The Strategist

Global M&A deals volume reaches $ 2.5 trillion in 2018

06/28/2018 - 17:16

The volume of M&A deals concluded in the world in the first half of 2018 reached $ 2.5 trillion. This is a record high for this period. The data underscore activity of mergers and acquisitions despite geopolitical tensions, writes the Financial Times.

The wave of major deals, mainly in the media and telecommunications sectors of the United States, contributed to a 65% increase in global transactions volume compared to the same period last year. In nominal terms, the volume of transactions became the largest since Thomson Reuters began collecting data on M&A in 1980.

One of the largest deals was Walt Disney Co. purchasing the main part of the assets of 21st Century Fox for $ 71.3 billion, approved on Wednesday by the US Department of Justice. The American telecommunications corporation Comcast also claimed these assets.

Other major deals in the first half of the year include acquisition of the Irish pharmaceutical company Shire by the Japanese company Takeda for $ 77 billion, and merger of T-Mobile with the competing US telecommunications company Sprint for $ 59 billion. The newspaper also noted the purchase of the electronic trading company Flipkart by the Walmart retailer for $ 16 billion.

All over the world, the companies have concluded 79 deals worth over $ 5 billion each, surpassing the previous record for this period, which was recorded in 2007. The number of transactions amounting to more than $ 10 billion has also set a record: there were 35 such transactions in the first half of the year.

Large companies in all sectors are experiencing pressure due to development of new technologies. Thus, they feel the need to merge with long-standing rivals in order to gain more opportunities in competition.

"Raising interest rates is not the main problem for corporations," says Stephen Arkano of Skadden law firm, "Most companies are primarily focused on how to increase revenues in an economic environment where organic growth can improve, but not quickly enough. M&A are still the best solution to this problem. "

Activity transactions were observed in all regions. In the US, it returned to the highs seen before the 2008 crisis. In Europe, transaction activity almost doubled, and jumped by 22% in annual terms in Asia.

Against the backdrop of US protectionism, the volume of foreign purchases by Chinese companies in the first half of the year was $ 76 billion, down 38% year-on-year and reaching a four-year low. However, outside the US, Chinese investors have actively acquired assets in the energy sector. The volume of transactions in the energy sector reached $ 39 billion, an increase of 89% in annual terms, which was a new record for the country.

Most of this amount falls on one transaction that has not yet been agreed. For instance, there is a proposal to buy state-owned China Three Gorges Corporation by the Portuguese EDP for $ 28.6 billion, including net debt.