Mergers and acquisitions have surged this month with megadeals for iconic companies such as Dell Inc. and H.J. Heinz Co., fueling optimism that more buyers are ready to embrace $10 billion pricetags.
Almost $40 billion in deals were announced yesterday, led by Heinz’s $23 billion takeover by Berkshire Hathaway Inc. and 3G Capital, data compiled by Bloomberg show. Transaction volume has increased by 27 percent so far this year compared with the same period a year earlier, signaling buyers are willing to spend again following last year’s mergers slump.
Record corporate profits and cheap borrowing costs are attracting buyers even as stock prices soar to a five-year high, with more than $140 billion of announced M&A deals this month, data compiled by Bloomberg show. The past two weeks alone have yielded at least four deals worth more than $10 billion each, including the Heinz and Dell buyouts and Comcast Corp.’s $16.7 billion purchase of General Electric Co.’s stake in NBC Universal.
“The Goldilocks era of post-crisis M&A has never been an if, but a when,” said JPMorgan Chase & Co. Vice Chairman James B. Lee, whose firm advised on Dell, Heinz and GE, as well as Liberty Global Inc.’s proposed $16 billion takeover of Virgin Media Inc. “CEOs are declaring that day has come.”
Last year, M&A shrank about 8 percent to $2.21 trillion, according to data compiled by Bloomberg. The one bright spot: The fourth quarter, which was the strongest for deals since 2008, buoyed by Softbank Corp.’s plan to take control of Sprint Nextel Corp. and the proposed combination of T-Mobile USA Inc. and MetroPCS Communications Inc.
Confidence Growing
The completion of the U.S. Presidential election in November and easing financial turmoil in Europe have helped set the stage for larger purchases.
“The Euro zone dynamics, the U.S. elections, the fiscal cliff and debt ceiling, while not in the rear-view mirror, have all taken a back seat to improving fundamentals,” said Paul Parker, Barclays Plc’s head of global corporate finance and M&A.
“Big deals tend to be transformational for industries and the second-order consequences can be very meaningful, often requiring a strategic offensive or defensive response,” he said. Barclays helped Silver Lake Management LLC finance its bid for Dell and is advising on US Airways Group Inc.’s merger with AMR Corp.’s American Airlines.
Debt Capacity