27 February 2013

US blockbusters back on the menu?

The year so far has brought the return of the USD 1,000 million-plus blockbuster deals, with USD 10,000 million and above for the likes of US giants Heinz, Dell Virgin Media and NBCUniversal, all of which were announced within the last few weeks alone. In the year to date, there have been 8,025 global deals valued at an aggregate USD 457,564 million, of which 3,017 transactions worth USD 258,041 million were signed off in February alone, according to Zephyr, the M&A database published by Bureau van Dijk. Narrowing the field even further, US-based companies accounted for 31 per cent of the month-to-date’s total value (USD 141,650 million).

To throw yet more figures into the mix, US targets have signed off a total of 1,560 deals valued at USD 195,524 million so far this year compared to 1,735 worth an aggregate USD 88,927 million at the same time in 2011, representing a 10 per cent decrease by volume against a 120 per cent surge by value, driven by big ticket transactions. To remain focused purely on the mega deals would be doing the other global blockbusters an injustice as there were 45 deals worth USD 1,000 million or more recorded so far this month, according to Zephyr. Alongside US targets were companies based in the UK, Portugal, Sweden, China, Malaysia, the Netherlands and Russia, among others.

However, North American deal-making was certainly the order of the day as Warren Buffett, always a good M&A bellwether, teamed up with 3G Capital, a private equity player backed by Brazilian billionaire Jorge Paulo Lemann, to buy condiments manufacturer Heinz for USD 28,000 million. This came on the heels of AMR’s American Airlines and US Airways agreeing to tie up to form the world’s largest carrier with a combined equity value in the region of USD 11,000 million. That is not to say that the USD 24,400 million leveraged buyout of Dell, or Comcast’s acquisition of General Electric’s stake in NBCUniversal for USD 16,700 million are not worth mentioning.

Heightened 2013 deal-making may not be such an anomaly as first thought. According to Zephyr there were 17,945 announced or completed deals worth a combined USD 1,062 billion in the fourth quarter of 2012, the highest quarterly total since Q4 2008, when there were 16,915 transactions valued at USD 1,150 billion. There were nine mega deals during Q4 2012 with values ranging from USD 11,973 million, which involved the acquisition of Spanish lender Catalunya Banc to Anheuser-Busch InBev’s USD 48,407 million purchase of Brazilian alcoholic and soft drinks manufacturer Companhia de Bebidas das Americas.

It remains to be seen how the M&A landscape pans out in the year ahead and whether the market switches from bear to bull. There are already a number of reports which indicate activity in certain sectors is on the rebound. Only time will tell.

© Zephyr