Takeovers & Buyouts: Mega M&A Deals in 2019 Highest in Four Years

January 2, 2020 | Takeovers and Buyouts

Cross-border M&A was, however, down 25% year-on-year.

Key trends in global M&A during 2019 included a sharp rise in large M&A transactions accompanied by a slowdown in cross-border deals. Deal-makers were defensive given geopolitical tensions such as trade disputes. As a result, they focused more on deals in their home turf.

Aggregate transactions worldwide totaled $3.9 trillion in 2019, the fourth strongest year for M&A deal-making, according to data from Refinitiv as reported by Reuters. It was also the sixth year on the trot that transactions totaled more than $3 trillion.

The 2019 level was nearly flat compared to the 2018 volume of $3.96 trillion. But for a late surge in the last quarter of the year, the 2019 tally would have been lower.

Of this, cross-border deal-making accounted for $1.2 trillion, lower by 25% on 2018. It also marked the lowest volume since 2013.

Big-ticket M&A deals on the rise

Low financing costs and high stock prices led to a surge in large-value transactions. These are deals having a value greater than $10 billion. Of 43 such transactions, nearly half or 21, were over $20 billion in size.

“Mega-deals were the main feature of this year’s deal-making, especially in the United States, where the bulk of these transactions took place,” said Goldman Sachs Group Inc (GS.N) global M&A co-head Gilberto Pozzi.

Eight of the year’s 10 biggest transactions were located in the US. These were led by Bristol-Myers Squibb’s $74 billion takeover of Celgene Corp and United Technologies Corp’s $135 billion merger with Raytheon Co.

Interestingly, markets named November 25, 2019, as “merger Monday.”

More than $60 billion worth of deals were unwrapped on that one day.

These included Charles Schwab’s $26 billion all-share deal to nab TD Ameritrade and LVMH of France’s $16 billion takeover of Tiffany.

M&A Geographically speaking…

Europe and cross-border China slumped by a quarter each, while M&A volume in Africa and the Middle-East more than doubled. Cross-border UK deals were in demand regardless of Brexit tensions, and boosted by the cheaper pound.

Private Equity and M&A

Global private equity-backed M&A surged 4% to $479 billion in 2019, making it the best year for global buyout activity since 2007.

In 2020, private equity buyouts may be to the fore as PE firms nurse a dry powder trove of $1.3 trillion, according to Hernan Cristerna, global co-head of M&A at J.P. Morgan.

Slowdown not bad for M&A

The much-feared market correction or a slowdown in the global economy will in fact work in favor of M&A activity. Provided the severity is less than that of the 2008 crisis.

“A lukewarm economy is ideal for acquisitions, because companies need M&A to ensure growth, and business sentiment is sufficiently strong for CEOs and boards to be comfortable with pursuing deals,” said Sullivan & Cromwell LLP partner Frank Aquila.

Related Story:  Refinitiv: Sovereign Wealth Funds Put $24.6 Billion into Q3 M&A Deals

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