Global mega-deals push M&A values to $2.5 trillion by mid-November*, the highest since 2007
24 November 2014
This year saw a sharp increase in European deal-making, which doubled from around $300 billion for the first nine months of 2013 to more than $600 billion in the same period of 2014. This year also saw the return of Chinese deal making into the West. Chinese M&A activity into Europe more than tripled by the start of November to $7.9 billion.
Although the US quantitative easing programme has ended, the pace of US economic recovery is expected to continue. At the same time, other major economies, including Eurozone, are facing challenges. These diverging economic trajectories mean that the US companies could take advantage of an appreciating US dollar to pursue more cross-border deals.
Macmillan added: “The Europe-North America corridor will continue to be busy next year. US companies will seek to use their strong dollar to do cross-border consolidation deals, whereas the stronger European companies are expected to look at the US for growth opportunities.”
Corporate cash is still close to record highs, with the one thousand largest non-financial companies having $3.1 trillion in cash reserves at the end of the first half of 2014. The M&A Index reveals a shifting preference in choice of deal financing towards stock. In 2012 all cash deals accounted for 75% of activity, which dropped down to 60% in 2014. This was matched by an increase in M&A deals using both cash and stock to complete deals.
Macmillan continued: “Many companies have been undertaking share repurchase programmes in the last few years and with the rallies in the stock market, shares are increasingly becoming an attractive currency for acquisitions.”
Withdrawn deals reached $430 billion in the first ten months of the year, the highest since 2008.
Macmillan concluded: “While the focus this year has been on a few large withdrawn deals, we found that less than 2% of the announced deals by volume were withdrawn, the lowest in over a decade. This suggests in the current market the investors are more supportive of companies doing the right deal.”
The Deloitte M&A Index is a forward-looking statistical indicator that forecasts future global M&A deal volumes and identifies the factors influencing conditions for deal activities.
* at 18 November 2014
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