The acquisitions and mergers wave has been strong on a global level right from the beginning of the year, whereby the “first quarter of 2018” is witnessing the “strongest start ever” with a total value of around “$1.2 trillion”. This trend is the result of “U.S. tax reform” along with the “faster economic growth in Europe”.
Strong performances shown by the debt and equity sectors besides corporate treasuries swelling with cash have been a great support to welcome the confidence boost in C.E.Os who sought to undertake “transformative mergers”. M&A’s North America Head at JPMorgan Chase & Co, Anu Aiyengar said:
“The clarity on tax has unclogged some of the M&A activity that was strategically imperative, but companies were waiting for the right financial timing”
On the first quarter of 2018, the M&A deals show a global scale increment of 67% on “year-on-year” basis, while “Thomson Reuters data” informed that there was a 10% drop of deals number to “10,338”, whereby showcasing the average trend of deals “getting bigger”. While, Reuters added:
“Among the largest deals clinched this quarter were U.S. health insurer Cigna Corp’s $67 billion deal to acquire U.S. pharmacy chain Express Scripts Holding Co (ESRX.O) and German utility E.ON SE’s (EONGn.DE) $38.5 billion deal to acquire RWE AG’s (RWEG.DE) renewable energy business Innogy SE (IGY.DE)”.
During these three months of 2018, Europe’s mergers and acquisitions volumes “doubled”, in Asia the respective number rose by 11% while in the U.S. it grew by 67%. HSBC Holdings Plc’s EMEA Advisory’s Head, Borja Azpilicueta:
“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”
The “trade tariffs” imposition on imported goods from China as announced by the U.S. President thwarted the first quarter’s “stock market rally”. However, business valuations still show an elevation, although “market volatility” has also gained simultaneously. Goldman Sachs Group Inc’s Co-Head of Global Mergers and Acquisitions, Gilberto Pozzi said:
“Companies have become more aggressive in pursuing deals that make strong strategic sense. But valuations remain high and boards have recently become more cautious on large acquisitions, as it is more difficult to convince their investors of the potential for value creation at such price levels”
Similarly, there has been an increment on the regulatory risk while the “dramatic intervention” of Trump on the grounds of “national security” to block Broadcom’s “$117 billion hostile bid for U.S. chip maker Qualcomm Inc” underlined the concerns of the U.S. on staying behind China in the new tech race. PJT Partners Inc’s partner, Johannes Groeller stated:
“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”.
While, Centerview Partners Holdings LP’s partner, Jack Levy added:
“The antitrust environment for M&A transactions seems favorable today though certain deals, which catch the attention of regulators or politicians for one reason or another, can be problematic”.
“One should resist the temptation to conclude from those specific deals that the antitrust regime has become more difficult”.
References:
reuters.com
Strong performances shown by the debt and equity sectors besides corporate treasuries swelling with cash have been a great support to welcome the confidence boost in C.E.Os who sought to undertake “transformative mergers”. M&A’s North America Head at JPMorgan Chase & Co, Anu Aiyengar said:
“The clarity on tax has unclogged some of the M&A activity that was strategically imperative, but companies were waiting for the right financial timing”
On the first quarter of 2018, the M&A deals show a global scale increment of 67% on “year-on-year” basis, while “Thomson Reuters data” informed that there was a 10% drop of deals number to “10,338”, whereby showcasing the average trend of deals “getting bigger”. While, Reuters added:
“Among the largest deals clinched this quarter were U.S. health insurer Cigna Corp’s $67 billion deal to acquire U.S. pharmacy chain Express Scripts Holding Co (ESRX.O) and German utility E.ON SE’s (EONGn.DE) $38.5 billion deal to acquire RWE AG’s (RWEG.DE) renewable energy business Innogy SE (IGY.DE)”.
During these three months of 2018, Europe’s mergers and acquisitions volumes “doubled”, in Asia the respective number rose by 11% while in the U.S. it grew by 67%. HSBC Holdings Plc’s EMEA Advisory’s Head, Borja Azpilicueta:
“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”
The “trade tariffs” imposition on imported goods from China as announced by the U.S. President thwarted the first quarter’s “stock market rally”. However, business valuations still show an elevation, although “market volatility” has also gained simultaneously. Goldman Sachs Group Inc’s Co-Head of Global Mergers and Acquisitions, Gilberto Pozzi said:
“Companies have become more aggressive in pursuing deals that make strong strategic sense. But valuations remain high and boards have recently become more cautious on large acquisitions, as it is more difficult to convince their investors of the potential for value creation at such price levels”
Similarly, there has been an increment on the regulatory risk while the “dramatic intervention” of Trump on the grounds of “national security” to block Broadcom’s “$117 billion hostile bid for U.S. chip maker Qualcomm Inc” underlined the concerns of the U.S. on staying behind China in the new tech race. PJT Partners Inc’s partner, Johannes Groeller stated:
“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”.
While, Centerview Partners Holdings LP’s partner, Jack Levy added:
“The antitrust environment for M&A transactions seems favorable today though certain deals, which catch the attention of regulators or politicians for one reason or another, can be problematic”.
“One should resist the temptation to conclude from those specific deals that the antitrust regime has become more difficult”.
References:
reuters.com