risk,” said Peter Weinberg, a founding partner of investment bank Perella Weinberg.
M&A activity has increased in almost every sector of the economy – reversing the trend of the past few years, in which consolidation deals have spiked in certain industries, such as technology, masking fragility in the wider market.
Advisers suggested this rise in industry-wide M&A was the logical conclusion of the strategies adopted by companies since the financial crisis.
“We have been through a period where costs have been cut and a lot of the straightforward organic expansion has been done, so companies naturally turn to M&A as a way to keep growing”, said Peter Tague, co-head of global M&A at Citi.
Others said the jump in activity reflected the fact that companies have had time to work out their dealmaking options.
“The reason response times have been so quick is because these companies had five years to stare at each other and figure out all of their own possible M&A moves and those of their competitors,” said Michael Carr, head of Americas M&A at Goldman Sachs.
“Transactions beget transactions and nobody wants to go first, but once it starts to move there is pressure to do something,” he added. “A lot of these industries are down to a very small number of players so the consequences of inactivity are potentially significant.”
Energy and power companies have led the way in terms of M&A value this year, with some $376.2bn of deals in the sector in the past nine months – a 56 per cent increase on the same period in 2013. This surge was helped by Kinder Morgan’s $58.6bn deal to acquire its subsidiaries.
Healthcare, meanwhile, enjoyed its strongest nine months of dealmaking value since records began in 1980, with some $368.6bn of deals announced in the sector so far this year – excluding Pfizer’s failed $116bn takeover of AstraZeneca.