NEW YORK – While the proposed takeovers of Dell and H.J. Heinz dominated headlines in the first quarter, global dealmaking stumbled, with March on track to be the worst month for mergers in more than three years.
Takeovers fell 4.4 percent from a year ago and 36 percent from the previous quarter to more than $461 billion, according to data compiled by Bloomberg as of March 27. Berkshire Hathaway’s $23 billion purchase of Heinz and the $24.4 billion buyout of Dell in February failed to spark a rally in March, when mergers shrank to $100 billion, on track for the worst month since 2009.
Concern about U.S. spending cuts, leadership changes in China and persistent sovereign debt problems in Europe are weighing on executive confidence, said Mark Shafir, global co-head of mergers and acquisitions at New York-based Citigroup Inc. Still, record cash piles and global equity markets at an almost five-year high are pushing more companies to weigh acquisitions to lock in growth before interest rates rise.
There is still a lot of hesitancy among corporates to do big deals, said Henrik Aslaksen, global head of M&A at Frankfurt-based Deutsche Bank. There is a psychological barrier, but there is no doubt that the dialogue and intensity are increasing.
Verizon Communications and Vodafone are working to resolve their joint ownership of Verizon Wireless this year, weighing options from a full merger to Verizon’s takeover of the mobile venture, people familiar with the matter said this month. A sale of Vodafone’s stake in the wireless alliance alone could be valued at about $115 billion, based on analysts’ estimates, the biggest deal in more than decade.
While massive deals are exceptions, the rally in stock markets may help coax more CEOs into action, said Steve Baronoff, chairman of mergers and acquisitions at Bank of America in New York.
Dell last week attracted proposals from Blackstone and Carl Icahn to rival founder Michael Dell and Silver Lake Management’s buyout offer, opening up an unexpected bidding war for the struggling personal-computer maker.
The ability to do big transformational deals exists, said Chris Ventresca, New York-based JPMorgan Chase & Co.’s global head of mergers and acquisitions.