DEALS-Global M&A at seven-year high as big corporate deals return

Mon Jun 30, 2014 11:12am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

(Adds graphic)

By Soyoung Kim and Greg Roumeliotis

NEW YORK, June 30 (Reuters) - Investor support for large acquisitions and a desire to trump rivals in consolidating markets have led chief executives to strike big transactions so far in 2014, raising year-to-date global deal volumes to their highest level in seven years.

Corporate buyers did not shy away from going hostile if their targets proved unwilling to sell, while more U.S. companies rushed to buy overseas peers to lower tax rates and access cash held offshore in a practice known as inversion.

The dealmaking frenzy could last for several months absent geopolitical or economic shocks, with buyers keen to take advantage of their strong stock prices, ample cash reserves and cheap available financing.

"Companies have strategic imperatives to do deals, they have the cash to do deals, and they can borrow additional cash at record-low rates," said Frank Aquila, a mergers and acquisitions lawyer at Sullivan & Cromwell LLP. "It really is a bit of a perfect storm when it comes to dealmaking."

Unlike the most recent heyday of dealmaking, which was back in 2007 when private equity used cheap money to load up companies with debt, this year's merger boom is being led by cash-rich corporations with strong balance sheets, such as Pfizer Inc, Comcast Corp and General Electric Co.

"What is notable about the deal activity we have seen in the first half of the year is the blue-chip nature of the companies who are doing the acquiring. We have finally seen the return of the strategic acquirer," said Gregg Lemkau, co-head of global mergers and acquisitions at Goldman Sachs Group.

Year-to-date global deal volume as of June 26 surged to $1.75 trillion, up 75 percent from the year-ago period, according to Thomson Reuters data. That was the highest level since 2007, when deal volume reached $2.28 trillion. (Graphic link.reuters.com/gur32w)   Continued...