Second-quarter M&A close to record amid mega deals

Mon Jun 29, 2015 7:08pm EDT
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By Greg Roumeliotis and Pamela Barbaglia

NEW YORK/LONDON (Reuters) - Mergers and acquisitions (M&A) worldwide in the second quarter of 2015 almost matched the record set in the second quarter of 2007, according to preliminary Thomson Reuters data, as big companies turned to deals to boost their market share.

Low interest rates and stronger confidence among chief executives have led to a steady rise in M&A activity in the last two years to close to pre-2008 financial crisis levels. The second quarter of 2015, however, stands out for the number of mega deals that were clinched or attempted.

These include Royal Dutch Shell Plc's (RDSa.L: Quote) $70 billion acquisition of British rival BG Group Plc BG.L, cable operator Charter Communications Inc's (CHTR.O: Quote) $78.7 billion merger with Time Warner Cable Inc TWC.N, and chip maker Avago Technologies Ltd's (AVGO.O: Quote) $37 billion acquisition of peer Broadcom Corporation BRCM.O.

Such large deals drove M&A volumes globally in the second quarter of 2015 up by 34.6 percent year-on-year to $1.33 trillion as of June 26, shy of the record $1.41 trillion seen in the second quarter of 2007.

"Given the consolidation that is going on across numerous sectors, to be a bystander could mean losing ground from a competitive standpoint," said Gary Posternack, global head of mergers and acquisitions at Barclays Plc (BARC.L: Quote).

"Companies are mapping out their industry landscapes, focusing on transactions that could position themselves as industry leaders, and acting aggressively to try to bring them to fruition," Posternack added.

Consolidation was often sparked by one company exploring a sale and spurring its rivals into action. In the United States, for example, health insurer Humana Inc's (HUM.N: Quote) decision to put itself on the block prompted peers Cigna Corp (CI.N: Quote), Aetna Inc (AET.N: Quote), Anthem Inc (ANTM.N: Quote) and UnitedHealth Group Inc (UNH.N: Quote) to also explore other deals.

To be sure, there were several takeover approaches in the quarter that were rebuffed. Cigna has so far snubbed Anthem's $53.8 billion acquisition proposal, natural gas pipeline company Williams Companies Inc (WMB.N: Quote) rejected a $53.1 billion offer from peer Energy Transfer Equity LP (ETE.N: Quote), and generic drug maker Mylan NV (MYL.O: Quote) is resisting a roughly $50 billion bid by Teva Pharmaceutical Industries Ltd (TEVA.TA: Quote), while also seeking to acquire rival Perrigo Company Plc (PRGO.N: Quote) in a hostile $35 billion bid.   Continued...

Shell's company logo is pictured at a gas station in Zurich April 8, 2015. REUTERS/Arnd Wiegmann