Global M&A boom tops $3 trillion this year
Global mergers and acquisitions have surpassed $3 trillion this year following Monday’s major tie-up announcements that totaled more than $100 billion.
Two giant deals pushed the global M&A volume to a post-recession high. Actavis (ACT) agreed to buy Botox-maker Allergan (AGN) for $66 billion in the biggest deal announced this year, and Halliburton (HAL) inked a $34.6 billion acquisition of oil-services peer Baker Hughes (BHI).
The current volume of worldwide deals is the highest since 2007, according to Dealogic. The boom is driven by cheap credit and high stock prices, both helped along by the Federal Reserve’s easy-money policies.
While those policies have been in place for awhile, the deal demand only took off this year. The 32% year-over-year gain is partly due to the warm reception from investors following recent takeover announcements.
Investors are traditionally skeptical of most deals, which can be costly to implement and don’t always end up being as lucrative as expected.
“Good deals beget more good deals,” Scott Barshay, head of the corporate department at law firm Cravath, Swaine & Moore LLP, told the Wall Street Journal. “Companies are going after targets within their core competencies, and when you add in the price of debt being as cheap as it is, that helps tremendously in making a deal look smart.”
The dealmaking may not slow down soon and could last at least another six to 12 months, Joseph Perella, co-founder of merger-advisory firm Perella Weinberg Partners, told the WSJ. Following that, the presidential election and other economic unknowns make predictions too difficult.