May 24, 2018

Megadeals are heating up, just in time for summer

Mike Sabutis, Senior Vice President | May 24, 2018

This year has started with a spate of megadeals — and the pace of these mammoth combinations only quickened in April. Three of the six biggest deals by value since the start of 2018 were announced in the month, including US-based telecommunications provider Sprint’s merger proposal with rival T-Mobile in a transaction valued at US$58.9bn. The deal would allow the companies to accelerate development of 5G wireless technology, they say, even as consumer advocates warn that it could drive up prices for mobile service.

Consolidation ramped up further in the global media industry as well in April with the second-largest deal of the month: US cable giant Comcast’s bid for a majority stake in European pay-TV operator Sky valued at US$40.7bn. Separately, Comcast is reportedly considering a hostile bid for 21st Century Fox assets that Disney won in December, in a deal that would allow Comcast to consolidate 100% control of Sky. (Incidentally, all this deal activity involving major media companies is injecting uncertainty into the upcoming TV lineups for their networks.)

The decidedly less flashy Industrial & Chemicals sector also held its own in the deal value column thanks to the third-largest transaction in April: the US$30.1bn merger of US refineries Marathon Petroleum and Andeavor, creating the country’s biggest refiner by capacity.

One area of M&A that finally cooled off last month was private equity (PE). After a record-breaking first quarter for buyout value, PE deal activity came back down to earth with a humdrum US$33.2bn in aggregate value (compared to US$120.6bn in the first three months of the year). None of the top 10 transactions in April involved a financial buyer acquiring an asset. The tenth biggest deal did, however, represent a PE exit — the US$5.5bn sale of Sky Betting and Gaming by UK-based CVC Capital Partners and Sky to Canadian online gambling company Stars Group.

That sale was one of just three cross-border deals in the top 10 for the month, as the slowdown in international M&A continued. The rising tide of protectionism and trade barriers — and the uncertainty surrounding potential future actions — appear to be taking their toll on cross-border activity.

Nonetheless, M&A value in 2018 remains on track to nearly match the highest amount ever, US$3.87tn, reached in 2015. US companies are still actively putting to work funds freed up by the tax reform law; European businesses are seeking deals to fuel inorganic growth; and Asia-Pacific acquirers are expanding their presence on the world stage and diversifying from domestic markets. Equity prices have seen a modest retreat worldwide and an increase in volatility, but the global economy remains stable and growing. Dealmakers are likely to remain busy in the months ahead.

For greater insight into these trends and more, download The Monthly M&A Insider, presented by Merrill Corporation and Mergermarket. The report explores the global M&A market with respect to the numbers, movements and trends, as well as revealing the top financial and legal advisors – globally and across six regions (North America, Central and South America, Europe, Middle East and Africa, Asia-Pacific and Japan).

Ready to Get Started?

Here are some other items you might be interested in:

From the Bullpen to the Boardroom: Insights from CEOs

As many professionals can attest, investment banking is a feeder job for other highly successful and ambitious career moves. However, the transition to get there is not always so clear, especially for aspiring entrepreneurs. Our expert panel of CEO's broke down the challenges for our audience and offered several great takeaways for those who want to be CEO one day.

Colleagues Discussing Business in Conference Room
Expert Spotlight: Japan Deal Momentum

Japan dealmakers are seeing a strong rebound in M&A following the initial impact of COVID- 19 with the current momentum backed by an uptick in corporate divestitures, low-cost financing, and activism among others, according to industry experts speaking at a recent webinar hosted by Datasite and Mergermarket. Learn more from this expert spotlight blog.

Tokyo Japan Skyline
Market Spotlight: Restructuring in the Middle East

How is M&A faring in the Middle East? Is distressed market activity on the rise, as it is in other regions? And how can deals get done quickly? One thing seems fairly certain: there’s definitely more to come in the region.