“M&A boom times keep coming”

Quarter 3 of 2018 has just ended and in the first three quarters of 2018 we have seen just over USD 3.5bn worth of announced deals globally. This is a 23 per cent increase on the same time period last year and is the highest figure recorded for this time period since 2007, when the value of announced deals reached just over USD 3.7bn. The “mega deal” has returned with a vengeance in 2018, with 35 deals greater than USD 10bn announced in the year to date, 92 per cent of which have involved corporate buyers delving into their war chests to pursue targets that are clearly of significant strategic value to them. While the 35 deals announced in the first three quarters is much higher than the figure recorded for the corresponding periods of 2017 and 2016, it is still five less than in the first three quarters of 2015 and nine less than in the first three quarters of 2007. The biggest difference is that in 2007, private equity firms accounted for 10 deals greater than USD 10bn, whereas in both 2015 and 2018, only three deals greater than USD 10bn were attributable to private equity buyers.

So why are we seeing global deal levels on a par with 2007? Well, a number of factors are coming into play, including the changes to US corporation tax rules in December 2017, which have made it more attractive for large US corporates to bring back overseas profits, boosting corporate war chests. The capital markets continue to trade at record highs with buoyant stock prices, consumer confidence is strong and borrowing costs are still relatively low, private equity dry powder is at yet another all-time high – a reported USD 1,700bn that has to be invested somewhere. As such, the signs for the final quarter would appear to be good and we appear to be on track for another record year!