January sets the bar high for mega deals this year

Billy Bambrough
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The 47th Munich Security Conference
January has seen a massive $254.9bn worth of deals, up 6.7 per cent from the same period in 2015 (Source: Getty)

The start of 2016 has been the biggest since 2008 for merger and acquisition activity, according to deal data firm Mergermarket.

A whopping $254.9bn worth of deals, up 6.7 per cent from the same period in 2015, have been done around the world to date this year with the latest deal to be announced, the takeover of pharmaceuticals giant Syngenta by ChemChina, valued at $45.8bn.

In 2008, a year that ended badly for M&A due to the financial crisis and lack of credit to fund deals, firms

managed to agree $275.8bn of deals during the opening weeks of the year. So far in 2016 there have been two mega deals worth over $30bn, with one further deal valued at over $10bn.

The deal that Shire struck to buy rival Baxalta in January was worth $34.8bn, while the Johnson Controls bid for Tyco International added $16.6bn to the pile.

Over the same period last year the highest valued deal was the $40.3bn acquisition of Hutchison Whampoa by Cheung Kong Holdings.

In 2015 as a whole firms splashed out to the tune of $3.9 trillion on mergers and acquisitions, breaking the previous record set in 2007. Many are speculating that 2016 could hit fresh highs after such a strong start.

According to a Mergermarket spokesperson: “There are no signs of a sudden slowdown in M&A activity. Themes from last year such as strong levels of deal making by US and Chinese companies are likely to continue.”

Following a spat of so-called mega deals, including the ABinBev and SABMiller tie up, as well as the Shell acquisition of BG Group, it’s expected there will be a rush of smaller deals as companies offload assets to meet regulatory approval.

Mergermarket added: “A new trend we could see are more divestments and non-core disposals as firms seek better shareholder value and even pre-empt hostile takeovers.”

Executives are planning more deals in 2016, according to a survey published by accountants EY at the end of last year, with almost 60 per cent expected to carry out acquisitions in the next 12 months, up from 40 per cent a year earlier.

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