Global M&A Tops $2.5 Trillion After First-Half Deals Surge

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Cross-Border Capital

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Strong corporate earnings, on the back of that pervasive AI investment and fiscal stimulus, are playing their part as well, according to Daniel Mendelow, co-head of US investment banking at Evercore Inc.  

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A lot of the activity was across borders, particularly into the US, where that AI, and other technological, innovation is largely developed and commercialized. It’s also the biggest and wealthiest market by most measures.

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“Large cross-border corporate M&A momentum is here to stay as companies are generally well-capitalized with lots of liquidity and many stocks are at an elevated level, which support corporates to do more deals,” said Robin Rousseau, global chair of M&A for Citigroup Inc.

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Other sectors also produced deals with eye-watering valuations. In industrials, Kone Oyj is forking out €29.4 billion to take over TK Elevator GmbH.

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In TMT, Fox Corp. announced it was shelling out about $22 billion for Roku Inc. in an attempt to capture more of the streaming market. And Bloomberg News reported Deutsche Telekom AG is discussing a potential combination with its American arm T-Mobile US Inc., a move that would create the world’s biggest phone company and set a record for public M&A. If announced, that will add fuel to second half volumes.

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Some were considered far fetched, such as GameStop Corp.’s move on eBay Inc. The about $53 billion transaction, spearheaded by GameStop Chief Executive Officer Ryan Cohen, was rejected by the board.

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One of the laggards in the first half, however, was private equity.

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“What we generally view as more of the bread and butter part of the market, like the regular way private equity business, is actually way down,” said JPMorgan’s Bouckaert.

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That’s largely because investments made earlier at high valuations and low interest rates are proving difficult to exit now.

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Some deals, as always, were a bridge too far as the ambitions of a family business and price got in the way. Those included, at least at this point, Puig Brands SA’s proposed combination with Estee Lauder Cos., which would have created one of the world’s largest fragrance and skincare companies, and the short-lived discussions between Jack Daniel’s whiskey maker Brown-Forman Corp. and its French counterpart Pernod Ricard SA about a potential combination.

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“Public investors are more cautious when a company uses its balance sheet,” Morgan Stanley’s Miles said. “If you do hit a bump in the road, you want to have a fortress type balance sheet.”

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The second half of the year stands to be as good or even better, dealmakers said.

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“We’re going to see a real ramp-up in the places that have been quieter, like the smaller strategic stuff,” said Turano at Paul Weiss. “There’s a huge pipeline when you think about all the carve-out sales and portfolio re-balancings.” 

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Some companies, at the beginning of the year, were more cautious and were trying to see how things would play out. They’ve now seen their rivals go to market and Turano said “we’re to the point where it’s like ‘after we come back from the summer holidays, it’s really ‘go time.’”

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To be sure, the market will have to navigate some potential headwinds and challenges over the next six months for that to happen.

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“There are a few concerns on the horizon — like what happens to the economy and the election in November — but I think confidence is strong right now,” Evercore’s Mendelow said.

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