$3 billion deal for Meredith creates an all-time M&A record

Sep 08, 2015

The urge to merge is still greater than fears about the global economy, apparently.

The value of announced U.S. mergers and acquisitions in 2015 hit an all-time record, and we still have nearly five months to go in the year. Tuesday's acquisition of Meredith (mdp) by Media General (meg), which values the magazine and television company at $3 billion including debt, officially pushed M&A activity over the top. Adding to the tally is Blackstone's (bx) $6 billion purchase of Strategic Hotels and Resorts (bee), which owns locations of high-end chains, including Four Seasons properties. That put this year's deal spree at $1.503 trillion in announced transactions, according to data firm Dealogic.

1999 had been the previous record for U.S. M&A, when activity totaled $1.497 trillion, and that tally was for the full year. Both figures, this year's and 1999's, include the value of debt in the deals, and they strip out spinoffs.

The last year of the the last millennium seemed like fluffier times for markets, with the dotcom boom in full bloom. But today's booming M&A market may suggest otherwise. Low interest rates and a resurgent economy are spurring a surge of deals, and some market watchers are increasingly worried about the valuations that many private technology companies are getting.

What's more, the current dealmaking frenzy has pushed the price tag for acquisitions up as well. In the biggest deal of the year, Charter Communications (chtr) announced in May that it was buying rival Time Warner Cable (twc) for nearly $79 billion. That deal valued Time Warner at 9.5 times its earnings before depreciation, interest, and taxes. That was nearly 25% higher than the price of other cable deals. Last month, Warren Buffett did one of his biggest deals ever. Buffett's Berkshire Hathaway (brk.a) acquired specialty airline and energy industry components maker Precision Castparts (pcp) for $30 billion. That deal valued Precision at 20 times its earnings. Even the world's most famous value investor is paying up.

Still, with four months to go in 2015, a slowdown in M&A could be in the works. The Federal Reserve has signaled that it may raise interest rates, even though the August's jobs report may have provided evidence the U.S. central bank should hold off. What's more, tremors in the global economy could eventually cause executives to think twice about launching multi-billion megadeals. But not yet.

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