M&A surges onward with $40bn in new deals

The announcements push the total amount of transactions since January over $3tn, the highest total since 2007, according to Thomson Reuters data.

Turmoil on China’s equity markets sent shockwaves across international exchanges in late August, raising serious questions among bankers about the risks posed by a fresh wave of global economic uncertainty. The uncertainty has taken its toll on plans for new stock listings

But the sheer number of M&A deals unveiled since August, when the market jitters started, highlights how the market swings have not been severe enough to clog what bankers say is one of the most robust pipelines in generations.

“While market volatility generally dampens M&A activity, for some deals it may make sellers more willing to transact to protect value for their shareholders or consider merging to create a larger, more stable pro forma company,” said Chris Ventresca, global co-head of M&A at JPMorgan.

Last month, with more than $300bn worth of deals announced, was the busiest August in US history, as M&A activity hit $1.46tn year-to-date in 2015, surpassing overall transaction volumes in 2014.

The flurry of big deals in Asia-Pacific on Tuesday also pushed the region’s dealmaking total past $700bn for only the second time on record, according to Dealogic.

“We haven’t seen any material impact on our M&A backlog from the recent market volatility,” said Larry Hamdan, head of Americas M&A at Barclays. “Over the past few years, there have been various short-term impacts to the market and M&A volumes have continued to rise.”

A further sign of the robustness of the M&A cycle is that a growing number of companies are pushing ahead with contentious hostile bids, including Mylan, the Dutch-incorporated pharmaceutical company, which on Tuesday took its $33bn offer for smaller rival Perrigo directly to the latter’s shareholders.

Some bankers said that the market volatility could have an impact on the way deals are structured and financed.

Mr Ventresca said that there might be more stock-centred deals as buyers try to hedge against market swings instead of using cash for transactions that might be impacted by a fresh wave of jitters.

On the financing side, although the debt market remains robust, purchasers may have to pay more for their funding in light of the upheaval.

“In times of volatile markets, financing can become slightly more conservative, but not to the point that this would impede activity — if anything, it would be more likely to impact valuations,” said Robin Rankin, co-head of global M&A at Credit Suisse.

Mark Shafir, co-head of global M&A at Citi, said: “Unless the current correction leads to broader market disruption, we remain optimistic that M&A activity will continue.”

Additional reporting by Jennifer Hughes in Hong Kong

Source:: ft.com

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