Sun, Feb 03, 2019 - Page 16 News List

M&A surge makes for the best January since 2000


After a dismal December, dealmakers made a comeback last month, logging US$275 billion of mergers and acquisitions (M&A) globally to mark the best start to a year in nearly two decades.

“M&A came back even though the markets felt choppy, and that shows how confident CEOs are,” said Susie Scher, cohead of the global financing group at Goldman Sachs Group Inc.

The surge was led by North American deals, with US$187 billion of transactions announced during the month — up 40 percent from last year — data compiled by Bloomberg showed.

Asia was next with US$47 billion, an increase of about 10 percent from a year earlier, while in Europe M&A volumes fell about 24 percent to US$30.5 billion, the data showed.

In the US, Bristol-Myers Squibb’s purchase of Celgene Corp alone, valued at US$89 billion including debt, made sure December’s US$52 billion total was surpassed on the third day of the year.

You would have to go back all the way to 2000 to find more M&As announced in the first 31 days of the year globally. That is when the biggest deal on record — Time Warner Inc’s merger with America Online Inc for US$186 billion, including debt — catapulted the monthly total to nearly US$410 billion.

Scher is expecting a solid year for M&As as investment-grade financing markets recovered from a downbeat December and debt investors show a greater willingness to lend to riskier companies.

“Could you see US$70 [billion] to US$80 billion of bonds sold globally for an investment-grade deal? Absolutely,” she said. “In the high-yield market there is capacity for US$20 billion deals globally across bonds and loans.”

That would top last year’s biggest deals. The largest bond sale in the investment-grade market last year came from CVS Health Corp, which issued US$40 billion of debt in March to help finance its takeover of Aetna Inc. Blackstone Group LP’s sale of US$13.5 billion in bonds and loans to fund its acquisition of Thomson Reuters Corp’s financial and risk operations was the largest leveraged buyout of the year.

On top of easily available financing — for now — some companies have extra cash on their balance sheets after US tax cuts last year, and while some of the funds have already been pledged for buybacks, there is still plenty to deploy on potential M&As, Scher said.

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