With stock markets hitting severe turbulence in August, many observers expected a level of restraint by big firms around the world. However, according to research by mergers analyst Dealogic, August represented the busiest on record for M&A deals in US history, continuing a trend of strong activity throughout this year.
Activity for this year has already surpassed $3trn, according to
Activity for this year has already surpassed $3trn, according to Thomson Reuters – which is the highest amount since pre-crisis levels in 2007. According to the Financial Times, recent M&A deals include US private equity giant Blackstone’s $6bn deal to acquire hotel group Strategic Hotels, as well as Japanese conglomerate Mitsui Sumitomo’s $5.3bn offer for British insurance firm Amlin. In the UK alone, deals surged to over £260bn, including the recent £6bn merger between betting companies Paddy Power and Betfair.
One area experiencing considerable consolidation is the technology sector. According to Dealogic, global M&A activity hit $1.9bn earlier this month for 2015 so far, which is up 23 percent on the same period in 2014. This represents the highest level since the tech bubble of 2000. Deals include eBay’s spinning off of Paypal for $49.2bn, which completed in July. Avago Technologies has also bid $36.6bn for Broadcom, which is pending approval.
While high levels of M&A could be seen as a reflection of confidence within many markets, they may also represent a desire to consolidate industries in the face of uncertain economic conditions in the coming months.
Speaking to the Financial Times, Chris Ventresca, JP Morgan’s global co-head of M&A, said that many of these mergers could be to create larger firms more resistant to market volatility. “While market volatility generally dampens M&A activity, for some deals it may make sellers more willing to transact to protect value for their shareholders or consider merging to create a larger, more stable pro forma company.”