Merger and acquisition (M&A) activity is back, and 18 large deals in the first nine months of 2013 are responsible for a large 22 per cent chunk of it, the highest since the same period in 2008.
New analysis from Dealogic shows that M&A volumes have now exceeded $2 trillion (£1.25bn). That's an increase of 13 per cent on the same time period last year. While volumes are up, the number of deals have dropped 20 per cent on the same period to 26,194.
Those large deals - that exceed $10bn (£6.2bn) each - are dominated by telecom deals. This is the highest number of large deals in the first nine months of a calendar year since 2008 (which saw 24 big ones).
Seven of the 18 $10bn+ deals were announced in 3Q 2013 for a total of $217.5bn, the highest activity in any 3Q period since 2007 (11 deals for $246.3bn), and the highest quarterly volume for such deals since 4Q 2012 ($237.4bn via eight deals).
The targets of the top ten deals? Verizon Wireless, AbbVie, HJ Heinz, Virgin Media, Koninklijke, Dell, Publicis, NBCUniversal Media, Life Technologies and Zoetis.
Not on the subject of M&A, but still pertinent: When Verizon's record breaking corporate bond issue was announced, Kit Juckes of Societe Generale stressed that a move towards bigger deals are a signal of problems with monetary policy:
The announcement of the world’s largest-ever corporate bond deal – eclipsing the previous one by a country mile – is a reminder of two things. Firstly, that for large, capital market-friendly corporations, money is cheap and plentiful regardless of the summer’s rise in bond yields; and secondly, that the current level of interest rates makes keeps the cost of funding too far below the return on equity.
This was the mix which spawned the leveraged buy-out boom by the private equity industry in the years before Lehman went bust. Things are ‘different now’ as is always the case, but you could hardly hope for a better example of why monetary policy normalisation is a sensible idea.