NEW YORK – The value of takeovers announced in 2014 hit the $1 trillion mark last Monday, reaching that level at the fastest pace in seven years.
That threshold was crossed 54 days earlier than in 2013, after more than $300 billion in purchases were announced by companies from Valeant Pharmaceuticals International to Alibaba Group Holding in April, data compiled by Bloomberg show. That total excludes another $175 billion in proposals by Pfizer, Mylan and others that have been rebuffed or are still awaiting final agreements.
Chief executive officers, with more than $4 trillion in cash on company balance sheets globally, have gone from being wary of making big deals to facing pressure to strike deals or be beat to opportunities by their major rivals, said Michael Shaoul at Marketfield Asset Management.
Literally this past week we maybe just entered an M&A boom, said Shaoul, who oversees more than $20 billion as CEO of Marketfield in New York. Management teams are starting to build this mentality that they’re going to be a buyer or be bought. It puts pressure on everybody to think about who they could be buying.
If dealmaking continued at April’s rate for the rest of the year, 2014 would see almost $4 trillion of deals announced, making it the second most active year for M&A ever, behind 2007, data compiled by Bloomberg show.
There are more to come. Merck & Co. is close to picking the winner of an auction of its consumer-products business, while Alstom has received offers for its energy business from both General Electric Co. and Siemens AG.
That the $1 trillion figure was hit in April this year, compared with June last year, is owed largely to the drug industry, which has accounted for nearly one-third of April’s deal announcements. Those companies could pressure rivals to strike their own takeovers or risk missing out as the industry recalibrates, said Mark Lubkeman, a senior partner at the Boston Consulting Group.
A three-way deal that will have Novartis, GlaxoSmithKline and Eli Lilly & Co. swapping assets, for example, will give other drugmakers the courage to think about creative ways to do M&A, he said.
There’s a real imperative for management teams to think expansively about value-creation and to get busy.