Global mergers and acquisitions got off to a rocky start this year as companies waited on tax clarity, but the floodgates have now opened. A total of $1.2 trillion in deals had been sealed by the end of the first quarter, and even though they were fewer in number, they were significantly bigger in size.
Megadeals are back, and they don't appear to be slowing.
Stock market woes and trade war fears failed to derail this train, driven by U.S. tax reform, an uptick in European economic growth, strong equity, strong debt markets and flush corporate cash coffers.
For the first quarter, global M&A deals saw their value increase by 67 percent year-on-year, with the number of deals falling 10 percent to 10,338, according to Thomson Reuters. But the size of the deals brought the total value to $1.2 trillion for Q1.
In Europe, the total value of M&A deals was up 50 percent, and in Asia, 11 percent.
Of the $1.2 trillion in acquisitions, more than half of them were worth $5 billion or more, and 20 deals were worth more than $10 billion.
On one day this week, more than $50 billion in takeovers were being positioned, according to The Financial Times.
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Some of the biggest megadeals of the first quarter included:
- U.S. health insurer Cigna Corp’s $67-billion acquisition of the Express Scripts Holding Co.
- German utility E.ON SE’s $38.5-billion acquisition of RWE AG’s Innogy SE renewable energy business.
And megadeals still in the pipeline include:
- Japan’s giant drugmaker Takeda is considering a $40-billion takeover of Irish Shire.
- U.S. oil and gas producer Concho Resources has agreed to scoop up RSP Permian for $9.5 billion
- The Chicago exchange’s CME Group has agreed to buy the UK’s Nex Group for £3.9bn (nearly $5.5 billion)
According to the Wall Street Journal, Walmart is said to be in preliminary talks to buy insurer Humana, with an $37-billion market cap--for another potential megadeal. It would be Walmart’s biggest acquisition ever, and it would turn the retailer into a drugstore behemoth.
As political uncertainty hits all-time highs, dealmakers aren’t blinking.
And it’s all about transformation, with M&A analysts saying the timing is right, all things considered.
"The better macro-economic environment in Europe has created greater confidence to get things done. Deals that have been in the works for a long time are now coming to fruition and some industries like utilities are being completely reshaped by the latest wave of consolidation," Borja Azpilicueta, head of EMEA Advisory at HSBC Holdings Plc., told Reuters.
And what’s missing is China.
Earlier this year, a massive Singapore chipmaker tried a $140-billion hostile takeover of its American semiconductor rival, Qualcomm, and failed when Trump killed the deal over national security concerns that are all about China. Similarly, efforts have been made to clip the wings of Chinese tech and telecommunications giant Huawei, which saw Best Buy drop its phones from its sales floor over fear of regulatory backlash and the intensifying anti-China sentiment coming out of Washington, DC.
"While every auction used to see at least one Chinese participant, now people are questioning their ability to deliver and are conscious of the political pushback that Chinese bidders could face," Reuters quoted Johannes Groeller, a partner at PJT Partners Inc., as saying.
By Josh Owens for Safehaven.com
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