M&A spikes in record third quarter

LONDON: Mergers and acquisitions came back with a bang in the third quarter as executives rushed to revisit deals left on hold at the height of the coronavirus pandemic and boardrooms regained confidence after a roller-coaster year.
A deal frenzy in September led to a record third quarter with more than $1 trillion worth of transactions around the world, mostly focused on coronavirus-resilient sectors such as technology and health care, according to Refinitiv data. The third-quarter spike, however, failed to take up all the slack after a lacklustre start to the year.
M&A deals overall were down 21 per cent at $2.2 trillion in the first nine months of 2020, with US transactions coming in at $800 billion, a 43 per cent slump from the same period last year.
“The way out of this crisis is through M&A and we have started to have really engaging conversations with CEOs and boards around strategic positioning post-COVID,” said Alison Harding-Jones, Citigroup’s C N head of M&A for Europe, the Middle East and Africa (EMEA) and vice chairman of EMEA banking, capital markets and advisory.
“People have realised they need to consolidate to create stronger and better-equipped businesses to deal with what the world looks like going forward,” she said.
M&A activity in July, August and September leapt 80 per cent from the previous quarter when the spread of COVID-19 triggered global lockdowns and brought business to a standstill.
In the United States, deal volumes rose threefold to $414 billion from the second quarter, Europe was up 21 per cent at $231 billion and Asia Pacific spiked 67 per cent to $274 billion.
“The market is picking up quite rapidly. Ironically, the prospects for M&A activity are stronger now than they were pre-COVID,” said Peter Weinberg, founding partner and chief executive of Perella Weinberg Partners.
The latest transaction to become a casualty of the pandemic was LVMH’s $16 billion takeover of US jeweller Tiffany, which is hanging in the balance after the French luxury giant said it could not meet a deal deadline.
While that was a blow for transatlantic mergers, the deal flow between the United States and Europe was partly restored by Nvidia’s $40 billion swoop on British chip designer Arm Holdings.
German health firm Siemens Healthineers and French drugmaker Sanofi, meanwhile, spent billions on US takeovers, buying Varian Medical Systems and Principia, respectively.
Other big deals included PetroChina’s sale of its oil and gas pipelines for $49 billion and a $42 billion move by Altice’s Franco-Israeli founder Patrick Drahi to take the telecoms firm private.
The third-quarter deal frenzy, however, gave mid-market mergers the biggest boost. Transactions in the $5 billion to $10 billion range are up 24 per cent so far this year while combinations worth more than $10 billion have dropped 37 per cent.
Dealmakers said the looming US presidential election on November 3 was a factor for companies considering acquisitions but a sustained economic recovery should help stimulate merger activity, regardless of the winner.
“The election is in focus with clients right now. But if you look back, the underlying strength of the economy and the capital markets are better predictors of M&A activity than any single event like the election,” said Chris Roop, co-head of North America M&A at JPMorgan Chase & Co.
In Europe, a long-awaited season of banking deals kicked off over the summer with Spanish and Italian banks finalising merger discussions, raising expectations that German and Swiss rivals might follow suit.
 — Reuters