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?

You may also like:

Keep the deal moving - even on the move

With the Datasite mobile app, you always know where the deal’s at – wherever you are.

M&A Professional reviewing documents via data room
The ABCs of SPACs and de-SPAC’ed Entities

With the change in market conditions over the last year (increased inflation, interest rates etc.), there is concern that companies who went public via a SPAC in 2020 and 2021 will not be able to continue their business operations due to a lack of free cash flow or will face de-listing because their stock is not in compliance with the NYSE or NASDAQ requirements. These companies may need to explore alternative options, such as rescue capital raises, full company sale to a strategic, bankruptcy, and PE take-private options, etc.

M&A Professionals work on a data room
M&A and digital transformation: Opportunities and challenges in APAC

The pandemic saw a growth spurt in digital platforms. Will the tech sector be able to sustain investor interest in the face of challenging macroeconomic dynamics? Learn more about emerging digital transformation stories from APAC in our expert spotlight blog.

City Skyline