The record dealmaking volume for last month did not create a ripple effect lifting US stocks as it has in the past, partly because the mergers, albeit large, were few and far between, bankers and analysts said.
Though acquisitive corporate bosses generated US$329 billion worth of takeovers last month, the biggest month for US mergers and acquisitions on record, according to Thomson Reuters data, the 615 deals that were announced marked the lowest number of monthly deals since March 2013. The top four deals alone represented more than a half of the month’s total.
The sparsity of deals indicates that while confidence might be running high in boardrooms at a handful of large companies, it is not necessarily widespread across corporate America. As such, the stock market’s 1.9 percent drop last month, as measured by the S&P 500 index, was more of a thud than a rallying roar.
“It should be bullish, because it’s a sign that companies see value in other companies, but it hasn’t helped,” said Donald Selkin, chief market strategist at National Securities in New York. “People feel that there’s not as much value in these stocks as there might have been.”
The deals also lack a common or new motivation that would inspire investors to gobble up stocks in anticipation of more mergers, bankers said.
While there is some ambition to get transactions done before the US Federal Reserve makes financing more expensive by raising interest rates, people involved with mergers and acquisitions say that was not a primary factor last month.
The US presidential election, which is a week away, also did not appear to be a driver.
The autumn merger boom does reflect a less alluring reality: The summer was uncertain as CEOs put off deals they might have done sooner.
Mergers and acquisitions in the US last quarter accounted for just 24 percent of the year to date, the lowest percentage since 2007.
Britain’s Brexit vote in June to leave the EU began a spate of market volatility. Although Brexit fueled some deals last month because the British pound had lost so much value, it stymied activity until recently.
“In the summer, the dealmakers in the US took a collective breather,” said John Reiss, global head of M&A at law firm White & Case.
Megadeals last month were spread out among many sectors.
The biggest for the month, as well as the year to date, was telecom giant AT&T Inc’s proposed US$85.4 billion acquisition of content creator Time Warner Inc. Qualcomm’s US$38 billion purchase of NXP Semiconductors NV also set a record for the semiconductor sector.
There were also large deals announced between cigarette makers, asset managers, and oil and gas producers. Healthcare stood out as a sector without big deals.
All told, there were 10 deals larger than US$5 billion and the average deal size was US$535 million — the highest since July last year, when it was US$329 million.
Bankers, lawyers and executives involved with the flurry described a range of rationales.
For instance, British American Tobacco’s US$47 billion offer to buy US tobacco firm Reynolds American Inc was driven by the drop in sterling. General Electric Co’s decision to merge its oil and gas business with Baker Hughes Inc reflects its ongoing divestiture of peripheral businesses.
And while the AT&T-Time Warner tie-up happened last month, it was driven by a years-long disruption in technology, media and telecom businesses that has led those types of companies to combine.
“At the end of the summer, there were a lot of things going on in the world: there was discussion around interest rates, concern over Brexit, uncertainty over where the economy was headed,” said Steve Arcano, who concentrates on mergers and acquisitions as a partner at law firm Skadden, Arps, Slate, Meagher & Flom.
“My sense is that over the course of September people felt they had a better read on all of that, re-engaged and started pushing forward again,” he said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last