Record Year for Mega Acquisitions?
This year has seen large mergers including Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) fall apart, but it has not deterred other companies from combining. It is shaping up to be the year of the mega deal, with 2015 on track to break a record in big M&A.
There have been 34 “jumbo” $10B+ deals proposed year-to-date, totaling $961 billion, according to Dealogic data. That is a 147% increase in deal volume from the same period last year, and is 37% greater than the previous record year pace in the first half of 2007.
“I’ll be shocked if this isn’t a five trillion dollar year,” said Robert Profusek, M&A practice leader at Jones Day. Profusek, who regularly advises on large transactions, said “this is the most extraordinary time I’ve ever seen in the deal business.” In a video with FOXBusiness.com, Profusek said he is working on a mega deal that will be announced this week.
The biggest deals to date have been Royal Dutch Shell’s (NYSE:RDS.A) proposed acquisition of BG Group, totaling $81.5 billion, including debt. And Charter Communication’s (NASDAQ:CHTR) proposed acquisition of Time Warner Cable (NYSE:TWC) is a close second, at $79.6 billion. On Friday, it was announced that Aetna (NYSE:AET) agreed to acquire Humana for $34.1 billion.
Frank Aquila, partner at Sullivan & Cromwell is also predicting continued mega merger momentum. “The pace is clearly picking up,” he said. “The overall number of deals are down, but the dollar value is way up.”
With proposed acquisitions totaling 11,800, there are fewer deals than the 12,800 seen at the same time last year. But the transactions have been larger. There have been $2.4 trillion in global deals so far this year, compared to $1.7 trillion in the same period last year.
David Shine, chair of the New York M&A practice for Paul Hastings, said he is “highly optimistic about the M&A market.” The latest boom is “driven by the availability of money and the psychology of the market. Money is clearly available. The psychology of the market is frothy.”
The top sectors for mega deals have been healthcare, oil & gas and telecommunications. Coming in at fourth is technology, an industry which is experiencing mega valuations.
Rob Fisher, PwC’s technology deals leader, predicts that technology is ripe for acquisitions, particularly in the semi-conductor, communications equipment and cloud spaces. “You’ve got very favorable market environment for large scale transactions and we’re seeing that play out across multiple industries,” Fisher said.
And with 54% of U.S. CEOs looking to make an acquisition this year, the tremendous deal volume is expected to continue.
“There’s no question that it's going to be a record M&A year,” said Profusek.