One third of deals paid in stock as M&A on track for post-crisis record
Mergers and acquisitions have surged in what will likely be an enduring trend in 2014 to rival the M&A boom of fast-paced 2007 – and this time companies are increasingly paying with stock.
The value of global M&A this year so far has surged 42 percent from the same period of 2013 to $1.2 tn, the highest level since 2007, the Financial Times reports. At the same time, the number of deals paid for in a combination of stock and cash has grown to an historic record of around 33 percent of the total, a full 10 percentage points above any other year.
‘What’s different in 2014 compared with 2007 is that there has been a significant divergence between M&A and the equity markets over the past few years, which are usually highly correlated,’ Bob Eatroff, co-head of US M&A at Morgan Stanley tells the FT. ‘The equity markets rose more than 30 percent last year, while M&A was flat.’
M&A so far this year has spanned most business sectors and been marked by large bids such as Comcast’s $45 bn offer for Time Warner Cable, Holcim’s planned $40 bn merger with Lafarge, Facebook’s $19 bn takeover of WhatsApp and a pending deal between General Electric and Alstom.
Bloomberg News, citing its own data, reports that the first quarter saw more than 5,000 M&A deals worldwide, the highest level since the financial crisis. April, the news agency adds, has been the busiest month ever.
Other analysts say M&A demand has been bottled up for several years due to lingering economic concerns, despite low interest rates and record cash stockpiles. CEOs are only now regaining the confidence needed to undertake large deals, and the recent increases in share prices are giving them the means to do so in stock.
‘We’re going to see deals in every sector,’ Walter Todd, chief investment officer at Greenwood Capital Associates, tells Bloomberg. ‘The market is rewarding acquisitions. The market likes this kind of stuff.’
